Accounting Policies of Reliance Capital Ltd. Company
Mar 31, 2023
1. Background
Reliance Capital Limited (''the Company'') is registered as Non-Banking Financial Company Core Investment Company (''CIC'') -Non-Deposit Taking Systemically Important (NBFC-CIC-ND-SI) under Section 45-IA of Reserve Bank of India Act, 1934. As a CIC, the Company is primarily a holding company, holding investments in its subsidiaries, associates and other group companies. The Company''s subsidiaries and associates are engaged in a wide array of businesses in the financial service sector. The Company is Public Limited Company listed on recognised stock exchanges in India. The registered office of the Company is located at Kamala Mills Compound, Trade World, B-Wing, 7th Floor, S. B. Marg, Lower Parel, Mumbai 400013.
The Reserve Bank of India (RBI) vide Press Release dated November 29, 2021 in exercise of the power conferred under Section 45-IE (1) of the Reserve Bank of India Act, 1934, superseded the Board of Directors of Reliance Capital Limited ("RCL" or "Company") and appointed Shri Nageswara Rao Y as the Administrator (Administrator) of the Company under Section 45-IE (2) of the RBI Act. Further, in terms of Section 45-IE(4)(b) all the powers, functions and duties, which may, by or under the provisions of the RBI Act or any other law for the time being in force, be exercised and discharged by or on behalf of the Board of Directors of the Company or by a resolution passed in general meeting of the Company, shall, until the Board of Directors of the Company is reconstituted, be exercised and discharged by the Administrator.
Thereafter, RBI vide press release dated November 30, 2021 in exercise of the power conferred under Section 45-IE (5A) of the Reserve Bank of India Act, 1934 constituted a three-member Advisory Committee to assist the Administrator in the discharge of his duties. Presently the members of the Advisory Committee are Mr. Sanjeev Nautiyal, ex-DMD, State Bank of India, Mr. Praveen P Kadle, ex-MD & CEO, Tata Capital Limited and Mr. Vikramaditya Singh Khichi, ex-ED, Bank of Baroda.
In terms of Section 25(2)(d) of the Code the Administrator appointed Deloitte India Insolvency Professionals LLP and AZB & Partners as Process and Legal advisors, respectively to assist him in completion of the CIRP of the Company.
On December 02, 2021 the RBI filed the Petition before the NCLT under sub-Clause (i) of clause (a) of Rule 5 of the Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers and Application to Adjudication Authority) Rules, 2019 (FSP Rules) to initiate Corporate Insolvency Resolution Process ("CIRP") against RCL read with Section 227 of the Insolvency and Bankruptcy Code, 2016 read with the Rules and Regulations framed there under and amended from time to time (the "Code"). Further, CIRP was initiated against the Company under Section 227 read with clause (zk) of sub section (2) of Section 239 of the Code and read with Rules 5 and 6 of the FSP Rules by an order dated December 06, 2021 of the Hon''ble National Company Law Tribunal, Mumbai Bench ("NCLT/Adjudicating Authority").
In accordance with section 14 of the Code read with the FSP Insolvency Rules, a moratorium has been effective on and from December 06, 2021, i.e. the date of admission of the Company in the CIRP process for prohibiting institution of suits or continuation of pending suits or proceedings against the Company including execution of any judgement, decree or order in any court of law, tribunal, arbitration panel or other authority. The Administrator has taken steps for seeking confirmations from various forums where litigations have been levied on the Company for disposal of assets, that such injunctions will not be applicable during CIRP.
Pursuant to the admission and commencement of CIRP of the Company under Insolvency and Bankruptcy Code, 2016 (IBC) with effect from December 06, 2021, there are various claims submitted by the operational creditors, the financial creditors, employees and other creditors. The overall obligations and liabilities including obligation for interest on loans and the principal rupee amount in respect of loans shall be determined during the CIRP.
In view of ongoing CIRP, the Company has provided for the interest expense which may be applicable on the financial debts upto the Insolvency Commencement Date i.e. December 06, 2021 and accordingly interest expense of '' 2 09 949 lakh for the post CIRP period from December 07, 2021 to March 31, 2023 have not been provided.
As per the provisions of the IBC, the fair value and liquidation value of the assets of Reliance Capital Limited ("RCAP" or "Company") as on the insolvency commencement date is required to be determined in accordance with Regulation 27 read with Regulation 35 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 ("CIRP Regulations"). The Administrator of RCAP duly appointed by the Hon''ble National Company Law Tribunal, Mumbai ("NCLT Mumbai Bench"), is obligated to appoint 2 registered valuers to determine such valuation and submit the report ("Valuation Report"). In furtherance thereof, the Administrator had appointed 2 registered valuers who have submitted their report. As per Ind AS 36- "Impairment of Assets", impairment testing of assets is to be conducted on an annual basis. On completion of the CIRP, the Company will consider carrying out a comprehensive review of all the assets including investments, other assets and intangible assets, liabilities and accordingly provide for impairment loss on assets and write back of liabilities, if any.
The Adjudicating Authority vide the above order, appointed the Administrator to perform all the functions of a Resolution Professional to complete the CIRP of the Company as required under the provisions of the Code. It is also incumbent upon the Administrator, (exercising same powers as Resolution Professional under the Code), under Section 20 of the Code, to manage the operations of the Company as a going concern. Accordingly, the Statement for the year ended March 31, 2023, have been prepared on going concern assumptions.
The financial statements of the Company have been taken on record by the Administrator while discharging the powers of the Board of Directors of the Company which were conferred by the RBI Order and in accordance with the NCLT Order solely for the purpose of ensuring regulatory compliance.
The administrator has taken charge with effect from November 29, 2021, and has relied on information, data, and clarification provided by the existing Key Management Personnel (KMP''s) of the Company for the purpose of the financial results. With respect to the financial statements for the year ended March 31, 2023, the Administrator has signed the same solely for the purpose of ensuring compliance by the Company with applicable law, and subject to the following:
(a) The Administrator has taken charge with effect from November 29, 2021 and therefore was not in control of the operations or the management of the Company prior to November 29, 2021;
(b) The Administrator has furnished and signed the report in good faith and accordingly, no suit, prosecution or other legal proceeding shall lie against the Administrator in terms of Section 233 of the Code;
(c) The Administrator, while signing this statement of financial results, has relied solely upon the assistance provided by the existing staff and present key management personnel (KMPs) of the Company in review of the financial results as well as the certifications,representations and statements made by the KMPs of the Company, in relation to these financial results. The statement of financial results of the Company for the year ended March 31, 2023 have been taken on record by the Administrator solely on the basis of and on relying on the aforesaid certifications, representations and statements of the aforesaid existing staff and present key management personnel (KMPs). For all such information and data, the Administrator has assumed, without any further assessment, that such information and data are in the conformity with the Companies Act, 2013 and other applicable laws with respect to the preparation of the financial statements and that they give true and fair view of the position of the Company as of the dates and period indicated therein.
These Standalone Financial Statement of the Company for the year ended March 31, 2023 were authorised for issue by the Administrator on May 29, 2023. The Standalone Financial Statements as adopted by the members of the Company can be amended or re-opened in terms of provisions of Section 131 of the Act.
2. Significant Accounting Policies
The principal accounting policies applied in the preparation of these Standalone Financial Statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. a Basis of Preparation of Standalone Financial Statements
These Standalone Financial Statements are presented in ''Indian Rupees, which is also the Company''s functional currency and all amounts, are rounded to the nearest lakh, unless otherwise stated.
The Standalone Financial Statements have been prepared in accordance with the requirements of the information and disclosures mandated by Schedule III to the Act, applicable Ind AS, other applicable pronouncements and regulations.
(i) Compliance with Ind AS and regulation
The Standalone Ind AS financial statements comply in all material aspects with Indian Accounting Standards (Ind AS) notified under Section 133 of the Companies Act, 2013 (the ''Act'') [Companies (Indian Accounting Standards) Rules, 2015 (as amended)] and other relevant provisions of the Act and the master direction - Core Investment Companies ( Reserve Bank) Direction, 2016 issued by RBI.
(ii) Historical cost convention
The Standalone Financial Statements have been prepared on a historical cost basis, except for the following:
- Certain financial assets and liabilities (including derivatives instruments) are measured at fair value.
- Defined benefit plans - plan assets are measured at fair value; and
- Share based payments
b Investment in subsidiaries and associates
Investments in subsidiary and associate companies are carried at cost and fair value (deemed cost) as per Ind AS -101 "First-time Adoption of Indian Accounting Standards" and 109 "Financial Instruments" less accumulated impairment losses, if any. Where an indication of impairment exists, the carrying amount of the investment is assessed and written down to its recoverable amount. On disposal of investments in subsidiary companies and associate companies, the difference between net disposal proceeds and the carrying amounts are recognised in the Statement of Profit and Loss.
When the Company ceases to control the investment in subsidiary or associate the said investment is carried at fair value through profit and loss in accordance with Ind AS 109 "Financial Instruments". c Segment Reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker.
d Foreign currency translation
(i) Functional and presentation currency
Items included in Standalone Financial Statements of the Company are measured using the currency of the primary economic environment in which the Company operates (''the functional currency''). The Standalone Financial Statements are presented in Indian rupee (INR), which is the Company''s functional and presentation currency.
(ii) Translation and balances
Transactions denominated in foreign currencies are recorded at the exchange rate prevailing at the time of the transaction. Exchange differences, if any arising out of transactions settled during the year are recognised in the Statement of Profit and Loss.
Monetary assets and liabilities denominated in foreign currencies at the year end are restated at year end rates.
e Financial instruments
Financial assets and financial liabilities are recognised when the entity becomes a party to the contractual provisions of the instrument. Regular way purchases and sales of financial assets are recognised on trade-date, the date on which the Company commits to purchase or sell the asset.
At initial recognition, the Company measures a financial asset or financial liability at its fair value plus or minus, in the case of a financial asset or financial liability not at fair value through profit and loss, transaction costs that are incremental and directly
attributable to the acquisition or issue of the financial asset or financial liability, such as fees and commissions. Transaction costs of financial assets and financial liabilities carried at fair value through profit and loss are expensed in Statement of Profit and Loss. Immediately after initial recognition, an expected credit loss allowance (ECL) is recognised for financial assets measured at amortised cost and investments in debt instruments measured at fair value through Statement of Profit and Loss, which results in an accounting loss being recognised in Statement of Profit and Loss.
When the fair value of financial assets and liabilities differs from the transaction price on initial recognition, the entity recognizes the difference as follows:
(i) When the fair value is evidenced by a quoted price in an active market for an identical asset or liability (i.e. a Level 1 input) or based on a valuation technique that uses only data from observable markets, the difference is recognised as a gain or loss.
(ii) In all other cases, the difference is deferred and the timing of recognition of deferred in Satement of Profit and Loss is determined individually. It is either amortised over the life of the instrument, deferred until the instrument''s fair value can be determined using market observable inputs, or realised through settlement.
When the Company revises the estimates of future cash flows, the carrying amount of the respective financial assets or financial liability is adjusted to reflect the new estimate discounted using the original effective interest rate. Any changes are recognised in Statement of Profit and Loss.
f Financial assets
(i) Classification and subsequent measurement
The Company has applied Ind AS 109 "Financial Instruments" and classifies its financial assets in the following measurement categories:
- Fair value through profit and loss (FVTPL);
- Fair value through other comprehensive income (FVOCI); or
- Amortised cost.
Fair value through profit and loss: Assets that do not meet the criteria for amortised cost or FVOCI are measured at fair value through profit and loss. A gain or loss on a debt investment that is subsequently measured at fair value through profit and loss and is not part of a hedging relationship is recognised in Statement of Profit and Loss in the period in which it arises, unless it arises from debt instruments that were designated at fair value or which are not held for trading. Interest income from these financial assets is included in ''Interest income'' using the effective interest rate method.
Fair value option for financial assets: The Company may also irrevocably designate financial assets at fair value through profit and loss if doing so significantly reduces or eliminates an accounting mismatch created by assets and liabilities being measured on different bases.
Amortised cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest, and that are not designated at FVTPL, are measured at amortised cost. The carrying amount of these assets is adjusted by any expected credit loss allowance recognised and measured. Interest income from these financial assets is recognised using the effective interest rate method.
Interest income
Interest income is calculated by applying the effective interest rate to the gross carrying amount of financial assets, except for:
(i) Purchased or originated credit impaired (POCI) financial assets, for which the original credit-adjusted effective interest rate is applied to the amortised cost of that financial asset.
(ii) Financial assets that are not ''POCI'' but have subsequently become credit-impaired (or ''stage 3''), for which interest revenue is calculated by applying the effective interest rate to their amortised cost (i.e. net of the expected credit loss provision).
The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial asset or financial liability to the gross carrying amount of a financial asset (i.e. its amortised cost before any impairment allowance) or to the amortised cost of a financial liability. The calculation does not consider expected credit losses and includes transaction costs, premiums or discounts and fees and points paid or received that are integral to the effective interest rate, such as origination fees. For FVOCI financial assets - assets that are credit-impaired at initial recognition - the Company calculates the credit-adjusted effective interest rate, which is calculated based on the amortised cost of the financial asset instead of its gross carrying amount and incorporates the impact of expected credit losses in estimated future cash flows.
Equity instruments
Equity instruments are instruments that meet the definition of equity from the issuer''s perspective; that is, instruments that do not contain a contractual obligation to pay and that evidence a residual interest in the issuer''s net assets.
The Company subsequently measures all equity investments at fair value. Where the company''s management has elected to present fair value gains and losses on equity investments in other comprehensive income, there is no subsequent reclassification of fair value gains and losses to profit and loss following the derecognition of the investment.
Changes in the fair value of financial assets at fair value through profit and loss are recognised in net gain/loss on fair value changes in the Statement of Profit and Loss. Impairment losses (and reversal of impairment losses) on equity investments measured at FVOCI are not reported separately from other changes in fair value.
Gains and losses on equity investments at FVTPL are included in the Statement of Profit and Loss.
(ii) Impairment
The Company assesses on a forward looking basis the expected credit losses (ECL) associated with its debt instruments carried at amortised cost and FVOCI and with the exposure arising from loan commitments and financial guarantee contracts. The Company recognizes a loss allowance for such losses at each reporting date.
The measurement of ECL reflects:
- An unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes;
- The time value of money; and
- Reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions and forecasts of future economic conditions.
The measurement of the ECL allowance is an area that requires the use of complex models and significant assumptions about future economic conditions and credit behavior (e.g. the likelihood of customers defaulting and the resulting losses).
(iii) Write-off policy
The Company writes off financial assets, in whole or in part, when it has exhausted all practical recovery efforts and has concluded there is no reasonable expectation of recovery. Indicators that there is no reasonable expectation of recovery include (i) ceasing enforcement activity and (ii) where the Company''s recovery method is foreclosing on collateral and the value of the collateral is such that there is no reasonable expectation of recovering in full.
(iv) Derecognition other than on a modification
Financial assets, or a portion thereof, are derecognised when the contractual rights to receive the cash flows from the assets have expired, or when they have been transferred and either (i) the Company transfers substantially all the risks and rewards of ownership, or (ii) the Company neither transfers nor retains substantially all the risks and rewards of ownership and the Company has not retained control. The Company directly reduces the gross carrying amount of a financial asset when there is no reasonable expectation of recovering a financial asset in its entirety or a portion thereof. g Financial liabilities
The Company is under moratorium under Section 14 of the Code since December 06, 2021. Therefore, all financial liabilities will be dealt in accordance with the provisions of the Code.
(i) Classification and subsequent measurement
In both the current and prior period, financial liabilities are classified as subsequently measured at amortised cost, except for:
Financial liabilities at fair value through profit and loss: this classification is applied to derivatives and financial liabilities held for trading and other financial liabilities designated as such at initial recognition. The Company has issued certain non-convertible debentures, the rate of interest on which is linked to performance of specified indices (Market linked debentures-MLD) over the period of the debentures. The Company has opted to designate the entire hybrid contract at FVTPL as the embedded derivative significantly modifies the cash flows that otherwise would be required by the contract. The Company hedges its interest rate risk on MLD by taking positions in future & options based on specified indices. Any gain / loss on these hedge positions is recognised in Statement of Profit and Loss.
(ii) Derecognition
Financial liabilities are derecognised when they are extinguished i.e. when the obligation specified in the contract is discharged, cancelled or expires).
The exchange between the Company and its original lenders of debt instruments with substantially different terms, as well as substantial modifications of the terms of existing financial liabilities, are accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. If an exchange of debt instruments or modification of terms is accounted for as an extinguishment, any costs or fees incurred are recognised as part of the gain or loss on the extinguishment. If the exchange or modification is not accounted for as an extinguishment, any costs or fees incurred adjust the carrying amount of the liability and are amortised over the remaining term of the modified liability.
h Financial guarantee contracts
Financial guarantee obligation is obligation that require the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due, in accordance with the terms of a debt instrument. Such financial guarantees are given to banks, financial institutions and others on behalf of customers to secure loans, overdrafts and other banking facilities.
For financial guarantee obligation, the loss allowance is recognised as a provision.
i Repossessed collateral
Repossessed collateral represents financial and non-financial assets acquired by the Company in settlement of overdue loans. The assets are initially recognised at fair value when acquired and included in premises and equipment, other financial assets, investment properties within other assets depending on their nature and the Company''s intention in respect of recovery of these assets, and are subsequently remeasured and accounted for in accordance with the accounting policies for these categories of assets.
j Derivatives and hedging activities
Derivatives are initially recognised at fair value on the date on which the derivative contract is entered into and are subsequently remeasured at fair value. All derivatives are carried as assets when fair value is positive and as liabilities when fair value is negative.
The method of recognising the resulting fair value gain or loss depends on whether the derivative is designated and qualifies as a hedging instrument, and if so, the nature of the item being hedged.
Derivatives that are not designated as hedges
The Company enters into certain derivative contracts to hedge risks which are not designated as hedges. Such contracts are accounted for at fair value through profit and loss and are included in Statement of Profit and Loss. k Revenue Recognition
Revenue is measured at fair value of the consideration received or receivable. Revenue is recognised when (or as) the Company satisfies a performance obligation by transferring a promised good or service to a customer.
When (or as) a performance obligation is satisfied, the Company recognizes as revenue the amount of the transaction price (excluding estimates of variable consideration) that is allocated to that performance obligation.
(i) Interest income
Interest income is recognised using the effective interest rate.
(ii) Dividend income
Dividend income is recognised when the right to receive payment is established.
(iii) Income from investments
Profit / (Loss) earned from sale of securities is recognised on trade date basis. The cost of securities is computed based on weighted average basis.
(iv) Discount on investments
The difference between the acquisition cost and face value of debt instruments is recognised as interest income over the tenor of the instrument on straight-line basis.
(v) Management fee income
Management fee income towards support services is accounted as and when services are rendered and it becomes due on contractual terms with the parties.
(vi) Rental income
Lease rental income is recognized in the Statement of Profit and Loss on a straight-line basis over the lease term.
(vii) Income from trading in Derivatives
Derivatives are initially recognised at fair value at the date the derivative contracts are entered into, and are subsequently re-measured to their fair value at the end of each reporting period. The resulting gain or loss is recognised in the statement of profit and loss immediately. Brokerage and other payments made in connection with the acquisition of derivatives are added to the cost of acquisition. l Income Tax
The income tax expense or credit for the period is the tax payable on the current period''s taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses.
(i) Current Taxes
Provision for current tax is made after taking into consideration benefits admissible under the provisions of the Income Tax Act, 1961. Minimum Alternative Tax (MAT) credit entitlement is recognised where there is convincing evidence that the same can be realised in future.
(ii) Deferred Taxes
The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognised using the tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax assets are recognised only to the extent there is reasonable certainty that the assets can be realised in future; however, where there is unabsorbed depreciation or carried forward loss under taxation laws, deferred tax assets are recognised only if there is reasonable certainty of realisation of such assets. Deferred tax assets are reviewed as at each balance sheet date and written down or written up to reflect the amount that is reasonably certain (as the case may be) to be realised. m Leases
(i) As a lessee
The Company lease assets primarily consists of office premises which are of short term lease with the term of twelve months or less and low value leases. For these short term and low value leases, the Company recognizes the lease payments as an expense in the Statement of Profit and Loss on a straight line basis over the term of lease.
(ii) As a Lessor
Leases for which the Company is a lessor is classified as finance lease or operating lease. Whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee, the lease contract is classified as finance lease. All other leases is classified as operating lease.
For Operating Lease, lease rentals are recognised on a straight line basis over the term of lease.
n 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. Bank overdrafts are shown within borrowings in liabilities in the balance sheet. o Property, plant and equipment
All items of property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset''s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance are charged to profit and loss during the reporting period in which they are incurred. Depreciation methods, estimated useful lives & residual value
Depreciation on Property, Plant and Equipment is provided in accordance with the provisions of Schedule II of the Companies Act, 2013. Tangible assets are depreciated on straight line basis method over the useful life of assets, as prescribed in Part C of Schedule II of the Companies Act, 2013.
The estimated useful lives for the different types of assets are :
(i) Furniture and Fixtures -10 years
(ii) Office Equipments - 5 years
(iii) Computers - 3 years
(iv) Vehicles - 8 years
(v) Plant & Machinery given on lease - 8 years
(vi) Data processing machineries given on lease - 3 years
(vii) Vehicles given on lease - 8 years
(viii) Buildings - 60 years
The Company provides pro-rata depreciation from the day the asset is put to use and for any asset sold, till the date of sale. The assets'' residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.
An asset''s carrying amount is written down immediately to its recoverable amount if the asset''s carrying amount is greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with carrying amount and are recognised in the Statement of Profit and Loss. p Intangible assets
Intangible assets are recognised where it is probable that the future economic benefit attributable to the assets will flow to the Company and its cost can be reliably measured. Intangible assets are stated at cost of acquisition less accumulated amortisation.
Intangible Assets are amortised on straight-line basis over the useful life of the asset up to a maximum of 5 years commencing from the month in which such asset is first installed.
The Company provides pro-rata depreciation from the day the asset is put to use and for any asset sold, till the date of sale. q Investment properties
An investment property is accounted for in accordance with cost model. The cost of any shares in a co-operative society or a company, the holding of which is directly related to the right to hold the investment property, is added to the carrying amount of the investment property.
Depreciation on Investment Property is depreciated under the straight line method as per the rates and the useful life prescribed as per Schedule II of the Companies Act.
r Borrowing costs
Borrowing costs, which are directly attributable to the acquisition / construction of property plant and equipment, till the time such assets are ready for intended use, are capitalised as part of the cost of the assets. Other borrowing costs are recognised as an expense in the year in which they are incurred. Brokerage costs directly attributable to a borrowing are expensed over the tenure of the borrowing.
s Provisions, contingent liabilities and contingent assets
The Company creates a provision when there is a present obligation as a result of past events and it is probable that there will be outflow of resources and a reliable estimate of the obligation can be made of the amount of the obligation. Contingent liabilities are not recognised but are disclosed in the notes to the Standalone Financial Statements. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources. When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made.
Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. If it is no longer probable that the outflow of resources would be required to settle the obligation, the provision is reversed.
Contingent assets are neither recognised nor disclosed in the Standalone Financial Statements.
t Offsetting Financial Instruments
Financial assets and liabilities are offset and the net amount is reported in the balance sheet where there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the Company or the counterparty. u Employee benefits
(i) Short-term obligations
Liabilities for wages and salaries, including non-monetary benefits that are expected to be settled wholly within 12 months after the end of the period in which the employees render the related service are recognised in respect of employees'' services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled.
(ii) Post-employment obligations Defined benefit plans Gratuity
The Company''s gratuity benefit scheme is a defined benefit plan. The Company''s net obligation in respect of the gratuity benefit scheme is calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value, and the fair value of any plan assets, if any, is deducted.
The present value of the obligation under such defined benefit plan is determined based on actuarial valuation using the Projected Accrued Benefit Method (same as Projected Unit Credit Method), which recognises each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation.
The obligation is measured at the present value of the estimated future cash flows. The discount rates used for determining the present value of the obligation under defined benefit plan, are based on the market yields on Government securities as at the balance sheet date.
Re-measurement gains and losses arising from experience adjustments and changes in actuarial assumptions are recognised in the period in which they occur, directly in other comprehensive income. They are included in retained earnings in the statement of changes in equity and in the balance sheet.
Actuarial gains and losses are recognised immediately in the Statement of Profit and Loss.
Defined contribution plans Provident fund
Company''s contributions to the recognised provident fund, which is a defined contribution scheme, are charged to the Statement of Profit and Loss.
(iii) Other long-term employee benefit obligations Compensated absences (Leave Encashment)
Leave encashment which is a defined benefit, is accrued for based on an actuarial valuation at the balance sheet date carried out by an independent actuary.
v Share-based payments
(i) Employee Stock Option Scheme (ESOS)
The employees of the Company and its subsidiaries are entitled for grant of stock options (equity shares), based on the eligibility criteria set in the ESOS plan of the Company. The fair value of options granted under ESOS is recognized as an employee benefits expense with a corresponding increase in equity. The total amount to be expensed is determined reference to the fair value of the options granted excluding the impact of any service conditions.
The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each period, the entity revises its estimates of the number of options that are expected to vest based on the service conditions. It recognises the impact of the revision to original estimates, if any, in profit and loss, with a corresponding adjustment to equity.
(ii) ESOS Trust
The Company''s ESOS scheme is administered through the RCAP ESOS Trust. The Company treats the trust as its extension and shares held by RCAP ESOS Trust are treated as treasury shares and accordingly RCAP ESOS Trust has been consolidated in the Company''s books.
w Contributed Equity
Equity shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.
Treasury shares are presented as a deduction from other equity and no gain or loss is recognised on the purchase, sale, issue or cancellation of such shares.
x Dividends
Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the entity, on or before the end of the reporting period but not distributed at the end of the reporting period.
y Earnings per share
(i) Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to owners of the Company by the weighted average number of equity shares outstanding during the financial year, adjusted for bonus element in equity shares issued during the year, if any and excluding treasury shares.
(ii) Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential equity shares, and the weighted average number of additional equity shares that would have been outstanding assuming the conversion of all dilutive potential equity shares. z Rounding of amounts
All amounts disclosed in the Standalone Financial Statements and notes have been rounded off to the nearest lakh as per the requirements of Schedule III, unless otherwise stated.
3. Critical estimates and judgements
As per the provisions of the IBC, the fair value and liquidation value of the assets of Reliance Capital Limited ("RCAP" or "Company") as on the insolvency commencement date is required to be determined in accordance with Regulation 27 read with Regulation 35 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 ("CIRP Regulations"). The Administrator of RCAP duly appointed by the Hon''ble National Company Law Tribunal, Mumbai ("NCLT Mumbai Bench"), is obligated to appoint 2 registered valuers to determine such valuation and submit the report ("Valuation Report"). In furtherance thereof, the Administrator had appointed 2 registered valuers who have submitted their report. As per Ind AS 36- "Impairment of Assets", impairment testing of assets is to be conducted on an annual basis. On completion of the CIRP, the Company will consider carrying out a comprehensive review of all the assets including investments, other assets and intangible assets, liabilities and accordingly provide for impairment loss on assets and write back of liabilities, if any.
Subject to the above,the Company makes estimates and assumptions that affect the amounts recognised in the Standalone Financial Statements, and the carrying amounts of assets and liabilities within the next financial year. Estimates and judgements are continually evaluated and are based on management''s experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Management also makes certain judgements, apart from those involving estimations, in the process of applying the accounting policies. Judgements that have the most significant effect on the amounts recognised in the Standalone Financial Statements and estimates that can cause a significant adjustment to the carrying amount of assets and liabilities within the next financial year include the following:
3.1 Estimation of fair value of unlisted securities
The fair value of financial instruments is ascertained in accordance with IND AS 107 as per the fair value hierarchy described in note no. 48.
3.2 Effective interest rate method
The Company recognises interest income/expense using the effective interest rate, i.e., a rate that represents the best estimate of a constant rate of return over the expected life of the loans. The effective interest method also accounts for the effect of potentially different interest rates at various stages and other characteristics of the product life cycle (including prepayments and penalty interest and charges).
This estimation, by nature, requires an element of judgement regarding the expected behavior and life-cycle of the instruments, as well expected changes to India''s base rate and other fee income/expense that are integral parts of the instrument.
3.3 Impairment of financial assets using the expected credit loss method
The impairment provisions for financial assets are based on assumptions about risk of default and expected loss rates. The Company uses judgement in making these assumptions and selecting the inputs to the impairment calculation, based on the Company''s history, existing market conditions as well as forward looking estimates at the end of each reporting period.
3.4 Current tax
Provision for current tax is made after taking into consideration benefits admissible under the provisions of the Income Tax Act, 1961. Minimum Alternative Tax credit entitlement is recognised where there is convincing evidence that the same can be realised in future.
3.5 Deferred tax
The recognition of deferred tax assets is based upon whether it is more likely than not that sufficient and suitable taxable profits will be available in the future against which the reversal of temporary differences can be deducted. To determine the future taxable profits, reference is made to the latest available profit forecasts. Where the temporary differences are related to losses, relevant tax law is considered to determine the availability of the losses to offset against the future taxable profits. Recognition therefore involves judgement regarding the future financial performance of the particular legal entity or tax group in which the deferred tax asset has been recognised.
3.6 Estimation of fair value of investments property
The Company carries out the valuation activity to assess fair value of its Investment in land and property. Accordingly, fair value estimates for investment in land and property is classified as level 3.
Mar 31, 2022
1 CORPORATE INFORMATION
Nippon Life India Asset Management Limited (''the Company'') was incorporated on February 24, 1995.
The Company''s principal activity is to act as an investment manager to Nippon India Mutual Fund (''the Fund'') and to provide Portfolio Management Services (''PMS'') and advisory services to clients under Securities and Exchange Board of India (SEBI) Regulations. The Company is registered with SEBI under the SEBI (Mutual Funds) Regulations, 1996.
The equity shares of the Company were listed on National Stock exchange of India Limited and Bombay Stock exchange Limited on November 6, 2017.
2 SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.
(i) Compliance with Ind AS
The financial statements comply in all material aspects with Indian Accounting Standards (Ind AS) notified under Section 133 of the Companies Act, 2013 (the Act) [Companies (Indian Accounting Standards) Rules, 2015] and other relevant provisions of the Act. The financial statements have been prepared on accural and going concern basis. The accounting policies are applied consistently to all the periods presented in the financial statements.
(ii) Historical cost convention
The financial statements have been prepared on a historical cost basis, except for the following assets and liabilities which have been measured at fair value:
a. Certain financial assets and liabilities (including derivatives instruments).
b. Defined benefit plans - plan assets and
c. Equity Settled share based payments
2.2 Property, Plant and Equipment
All items of property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset''s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognized when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred.
Property, Plant & Equipment which are significant to total cost of that item of Property plant & Equipment and having different useful life are accounted separately.
Depreciation methods, estimated useful lives & residual value:
Depreciation is calculated using the straight-line method to allocate their cost, net of their residual values, over their estimated useful lives or, in the case of certain leased furniture, fittings and equipment, the shorter lease term as follows:
The estimated useful lives for the different types of assets are:
|
Asset |
Useful Life |
|
Furniture and fixtures |
10 years |
|
Office equipment |
5 years |
|
IT equipments - computers & printers |
3 years |
|
Vehicles |
8 years |
Leasehold improvements are amortised over the primary period of the lease on straight-line basis or useful life of asset, whichever is lower.
The asset''s residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.
An asset''s carrying amount is written down immediately to its recoverable amount if the asset''s carrying amount is greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with carrying amount and are recognized in the statement of profit or loss.
The Company provides pro-rata depreciation from the day the asset is put to use and for any asset sold, till the date of sale.
Intangible assets are stated at cost of acquisition net of recoverable taxes, accumulated amortization and impairment losses, if any. Such costs include purchase price, borrowing cost, and any cost directly attributable to bringing the asset to its working condition for the intended use, net charges on foreign exchange contracts and adjustments arising from exchange rate variations attributable to the intangible assets.
Subsequent costs are included in the asset''s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the entity and cost can be measured reliably.
Gains or losses arising from derecognition of an Intangible Asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the statement of profit and loss when the asset is derecognised.
Acquisition of rights to manage and administer the schemes of Goldman Sachs Mutual Fund have been stated at cost net of impairment losses, if any.
Goodwill and intangible assets that have an indefinite useful life are not subject to amortization and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount
by which the asset''s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset''s fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or Groups of assets (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period.
The Company assesses at each balance sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset or the recoverable amount of the cash-generating unit to which the asset belongs is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognized in the statement of profit and loss. If at the balance sheet date there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of depreciable historical cost.
The Company has applied IND AS 116 using the partial retrospective approach.
The Company assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
The Company applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. The Group recognizes lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets.
Right of use assets
The Company recognizes right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognized, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease term and the estimated useful lives of the assets.
At the commencement date of the lease, the Company recognizes lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees.
In calculating the present value of lease payments, the Company uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the lease payments (e.g., changes to future payments resulting from a change in an index or rate used to determine such lease payments) or a change in the assessment of an option to purchase the underlying asset.
Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision Maker.
The power to assess the financial performance and position of the Company and make strategic decisions is vested in the Executive Director who has been identified as the Chief Operating Decisions Maker.
2.7 Foreign Currency Translation
Transactions in foreign currencies are recorded at the exchange rate prevailing on the date of transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency closing rates of exchange at the reporting date.
Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates are generally recognized in profit or loss.
Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was measured. The gain or loss arising on translation of non -monetary items measured at fair value is treated in line with the recognition of the gain or loss on the change in fair value of the item(i.e. translation differences on items whose fair value gain or loss is recognized in Other Comprehensive Income or Statement of Profit and Loss are also recognized in Other Comprehensive Income or Statement of Profit and Loss, respectively).
A. Initial Recognition and Measurement
All Financial Assets are initially recognized at fair value. Transaction Costs that are directly attributable to the acquisition or issue of Financial Assets, which are not at Fair Value Through Profit or Loss, are adjusted to the fair value on initial recognition. Purchase and sale of financial assets are recognized using trade date accounting.
B. Subsequent Measurement
Financial Assets measured at Amortized cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest (''SPPI''), and that are not designated at FVPL, are measured at amortized cost. The carrying amount of these assets is adjusted by any expected credit loss allowance recognized and measured as described in note 6. Interest income from these financial assets is recognized using the effective interest rate method.
Financial Assets measured at Fair Value Through Other Comprehensive Income: Financial assets that are held for collection of contractual cash flows and for selling
the assets, where the assets'' cash flows represent solely payments of principal and interest, and that are not designated at FVPL, are measured at fair value through other comprehensive income. Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains and losses on the instrument''s amortized cost which are recognized in profit or loss. When the financial asset is derecognized, the cumulative gain or loss previously recognized in OCI is reclassified from equity to profit or loss. Interest income from these financial assets is included in ''Interest income'' using the effective interest rate method.
Financial Assets measures at Fair Value Through Profit or Loss: Assets that do not meet the criteria for amortized cost or FVOCI are measured at fair value through profit or loss. A gain or loss on a debt investment that is subsequently measured at fair value through profit or loss and is not part of a hedging relationship is recognized in profit or loss in the period in which it arises, unless it arises from debt instruments that were designated at fair value or which are not held for trading. Interest income from these financial assets is included in ''Interest income'' using the effective interest rate method.
C. Equity instruments
All equity investments are measured at fair value with value changes recognized in statement of profit and loss, except for those equity investments for which the Company has elected to present the value changes in ''Other Comprehensive Income'' .
Changes in the fair value of financial assets at fair value through profit or loss are recognized in net gain/loss on fair value changes in the statement of profit or loss. Impairment losses (and reversal of impairment losses) on equity investments measured at FVOCI are not reported separately from other changes in fair value.
D. Impairment of Financial Asset
The Company assesses on a forward looking basis the expected credit losses (ECL) associated with its debt instruments carried at amortized cost and with the exposure arising from loan commitments and financial guarantee contracts. The Company recognizes a loss allowance for such losses at each reporting date. The measurement of ECL reflects:
- An unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes;
- The time value of money; and
- Reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions and forecasts of future economic conditions.
The Company recognizes loss allowance using the expected credit loss (ECL) model for the financial assets which are not fair valued through profit or loss. ECL is measured at an amount equal to the 12 months ECL, unless there has been a significant increase in credit risk from initial recognition in which case those are measured at lifetime ECL. The amount of expected credit losses ( or reversal) that is required to adjust
the loss allowance at the reporting date to the amount that is required to be recognized, is recognized as an expense in the statement of profit or loss.
A. Initial Recognition
All Financial liabilities are recognized at fair value and in case of borrowing, net of directly attributable cost. Fees of recurring nature are directly recognized in the statement of profit and loss as finance cost.
B. Subsequent measurement
Financial liabilities are carried at amortized cost using the effective interest method.
For trade and other payables maturing within one year from the balance sheet date, the carrying amounts approximate fair value due to the short maturity of these instruments.
C. Derecognition
Financial liabilities are derecognized when they are extinguished i.e. when the obligation specified in the contract is discharged, cancelled or expires.
2.10 Financial guarantee contracts
Financial guarantee contracts are contracts that require the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due, in accordance with the terms of a debt instrument.
Financial guarantee contracts are initially measured at fair value and subsequently measured at the higher of:
i. The amount of the loss allowance; and
ii. The premium received on initial recognition less income recognized in accordance with the principles of Ind AS 115.
Revenue is measured at fair value of the consideration received or receivable. Revenue is recognized when (or as) the Company satisfies a performance obligation by transferring a promised good or service (i.e. an asset) to a customer. An asset is transferred when (or as) the customer obtains control of that asset.
When (or as) a performance obligation is satisfied, the Company recognizes as revenue the amount of the transaction price (excluding estimates of variable consideration) that is allocated to that performance obligation.
The Company applies the five-step approach for recognition of revenue:
i. Identification of contract(s) with customers;
ii. Identification of the separate performance obligations in the contract;
iii. Determination of transaction price;
iv. Allocation of transaction price to the separate performance obligations; and
v. Recognition of revenue when (or as) each performance obligation is satisfied.
Revenue Recognition For different heads of Income are as under:
(i) Investment Management Fees (net of tax)
Investment Management fees are recognized on an accrual basis in accordance with Investment Management Agreement and SEBI (Mutual Fund) Regulations, 1996 based on average assets under management (AUM) of Nippon India Mutual Fund schemes.
(ii) Advisory Fees (net of tax)
Advisory fees are recognized on an accrual basis in accordance with agreement entered into with respective investment managers / advisors.
(iii) Portfolio Management Fees (net of tax)
Portfolio Management fees are recognized on an accrual basis in accordance with Portfolio Management Agreement entered with respective clients.
(iv) Interest income
Interest income is recognized using the effective interest rate.
(v) Dividend income
Dividend income is recognized in the statement of profit or loss on the date that the Company''s right to receive payment is established, it is probable that the economic benefits associated with the dividend will flow to the entity and the amount of dividend can be reliably measured. This is generally when the Shareholders approve the dividend.
The tax expense for the period comprises of current tax and deferred income tax. Tax is recognized in Statement of Profit and Loss, except to the extent that it relates to items recognized in the Other Comprehensive Income or in Equity. In which case, the tax is also recognized in Other Comprehensive Income or Equity.
Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the Income Tax Authorities, based on tax rates and laws that are enacted at the Balance sheet date.
Deferred tax is recognized on temporary differences arising between carrying amounts of asset and liabilities in financial statements and corresponding tax bases used in the computation of taxable profit.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on the tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The carrying amount of deferred tax liabilities and assets are reviewed at the end of each reporting period.
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 overdraft.
2.14 New fund offer expenses of mutual fund and PMS schemes
Expenses relating to new fund offer of mutual fund and PMS schemes are charged in the statement of profit and loss in the year in which such expenses are incurred.
2.15 Fund and commission expenses
Prior to October 21,2018, certain scheme related expenses and commission were being borne by the Company in accordance with circulars and guidelines issues by SEBI and the Association of Mutual Funds in India (AMFI). Commission paid for future period for the mutual fund schemes (including for Equity Linked Savings Schemes) until October 21, 2018 is treated as prepaid expenses and is amortised on the contractual period and charged to Statement of Profit and Loss account unless considered recoverable from schemes.Pursuant to circulars issued by SEBI in this regard, after October 21, 2018, these expenses, subject to some exceptions, are being borne by the mutual fund schemes.
Commission is paid to the brokers for Portfolio Management and other services as per the terms of agreement entered into with respective brokers. In case of certain portfolio management schemes and other services, the brokerage expenses are amortised over the tenure of the product or commitment period. Unamortised brokerage is treated as Non-Financial Assets considering the normal operating cycle of the Company.
2.16 Off-setting Financial Instruments
Financial assets and liabilities are offset and the net amount is reported in the balance sheet where there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the Company or the counterparty.
Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to passage of time is recognized as a finance cost.
2.18 Employee-Benefits Expense
(i) Short-term Employee Benefits
The undiscounted amount of short term employee benefits expected to be paid in exchange for the services rendered by employees are recognized as an expense during the period when the employees render the service.
(ii) Post-employment obligations Defined contribution plans
The Company recognizes contribution payable to provident fund scheme as an expense, when the employee renders the related service. If the contribution payable to the scheme for service received before the balance sheet date exceeds the contribution already paid, the deficit payable to the scheme is recognized as a liability after deducting the contribution already paid. If the contribution already paid exceeds the contribution due for services received before the balance sheet date, then excess is recognized as an asset.
Defined benefit plans
The liability or asset recognized in the balance sheet in respect of defined benefit gratuity plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by actuaries using the projected unit credit method.
The present value of the defined benefit obligation denominated in INR is determined by discounting the estimated future cash outflows by reference to market yields at the end of the reporting period on government bonds that have terms approximating to the terms of the related obligation. The estimated future payments which are denominated in a currency other than INR, are discounted using market yields determined by reference to high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms approximating to the terms of the related obligation.
The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. This cost is included in employee benefit expense in the statement of profit or loss.
Re-measurement gains and losses arising from experience adjustments and changes in actuarial assumptions are recognized in the period in which they occur, directly in other comprehensive income. They are included in retained earnings in the statement of changes in equity and in the balance sheet.
(iii) Other long-term employee benefit obligations Leave encashment
The liabilities for earned leave are not expected to be settled wholly within 12 months after the end of the period in which the employees render the related service. They are therefore measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method. The benefits are discounted using the appropriate market yields at the end of the reporting period that have terms approximating to the terms of the related obligation. Remeasurements as a result of experience adjustments and changes in actuarial assumptions are recognized in the statement of profit or loss.
As a long-term incentive plan to employees, the Company has initiated Phantom Stock Option Plan which are cash settlement rights where the employees are entitled to get cash compensation based on agreed formulae. The employees are entitled to receive cash payment equivalent to appreciation in the value over the defined base price. The present value of the obligation under such plan is determined based on actuarial valuation.
Employee Stock Option Scheme (ESOS)
Equity settled share based payments to employees and others providing similar services are measured at fair value of the equity instruments at the grant date. Details regarding the determination of the fair value of equity settled share based payments transactions are set out in note 28.
The fair value determined at the grant date of the equity settled share based payments is expensed on a straight line basis over the vesting period, based on the Company''s estimate of equity instruments that will eventually vest, with a corresponding increase in equity. At the end of each reporting period, the Company revives its estimate of the number of equity instruments expected to vest. The impact of the revision of original estimates, if any, is recognized in Statement of profit and loss such that the cumulative expenses reflect the revised estimate, with a corresponding adjustment to Share based options outstanding account.
The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share.
Reliance Capital Asset Management Employees Benefits Trust
The Reliance Capital Asset Management Employees Benefit Trust is administered by the Company. The Company treats the trust as its extension and is consolidated in Company''s financial statements. There are no shares pending to be allotted in the Trust.
a) Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to owners of the Company by the weighted average number of equity shares outstanding during the financial year, adjusted for bonus element in equity shares issued during the year.
b) Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential equity shares, and the weighted average number of additional equity shares that would have been outstanding assuming the conversion of all dilutive potential equity shares.
All amounts disclosed in the financial statements and notes have been rounded off to the nearest crore as per the requirements of Schedule III, unless otherwise stated.
Mar 31, 2022
1 CORPORATE INFORMATION
Nippon Life India Asset Management Limited (''the Company'') was incorporated on February 24, 1995.
The Company''s principal activity is to act as an investment manager to Nippon India Mutual Fund (''the Fund'') and to provide Portfolio Management Services (''PMS'') and advisory services to clients under Securities and Exchange Board of India (SEBI) Regulations. The Company is registered with SEBI under the SEBI (Mutual Funds) Regulations, 1996.
The equity shares of the Company were listed on National Stock exchange of India Limited and Bombay Stock exchange Limited on November 6, 2017.
2 SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.
(i) Compliance with Ind AS
The financial statements comply in all material aspects with Indian Accounting Standards (Ind AS) notified under Section 133 of the Companies Act, 2013 (the Act) [Companies (Indian Accounting Standards) Rules, 2015] and other relevant provisions of the Act. The financial statements have been prepared on accural and going concern basis. The accounting policies are applied consistently to all the periods presented in the financial statements.
(ii) Historical cost convention
The financial statements have been prepared on a historical cost basis, except for the following assets and liabilities which have been measured at fair value:
a. Certain financial assets and liabilities (including derivatives instruments).
b. Defined benefit plans - plan assets and
c. Equity Settled share based payments
2.2 Property, Plant and Equipment
All items of property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset''s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognized when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred.
Property, Plant & Equipment which are significant to total cost of that item of Property plant & Equipment and having different useful life are accounted separately.
Depreciation methods, estimated useful lives & residual value:
Depreciation is calculated using the straight-line method to allocate their cost, net of their residual values, over their estimated useful lives or, in the case of certain leased furniture, fittings and equipment, the shorter lease term as follows:
The estimated useful lives for the different types of assets are:
|
Asset |
Useful Life |
|
Furniture and fixtures |
10 years |
|
Office equipment |
5 years |
|
IT equipments - computers & printers |
3 years |
|
Vehicles |
8 years |
Leasehold improvements are amortised over the primary period of the lease on straight-line basis or useful life of asset, whichever is lower.
The asset''s residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.
An asset''s carrying amount is written down immediately to its recoverable amount if the asset''s carrying amount is greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with carrying amount and are recognized in the statement of profit or loss.
The Company provides pro-rata depreciation from the day the asset is put to use and for any asset sold, till the date of sale.
Intangible assets are stated at cost of acquisition net of recoverable taxes, accumulated amortization and impairment losses, if any. Such costs include purchase price, borrowing cost, and any cost directly attributable to bringing the asset to its working condition for the intended use, net charges on foreign exchange contracts and adjustments arising from exchange rate variations attributable to the intangible assets.
Subsequent costs are included in the asset''s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the entity and cost can be measured reliably.
Gains or losses arising from derecognition of an Intangible Asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the statement of profit and loss when the asset is derecognised.
Acquisition of rights to manage and administer the schemes of Goldman Sachs Mutual Fund have been stated at cost net of impairment losses, if any.
Goodwill and intangible assets that have an indefinite useful life are not subject to amortization and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount
by which the asset''s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset''s fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or Groups of assets (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period.
The Company assesses at each balance sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset or the recoverable amount of the cash-generating unit to which the asset belongs is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognized in the statement of profit and loss. If at the balance sheet date there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of depreciable historical cost.
The Company has applied IND AS 116 using the partial retrospective approach.
The Company assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
The Company applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. The Group recognizes lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets.
Right of use assets
The Company recognizes right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognized, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease term and the estimated useful lives of the assets.
At the commencement date of the lease, the Company recognizes lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees.
In calculating the present value of lease payments, the Company uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the lease payments (e.g., changes to future payments resulting from a change in an index or rate used to determine such lease payments) or a change in the assessment of an option to purchase the underlying asset.
Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision Maker.
The power to assess the financial performance and position of the Company and make strategic decisions is vested in the Executive Director who has been identified as the Chief Operating Decisions Maker.
2.7 Foreign Currency Translation
Transactions in foreign currencies are recorded at the exchange rate prevailing on the date of transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency closing rates of exchange at the reporting date.
Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates are generally recognized in profit or loss.
Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was measured. The gain or loss arising on translation of non -monetary items measured at fair value is treated in line with the recognition of the gain or loss on the change in fair value of the item(i.e. translation differences on items whose fair value gain or loss is recognized in Other Comprehensive Income or Statement of Profit and Loss are also recognized in Other Comprehensive Income or Statement of Profit and Loss, respectively).
A. Initial Recognition and Measurement
All Financial Assets are initially recognized at fair value. Transaction Costs that are directly attributable to the acquisition or issue of Financial Assets, which are not at Fair Value Through Profit or Loss, are adjusted to the fair value on initial recognition. Purchase and sale of financial assets are recognized using trade date accounting.
B. Subsequent Measurement
Financial Assets measured at Amortized cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest (''SPPI''), and that are not designated at FVPL, are measured at amortized cost. The carrying amount of these assets is adjusted by any expected credit loss allowance recognized and measured as described in note 6. Interest income from these financial assets is recognized using the effective interest rate method.
Financial Assets measured at Fair Value Through Other Comprehensive Income: Financial assets that are held for collection of contractual cash flows and for selling
the assets, where the assets'' cash flows represent solely payments of principal and interest, and that are not designated at FVPL, are measured at fair value through other comprehensive income. Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains and losses on the instrument''s amortized cost which are recognized in profit or loss. When the financial asset is derecognized, the cumulative gain or loss previously recognized in OCI is reclassified from equity to profit or loss. Interest income from these financial assets is included in ''Interest income'' using the effective interest rate method.
Financial Assets measures at Fair Value Through Profit or Loss: Assets that do not meet the criteria for amortized cost or FVOCI are measured at fair value through profit or loss. A gain or loss on a debt investment that is subsequently measured at fair value through profit or loss and is not part of a hedging relationship is recognized in profit or loss in the period in which it arises, unless it arises from debt instruments that were designated at fair value or which are not held for trading. Interest income from these financial assets is included in ''Interest income'' using the effective interest rate method.
C. Equity instruments
All equity investments are measured at fair value with value changes recognized in statement of profit and loss, except for those equity investments for which the Company has elected to present the value changes in ''Other Comprehensive Income'' .
Changes in the fair value of financial assets at fair value through profit or loss are recognized in net gain/loss on fair value changes in the statement of profit or loss. Impairment losses (and reversal of impairment losses) on equity investments measured at FVOCI are not reported separately from other changes in fair value.
D. Impairment of Financial Asset
The Company assesses on a forward looking basis the expected credit losses (ECL) associated with its debt instruments carried at amortized cost and with the exposure arising from loan commitments and financial guarantee contracts. The Company recognizes a loss allowance for such losses at each reporting date. The measurement of ECL reflects:
- An unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes;
- The time value of money; and
- Reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions and forecasts of future economic conditions.
The Company recognizes loss allowance using the expected credit loss (ECL) model for the financial assets which are not fair valued through profit or loss. ECL is measured at an amount equal to the 12 months ECL, unless there has been a significant increase in credit risk from initial recognition in which case those are measured at lifetime ECL. The amount of expected credit losses ( or reversal) that is required to adjust
the loss allowance at the reporting date to the amount that is required to be recognized, is recognized as an expense in the statement of profit or loss.
A. Initial Recognition
All Financial liabilities are recognized at fair value and in case of borrowing, net of directly attributable cost. Fees of recurring nature are directly recognized in the statement of profit and loss as finance cost.
B. Subsequent measurement
Financial liabilities are carried at amortized cost using the effective interest method.
For trade and other payables maturing within one year from the balance sheet date, the carrying amounts approximate fair value due to the short maturity of these instruments.
C. Derecognition
Financial liabilities are derecognized when they are extinguished i.e. when the obligation specified in the contract is discharged, cancelled or expires.
2.10 Financial guarantee contracts
Financial guarantee contracts are contracts that require the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due, in accordance with the terms of a debt instrument.
Financial guarantee contracts are initially measured at fair value and subsequently measured at the higher of:
i. The amount of the loss allowance; and
ii. The premium received on initial recognition less income recognized in accordance with the principles of Ind AS 115.
Revenue is measured at fair value of the consideration received or receivable. Revenue is recognized when (or as) the Company satisfies a performance obligation by transferring a promised good or service (i.e. an asset) to a customer. An asset is transferred when (or as) the customer obtains control of that asset.
When (or as) a performance obligation is satisfied, the Company recognizes as revenue the amount of the transaction price (excluding estimates of variable consideration) that is allocated to that performance obligation.
The Company applies the five-step approach for recognition of revenue:
i. Identification of contract(s) with customers;
ii. Identification of the separate performance obligations in the contract;
iii. Determination of transaction price;
iv. Allocation of transaction price to the separate performance obligations; and
v. Recognition of revenue when (or as) each performance obligation is satisfied.
Revenue Recognition For different heads of Income are as under:
(i) Investment Management Fees (net of tax)
Investment Management fees are recognized on an accrual basis in accordance with Investment Management Agreement and SEBI (Mutual Fund) Regulations, 1996 based on average assets under management (AUM) of Nippon India Mutual Fund schemes.
(ii) Advisory Fees (net of tax)
Advisory fees are recognized on an accrual basis in accordance with agreement entered into with respective investment managers / advisors.
(iii) Portfolio Management Fees (net of tax)
Portfolio Management fees are recognized on an accrual basis in accordance with Portfolio Management Agreement entered with respective clients.
(iv) Interest income
Interest income is recognized using the effective interest rate.
(v) Dividend income
Dividend income is recognized in the statement of profit or loss on the date that the Company''s right to receive payment is established, it is probable that the economic benefits associated with the dividend will flow to the entity and the amount of dividend can be reliably measured. This is generally when the Shareholders approve the dividend.
The tax expense for the period comprises of current tax and deferred income tax. Tax is recognized in Statement of Profit and Loss, except to the extent that it relates to items recognized in the Other Comprehensive Income or in Equity. In which case, the tax is also recognized in Other Comprehensive Income or Equity.
Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the Income Tax Authorities, based on tax rates and laws that are enacted at the Balance sheet date.
Deferred tax is recognized on temporary differences arising between carrying amounts of asset and liabilities in financial statements and corresponding tax bases used in the computation of taxable profit.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on the tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The carrying amount of deferred tax liabilities and assets are reviewed at the end of each reporting period.
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 overdraft.
2.14 New fund offer expenses of mutual fund and PMS schemes
Expenses relating to new fund offer of mutual fund and PMS schemes are charged in the statement of profit and loss in the year in which such expenses are incurred.
2.15 Fund and commission expenses
Prior to October 21,2018, certain scheme related expenses and commission were being borne by the Company in accordance with circulars and guidelines issues by SEBI and the Association of Mutual Funds in India (AMFI). Commission paid for future period for the mutual fund schemes (including for Equity Linked Savings Schemes) until October 21, 2018 is treated as prepaid expenses and is amortised on the contractual period and charged to Statement of Profit and Loss account unless considered recoverable from schemes.Pursuant to circulars issued by SEBI in this regard, after October 21, 2018, these expenses, subject to some exceptions, are being borne by the mutual fund schemes.
Commission is paid to the brokers for Portfolio Management and other services as per the terms of agreement entered into with respective brokers. In case of certain portfolio management schemes and other services, the brokerage expenses are amortised over the tenure of the product or commitment period. Unamortised brokerage is treated as Non-Financial Assets considering the normal operating cycle of the Company.
2.16 Off-setting Financial Instruments
Financial assets and liabilities are offset and the net amount is reported in the balance sheet where there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the Company or the counterparty.
Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to passage of time is recognized as a finance cost.
2.18 Employee-Benefits Expense
(i) Short-term Employee Benefits
The undiscounted amount of short term employee benefits expected to be paid in exchange for the services rendered by employees are recognized as an expense during the period when the employees render the service.
(ii) Post-employment obligations Defined contribution plans
The Company recognizes contribution payable to provident fund scheme as an expense, when the employee renders the related service. If the contribution payable to the scheme for service received before the balance sheet date exceeds the contribution already paid, the deficit payable to the scheme is recognized as a liability after deducting the contribution already paid. If the contribution already paid exceeds the contribution due for services received before the balance sheet date, then excess is recognized as an asset.
Defined benefit plans
The liability or asset recognized in the balance sheet in respect of defined benefit gratuity plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by actuaries using the projected unit credit method.
The present value of the defined benefit obligation denominated in INR is determined by discounting the estimated future cash outflows by reference to market yields at the end of the reporting period on government bonds that have terms approximating to the terms of the related obligation. The estimated future payments which are denominated in a currency other than INR, are discounted using market yields determined by reference to high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms approximating to the terms of the related obligation.
The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. This cost is included in employee benefit expense in the statement of profit or loss.
Re-measurement gains and losses arising from experience adjustments and changes in actuarial assumptions are recognized in the period in which they occur, directly in other comprehensive income. They are included in retained earnings in the statement of changes in equity and in the balance sheet.
(iii) Other long-term employee benefit obligations Leave encashment
The liabilities for earned leave are not expected to be settled wholly within 12 months after the end of the period in which the employees render the related service. They are therefore measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method. The benefits are discounted using the appropriate market yields at the end of the reporting period that have terms approximating to the terms of the related obligation. Remeasurements as a result of experience adjustments and changes in actuarial assumptions are recognized in the statement of profit or loss.
As a long-term incentive plan to employees, the Company has initiated Phantom Stock Option Plan which are cash settlement rights where the employees are entitled to get cash compensation based on agreed formulae. The employees are entitled to receive cash payment equivalent to appreciation in the value over the defined base price. The present value of the obligation under such plan is determined based on actuarial valuation.
Employee Stock Option Scheme (ESOS)
Equity settled share based payments to employees and others providing similar services are measured at fair value of the equity instruments at the grant date. Details regarding the determination of the fair value of equity settled share based payments transactions are set out in note 28.
The fair value determined at the grant date of the equity settled share based payments is expensed on a straight line basis over the vesting period, based on the Company''s estimate of equity instruments that will eventually vest, with a corresponding increase in equity. At the end of each reporting period, the Company revives its estimate of the number of equity instruments expected to vest. The impact of the revision of original estimates, if any, is recognized in Statement of profit and loss such that the cumulative expenses reflect the revised estimate, with a corresponding adjustment to Share based options outstanding account.
The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share.
Reliance Capital Asset Management Employees Benefits Trust
The Reliance Capital Asset Management Employees Benefit Trust is administered by the Company. The Company treats the trust as its extension and is consolidated in Company''s financial statements. There are no shares pending to be allotted in the Trust.
a) Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to owners of the Company by the weighted average number of equity shares outstanding during the financial year, adjusted for bonus element in equity shares issued during the year.
b) Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential equity shares, and the weighted average number of additional equity shares that would have been outstanding assuming the conversion of all dilutive potential equity shares.
All amounts disclosed in the financial statements and notes have been rounded off to the nearest crore as per the requirements of Schedule III, unless otherwise stated.
Mar 31, 2022
1 CORPORATE INFORMATION
Nippon Life India Asset Management Limited (''the Company'') was incorporated on February 24, 1995.
The Company''s principal activity is to act as an investment manager to Nippon India Mutual Fund (''the Fund'') and to provide Portfolio Management Services (''PMS'') and advisory services to clients under Securities and Exchange Board of India (SEBI) Regulations. The Company is registered with SEBI under the SEBI (Mutual Funds) Regulations, 1996.
The equity shares of the Company were listed on National Stock exchange of India Limited and Bombay Stock exchange Limited on November 6, 2017.
2 SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.
(i) Compliance with Ind AS
The financial statements comply in all material aspects with Indian Accounting Standards (Ind AS) notified under Section 133 of the Companies Act, 2013 (the Act) [Companies (Indian Accounting Standards) Rules, 2015] and other relevant provisions of the Act. The financial statements have been prepared on accural and going concern basis. The accounting policies are applied consistently to all the periods presented in the financial statements.
(ii) Historical cost convention
The financial statements have been prepared on a historical cost basis, except for the following assets and liabilities which have been measured at fair value:
a. Certain financial assets and liabilities (including derivatives instruments).
b. Defined benefit plans - plan assets and
c. Equity Settled share based payments
2.2 Property, Plant and Equipment
All items of property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset''s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognized when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred.
Property, Plant & Equipment which are significant to total cost of that item of Property plant & Equipment and having different useful life are accounted separately.
Depreciation methods, estimated useful lives & residual value:
Depreciation is calculated using the straight-line method to allocate their cost, net of their residual values, over their estimated useful lives or, in the case of certain leased furniture, fittings and equipment, the shorter lease term as follows:
The estimated useful lives for the different types of assets are:
|
Asset |
Useful Life |
|
Furniture and fixtures |
10 years |
|
Office equipment |
5 years |
|
IT equipments - computers & printers |
3 years |
|
Vehicles |
8 years |
Leasehold improvements are amortised over the primary period of the lease on straight-line basis or useful life of asset, whichever is lower.
The asset''s residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.
An asset''s carrying amount is written down immediately to its recoverable amount if the asset''s carrying amount is greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with carrying amount and are recognized in the statement of profit or loss.
The Company provides pro-rata depreciation from the day the asset is put to use and for any asset sold, till the date of sale.
Intangible assets are stated at cost of acquisition net of recoverable taxes, accumulated amortization and impairment losses, if any. Such costs include purchase price, borrowing cost, and any cost directly attributable to bringing the asset to its working condition for the intended use, net charges on foreign exchange contracts and adjustments arising from exchange rate variations attributable to the intangible assets.
Subsequent costs are included in the asset''s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the entity and cost can be measured reliably.
Gains or losses arising from derecognition of an Intangible Asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the statement of profit and loss when the asset is derecognised.
Acquisition of rights to manage and administer the schemes of Goldman Sachs Mutual Fund have been stated at cost net of impairment losses, if any.
Goodwill and intangible assets that have an indefinite useful life are not subject to amortization and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount
by which the asset''s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset''s fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or Groups of assets (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period.
The Company assesses at each balance sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset or the recoverable amount of the cash-generating unit to which the asset belongs is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognized in the statement of profit and loss. If at the balance sheet date there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of depreciable historical cost.
The Company has applied IND AS 116 using the partial retrospective approach.
The Company assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
The Company applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. The Group recognizes lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets.
Right of use assets
The Company recognizes right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognized, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease term and the estimated useful lives of the assets.
At the commencement date of the lease, the Company recognizes lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees.
In calculating the present value of lease payments, the Company uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the lease payments (e.g., changes to future payments resulting from a change in an index or rate used to determine such lease payments) or a change in the assessment of an option to purchase the underlying asset.
Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision Maker.
The power to assess the financial performance and position of the Company and make strategic decisions is vested in the Executive Director who has been identified as the Chief Operating Decisions Maker.
2.7 Foreign Currency Translation
Transactions in foreign currencies are recorded at the exchange rate prevailing on the date of transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency closing rates of exchange at the reporting date.
Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates are generally recognized in profit or loss.
Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was measured. The gain or loss arising on translation of non -monetary items measured at fair value is treated in line with the recognition of the gain or loss on the change in fair value of the item(i.e. translation differences on items whose fair value gain or loss is recognized in Other Comprehensive Income or Statement of Profit and Loss are also recognized in Other Comprehensive Income or Statement of Profit and Loss, respectively).
A. Initial Recognition and Measurement
All Financial Assets are initially recognized at fair value. Transaction Costs that are directly attributable to the acquisition or issue of Financial Assets, which are not at Fair Value Through Profit or Loss, are adjusted to the fair value on initial recognition. Purchase and sale of financial assets are recognized using trade date accounting.
B. Subsequent Measurement
Financial Assets measured at Amortized cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest (''SPPI''), and that are not designated at FVPL, are measured at amortized cost. The carrying amount of these assets is adjusted by any expected credit loss allowance recognized and measured as described in note 6. Interest income from these financial assets is recognized using the effective interest rate method.
Financial Assets measured at Fair Value Through Other Comprehensive Income: Financial assets that are held for collection of contractual cash flows and for selling
the assets, where the assets'' cash flows represent solely payments of principal and interest, and that are not designated at FVPL, are measured at fair value through other comprehensive income. Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains and losses on the instrument''s amortized cost which are recognized in profit or loss. When the financial asset is derecognized, the cumulative gain or loss previously recognized in OCI is reclassified from equity to profit or loss. Interest income from these financial assets is included in ''Interest income'' using the effective interest rate method.
Financial Assets measures at Fair Value Through Profit or Loss: Assets that do not meet the criteria for amortized cost or FVOCI are measured at fair value through profit or loss. A gain or loss on a debt investment that is subsequently measured at fair value through profit or loss and is not part of a hedging relationship is recognized in profit or loss in the period in which it arises, unless it arises from debt instruments that were designated at fair value or which are not held for trading. Interest income from these financial assets is included in ''Interest income'' using the effective interest rate method.
C. Equity instruments
All equity investments are measured at fair value with value changes recognized in statement of profit and loss, except for those equity investments for which the Company has elected to present the value changes in ''Other Comprehensive Income'' .
Changes in the fair value of financial assets at fair value through profit or loss are recognized in net gain/loss on fair value changes in the statement of profit or loss. Impairment losses (and reversal of impairment losses) on equity investments measured at FVOCI are not reported separately from other changes in fair value.
D. Impairment of Financial Asset
The Company assesses on a forward looking basis the expected credit losses (ECL) associated with its debt instruments carried at amortized cost and with the exposure arising from loan commitments and financial guarantee contracts. The Company recognizes a loss allowance for such losses at each reporting date. The measurement of ECL reflects:
- An unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes;
- The time value of money; and
- Reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions and forecasts of future economic conditions.
The Company recognizes loss allowance using the expected credit loss (ECL) model for the financial assets which are not fair valued through profit or loss. ECL is measured at an amount equal to the 12 months ECL, unless there has been a significant increase in credit risk from initial recognition in which case those are measured at lifetime ECL. The amount of expected credit losses ( or reversal) that is required to adjust
the loss allowance at the reporting date to the amount that is required to be recognized, is recognized as an expense in the statement of profit or loss.
A. Initial Recognition
All Financial liabilities are recognized at fair value and in case of borrowing, net of directly attributable cost. Fees of recurring nature are directly recognized in the statement of profit and loss as finance cost.
B. Subsequent measurement
Financial liabilities are carried at amortized cost using the effective interest method.
For trade and other payables maturing within one year from the balance sheet date, the carrying amounts approximate fair value due to the short maturity of these instruments.
C. Derecognition
Financial liabilities are derecognized when they are extinguished i.e. when the obligation specified in the contract is discharged, cancelled or expires.
2.10 Financial guarantee contracts
Financial guarantee contracts are contracts that require the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due, in accordance with the terms of a debt instrument.
Financial guarantee contracts are initially measured at fair value and subsequently measured at the higher of:
i. The amount of the loss allowance; and
ii. The premium received on initial recognition less income recognized in accordance with the principles of Ind AS 115.
Revenue is measured at fair value of the consideration received or receivable. Revenue is recognized when (or as) the Company satisfies a performance obligation by transferring a promised good or service (i.e. an asset) to a customer. An asset is transferred when (or as) the customer obtains control of that asset.
When (or as) a performance obligation is satisfied, the Company recognizes as revenue the amount of the transaction price (excluding estimates of variable consideration) that is allocated to that performance obligation.
The Company applies the five-step approach for recognition of revenue:
i. Identification of contract(s) with customers;
ii. Identification of the separate performance obligations in the contract;
iii. Determination of transaction price;
iv. Allocation of transaction price to the separate performance obligations; and
v. Recognition of revenue when (or as) each performance obligation is satisfied.
Revenue Recognition For different heads of Income are as under:
(i) Investment Management Fees (net of tax)
Investment Management fees are recognized on an accrual basis in accordance with Investment Management Agreement and SEBI (Mutual Fund) Regulations, 1996 based on average assets under management (AUM) of Nippon India Mutual Fund schemes.
(ii) Advisory Fees (net of tax)
Advisory fees are recognized on an accrual basis in accordance with agreement entered into with respective investment managers / advisors.
(iii) Portfolio Management Fees (net of tax)
Portfolio Management fees are recognized on an accrual basis in accordance with Portfolio Management Agreement entered with respective clients.
(iv) Interest income
Interest income is recognized using the effective interest rate.
(v) Dividend income
Dividend income is recognized in the statement of profit or loss on the date that the Company''s right to receive payment is established, it is probable that the economic benefits associated with the dividend will flow to the entity and the amount of dividend can be reliably measured. This is generally when the Shareholders approve the dividend.
The tax expense for the period comprises of current tax and deferred income tax. Tax is recognized in Statement of Profit and Loss, except to the extent that it relates to items recognized in the Other Comprehensive Income or in Equity. In which case, the tax is also recognized in Other Comprehensive Income or Equity.
Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the Income Tax Authorities, based on tax rates and laws that are enacted at the Balance sheet date.
Deferred tax is recognized on temporary differences arising between carrying amounts of asset and liabilities in financial statements and corresponding tax bases used in the computation of taxable profit.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on the tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The carrying amount of deferred tax liabilities and assets are reviewed at the end of each reporting period.
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 overdraft.
2.14 New fund offer expenses of mutual fund and PMS schemes
Expenses relating to new fund offer of mutual fund and PMS schemes are charged in the statement of profit and loss in the year in which such expenses are incurred.
2.15 Fund and commission expenses
Prior to October 21,2018, certain scheme related expenses and commission were being borne by the Company in accordance with circulars and guidelines issues by SEBI and the Association of Mutual Funds in India (AMFI). Commission paid for future period for the mutual fund schemes (including for Equity Linked Savings Schemes) until October 21, 2018 is treated as prepaid expenses and is amortised on the contractual period and charged to Statement of Profit and Loss account unless considered recoverable from schemes.Pursuant to circulars issued by SEBI in this regard, after October 21, 2018, these expenses, subject to some exceptions, are being borne by the mutual fund schemes.
Commission is paid to the brokers for Portfolio Management and other services as per the terms of agreement entered into with respective brokers. In case of certain portfolio management schemes and other services, the brokerage expenses are amortised over the tenure of the product or commitment period. Unamortised brokerage is treated as Non-Financial Assets considering the normal operating cycle of the Company.
2.16 Off-setting Financial Instruments
Financial assets and liabilities are offset and the net amount is reported in the balance sheet where there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the Company or the counterparty.
Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to passage of time is recognized as a finance cost.
2.18 Employee-Benefits Expense
(i) Short-term Employee Benefits
The undiscounted amount of short term employee benefits expected to be paid in exchange for the services rendered by employees are recognized as an expense during the period when the employees render the service.
(ii) Post-employment obligations Defined contribution plans
The Company recognizes contribution payable to provident fund scheme as an expense, when the employee renders the related service. If the contribution payable to the scheme for service received before the balance sheet date exceeds the contribution already paid, the deficit payable to the scheme is recognized as a liability after deducting the contribution already paid. If the contribution already paid exceeds the contribution due for services received before the balance sheet date, then excess is recognized as an asset.
Defined benefit plans
The liability or asset recognized in the balance sheet in respect of defined benefit gratuity plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by actuaries using the projected unit credit method.
The present value of the defined benefit obligation denominated in INR is determined by discounting the estimated future cash outflows by reference to market yields at the end of the reporting period on government bonds that have terms approximating to the terms of the related obligation. The estimated future payments which are denominated in a currency other than INR, are discounted using market yields determined by reference to high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms approximating to the terms of the related obligation.
The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. This cost is included in employee benefit expense in the statement of profit or loss.
Re-measurement gains and losses arising from experience adjustments and changes in actuarial assumptions are recognized in the period in which they occur, directly in other comprehensive income. They are included in retained earnings in the statement of changes in equity and in the balance sheet.
(iii) Other long-term employee benefit obligations Leave encashment
The liabilities for earned leave are not expected to be settled wholly within 12 months after the end of the period in which the employees render the related service. They are therefore measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method. The benefits are discounted using the appropriate market yields at the end of the reporting period that have terms approximating to the terms of the related obligation. Remeasurements as a result of experience adjustments and changes in actuarial assumptions are recognized in the statement of profit or loss.
As a long-term incentive plan to employees, the Company has initiated Phantom Stock Option Plan which are cash settlement rights where the employees are entitled to get cash compensation based on agreed formulae. The employees are entitled to receive cash payment equivalent to appreciation in the value over the defined base price. The present value of the obligation under such plan is determined based on actuarial valuation.
Employee Stock Option Scheme (ESOS)
Equity settled share based payments to employees and others providing similar services are measured at fair value of the equity instruments at the grant date. Details regarding the determination of the fair value of equity settled share based payments transactions are set out in note 28.
The fair value determined at the grant date of the equity settled share based payments is expensed on a straight line basis over the vesting period, based on the Company''s estimate of equity instruments that will eventually vest, with a corresponding increase in equity. At the end of each reporting period, the Company revives its estimate of the number of equity instruments expected to vest. The impact of the revision of original estimates, if any, is recognized in Statement of profit and loss such that the cumulative expenses reflect the revised estimate, with a corresponding adjustment to Share based options outstanding account.
The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share.
Reliance Capital Asset Management Employees Benefits Trust
The Reliance Capital Asset Management Employees Benefit Trust is administered by the Company. The Company treats the trust as its extension and is consolidated in Company''s financial statements. There are no shares pending to be allotted in the Trust.
a) Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to owners of the Company by the weighted average number of equity shares outstanding during the financial year, adjusted for bonus element in equity shares issued during the year.
b) Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential equity shares, and the weighted average number of additional equity shares that would have been outstanding assuming the conversion of all dilutive potential equity shares.
All amounts disclosed in the financial statements and notes have been rounded off to the nearest crore as per the requirements of Schedule III, unless otherwise stated.
Mar 31, 2022
1 CORPORATE INFORMATION
Nippon Life India Asset Management Limited (''the Company'') was incorporated on February 24, 1995.
The Company''s principal activity is to act as an investment manager to Nippon India Mutual Fund (''the Fund'') and to provide Portfolio Management Services (''PMS'') and advisory services to clients under Securities and Exchange Board of India (SEBI) Regulations. The Company is registered with SEBI under the SEBI (Mutual Funds) Regulations, 1996.
The equity shares of the Company were listed on National Stock exchange of India Limited and Bombay Stock exchange Limited on November 6, 2017.
2 SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.
(i) Compliance with Ind AS
The financial statements comply in all material aspects with Indian Accounting Standards (Ind AS) notified under Section 133 of the Companies Act, 2013 (the Act) [Companies (Indian Accounting Standards) Rules, 2015] and other relevant provisions of the Act. The financial statements have been prepared on accural and going concern basis. The accounting policies are applied consistently to all the periods presented in the financial statements.
(ii) Historical cost convention
The financial statements have been prepared on a historical cost basis, except for the following assets and liabilities which have been measured at fair value:
a. Certain financial assets and liabilities (including derivatives instruments).
b. Defined benefit plans - plan assets and
c. Equity Settled share based payments
2.2 Property, Plant and Equipment
All items of property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset''s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognized when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred.
Property, Plant & Equipment which are significant to total cost of that item of Property plant & Equipment and having different useful life are accounted separately.
Depreciation methods, estimated useful lives & residual value:
Depreciation is calculated using the straight-line method to allocate their cost, net of their residual values, over their estimated useful lives or, in the case of certain leased furniture, fittings and equipment, the shorter lease term as follows:
The estimated useful lives for the different types of assets are:
|
Asset |
Useful Life |
|
Furniture and fixtures |
10 years |
|
Office equipment |
5 years |
|
IT equipments - computers & printers |
3 years |
|
Vehicles |
8 years |
Leasehold improvements are amortised over the primary period of the lease on straight-line basis or useful life of asset, whichever is lower.
The asset''s residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.
An asset''s carrying amount is written down immediately to its recoverable amount if the asset''s carrying amount is greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with carrying amount and are recognized in the statement of profit or loss.
The Company provides pro-rata depreciation from the day the asset is put to use and for any asset sold, till the date of sale.
Intangible assets are stated at cost of acquisition net of recoverable taxes, accumulated amortization and impairment losses, if any. Such costs include purchase price, borrowing cost, and any cost directly attributable to bringing the asset to its working condition for the intended use, net charges on foreign exchange contracts and adjustments arising from exchange rate variations attributable to the intangible assets.
Subsequent costs are included in the asset''s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the entity and cost can be measured reliably.
Gains or losses arising from derecognition of an Intangible Asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the statement of profit and loss when the asset is derecognised.
Acquisition of rights to manage and administer the schemes of Goldman Sachs Mutual Fund have been stated at cost net of impairment losses, if any.
Goodwill and intangible assets that have an indefinite useful life are not subject to amortization and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount
by which the asset''s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset''s fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or Groups of assets (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period.
The Company assesses at each balance sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset or the recoverable amount of the cash-generating unit to which the asset belongs is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognized in the statement of profit and loss. If at the balance sheet date there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of depreciable historical cost.
The Company has applied IND AS 116 using the partial retrospective approach.
The Company assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
The Company applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. The Group recognizes lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets.
Right of use assets
The Company recognizes right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognized, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease term and the estimated useful lives of the assets.
At the commencement date of the lease, the Company recognizes lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees.
In calculating the present value of lease payments, the Company uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the lease payments (e.g., changes to future payments resulting from a change in an index or rate used to determine such lease payments) or a change in the assessment of an option to purchase the underlying asset.
Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision Maker.
The power to assess the financial performance and position of the Company and make strategic decisions is vested in the Executive Director who has been identified as the Chief Operating Decisions Maker.
2.7 Foreign Currency Translation
Transactions in foreign currencies are recorded at the exchange rate prevailing on the date of transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency closing rates of exchange at the reporting date.
Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates are generally recognized in profit or loss.
Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was measured. The gain or loss arising on translation of non -monetary items measured at fair value is treated in line with the recognition of the gain or loss on the change in fair value of the item(i.e. translation differences on items whose fair value gain or loss is recognized in Other Comprehensive Income or Statement of Profit and Loss are also recognized in Other Comprehensive Income or Statement of Profit and Loss, respectively).
A. Initial Recognition and Measurement
All Financial Assets are initially recognized at fair value. Transaction Costs that are directly attributable to the acquisition or issue of Financial Assets, which are not at Fair Value Through Profit or Loss, are adjusted to the fair value on initial recognition. Purchase and sale of financial assets are recognized using trade date accounting.
B. Subsequent Measurement
Financial Assets measured at Amortized cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest (''SPPI''), and that are not designated at FVPL, are measured at amortized cost. The carrying amount of these assets is adjusted by any expected credit loss allowance recognized and measured as described in note 6. Interest income from these financial assets is recognized using the effective interest rate method.
Financial Assets measured at Fair Value Through Other Comprehensive Income: Financial assets that are held for collection of contractual cash flows and for selling
the assets, where the assets'' cash flows represent solely payments of principal and interest, and that are not designated at FVPL, are measured at fair value through other comprehensive income. Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains and losses on the instrument''s amortized cost which are recognized in profit or loss. When the financial asset is derecognized, the cumulative gain or loss previously recognized in OCI is reclassified from equity to profit or loss. Interest income from these financial assets is included in ''Interest income'' using the effective interest rate method.
Financial Assets measures at Fair Value Through Profit or Loss: Assets that do not meet the criteria for amortized cost or FVOCI are measured at fair value through profit or loss. A gain or loss on a debt investment that is subsequently measured at fair value through profit or loss and is not part of a hedging relationship is recognized in profit or loss in the period in which it arises, unless it arises from debt instruments that were designated at fair value or which are not held for trading. Interest income from these financial assets is included in ''Interest income'' using the effective interest rate method.
C. Equity instruments
All equity investments are measured at fair value with value changes recognized in statement of profit and loss, except for those equity investments for which the Company has elected to present the value changes in ''Other Comprehensive Income'' .
Changes in the fair value of financial assets at fair value through profit or loss are recognized in net gain/loss on fair value changes in the statement of profit or loss. Impairment losses (and reversal of impairment losses) on equity investments measured at FVOCI are not reported separately from other changes in fair value.
D. Impairment of Financial Asset
The Company assesses on a forward looking basis the expected credit losses (ECL) associated with its debt instruments carried at amortized cost and with the exposure arising from loan commitments and financial guarantee contracts. The Company recognizes a loss allowance for such losses at each reporting date. The measurement of ECL reflects:
- An unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes;
- The time value of money; and
- Reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions and forecasts of future economic conditions.
The Company recognizes loss allowance using the expected credit loss (ECL) model for the financial assets which are not fair valued through profit or loss. ECL is measured at an amount equal to the 12 months ECL, unless there has been a significant increase in credit risk from initial recognition in which case those are measured at lifetime ECL. The amount of expected credit losses ( or reversal) that is required to adjust
the loss allowance at the reporting date to the amount that is required to be recognized, is recognized as an expense in the statement of profit or loss.
A. Initial Recognition
All Financial liabilities are recognized at fair value and in case of borrowing, net of directly attributable cost. Fees of recurring nature are directly recognized in the statement of profit and loss as finance cost.
B. Subsequent measurement
Financial liabilities are carried at amortized cost using the effective interest method.
For trade and other payables maturing within one year from the balance sheet date, the carrying amounts approximate fair value due to the short maturity of these instruments.
C. Derecognition
Financial liabilities are derecognized when they are extinguished i.e. when the obligation specified in the contract is discharged, cancelled or expires.
2.10 Financial guarantee contracts
Financial guarantee contracts are contracts that require the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due, in accordance with the terms of a debt instrument.
Financial guarantee contracts are initially measured at fair value and subsequently measured at the higher of:
i. The amount of the loss allowance; and
ii. The premium received on initial recognition less income recognized in accordance with the principles of Ind AS 115.
Revenue is measured at fair value of the consideration received or receivable. Revenue is recognized when (or as) the Company satisfies a performance obligation by transferring a promised good or service (i.e. an asset) to a customer. An asset is transferred when (or as) the customer obtains control of that asset.
When (or as) a performance obligation is satisfied, the Company recognizes as revenue the amount of the transaction price (excluding estimates of variable consideration) that is allocated to that performance obligation.
The Company applies the five-step approach for recognition of revenue:
i. Identification of contract(s) with customers;
ii. Identification of the separate performance obligations in the contract;
iii. Determination of transaction price;
iv. Allocation of transaction price to the separate performance obligations; and
v. Recognition of revenue when (or as) each performance obligation is satisfied.
Revenue Recognition For different heads of Income are as under:
(i) Investment Management Fees (net of tax)
Investment Management fees are recognized on an accrual basis in accordance with Investment Management Agreement and SEBI (Mutual Fund) Regulations, 1996 based on average assets under management (AUM) of Nippon India Mutual Fund schemes.
(ii) Advisory Fees (net of tax)
Advisory fees are recognized on an accrual basis in accordance with agreement entered into with respective investment managers / advisors.
(iii) Portfolio Management Fees (net of tax)
Portfolio Management fees are recognized on an accrual basis in accordance with Portfolio Management Agreement entered with respective clients.
(iv) Interest income
Interest income is recognized using the effective interest rate.
(v) Dividend income
Dividend income is recognized in the statement of profit or loss on the date that the Company''s right to receive payment is established, it is probable that the economic benefits associated with the dividend will flow to the entity and the amount of dividend can be reliably measured. This is generally when the Shareholders approve the dividend.
The tax expense for the period comprises of current tax and deferred income tax. Tax is recognized in Statement of Profit and Loss, except to the extent that it relates to items recognized in the Other Comprehensive Income or in Equity. In which case, the tax is also recognized in Other Comprehensive Income or Equity.
Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the Income Tax Authorities, based on tax rates and laws that are enacted at the Balance sheet date.
Deferred tax is recognized on temporary differences arising between carrying amounts of asset and liabilities in financial statements and corresponding tax bases used in the computation of taxable profit.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on the tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The carrying amount of deferred tax liabilities and assets are reviewed at the end of each reporting period.
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 overdraft.
2.14 New fund offer expenses of mutual fund and PMS schemes
Expenses relating to new fund offer of mutual fund and PMS schemes are charged in the statement of profit and loss in the year in which such expenses are incurred.
2.15 Fund and commission expenses
Prior to October 21,2018, certain scheme related expenses and commission were being borne by the Company in accordance with circulars and guidelines issues by SEBI and the Association of Mutual Funds in India (AMFI). Commission paid for future period for the mutual fund schemes (including for Equity Linked Savings Schemes) until October 21, 2018 is treated as prepaid expenses and is amortised on the contractual period and charged to Statement of Profit and Loss account unless considered recoverable from schemes.Pursuant to circulars issued by SEBI in this regard, after October 21, 2018, these expenses, subject to some exceptions, are being borne by the mutual fund schemes.
Commission is paid to the brokers for Portfolio Management and other services as per the terms of agreement entered into with respective brokers. In case of certain portfolio management schemes and other services, the brokerage expenses are amortised over the tenure of the product or commitment period. Unamortised brokerage is treated as Non-Financial Assets considering the normal operating cycle of the Company.
2.16 Off-setting Financial Instruments
Financial assets and liabilities are offset and the net amount is reported in the balance sheet where there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the Company or the counterparty.
Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to passage of time is recognized as a finance cost.
2.18 Employee-Benefits Expense
(i) Short-term Employee Benefits
The undiscounted amount of short term employee benefits expected to be paid in exchange for the services rendered by employees are recognized as an expense during the period when the employees render the service.
(ii) Post-employment obligations Defined contribution plans
The Company recognizes contribution payable to provident fund scheme as an expense, when the employee renders the related service. If the contribution payable to the scheme for service received before the balance sheet date exceeds the contribution already paid, the deficit payable to the scheme is recognized as a liability after deducting the contribution already paid. If the contribution already paid exceeds the contribution due for services received before the balance sheet date, then excess is recognized as an asset.
Defined benefit plans
The liability or asset recognized in the balance sheet in respect of defined benefit gratuity plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by actuaries using the projected unit credit method.
The present value of the defined benefit obligation denominated in INR is determined by discounting the estimated future cash outflows by reference to market yields at the end of the reporting period on government bonds that have terms approximating to the terms of the related obligation. The estimated future payments which are denominated in a currency other than INR, are discounted using market yields determined by reference to high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms approximating to the terms of the related obligation.
The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. This cost is included in employee benefit expense in the statement of profit or loss.
Re-measurement gains and losses arising from experience adjustments and changes in actuarial assumptions are recognized in the period in which they occur, directly in other comprehensive income. They are included in retained earnings in the statement of changes in equity and in the balance sheet.
(iii) Other long-term employee benefit obligations Leave encashment
The liabilities for earned leave are not expected to be settled wholly within 12 months after the end of the period in which the employees render the related service. They are therefore measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method. The benefits are discounted using the appropriate market yields at the end of the reporting period that have terms approximating to the terms of the related obligation. Remeasurements as a result of experience adjustments and changes in actuarial assumptions are recognized in the statement of profit or loss.
As a long-term incentive plan to employees, the Company has initiated Phantom Stock Option Plan which are cash settlement rights where the employees are entitled to get cash compensation based on agreed formulae. The employees are entitled to receive cash payment equivalent to appreciation in the value over the defined base price. The present value of the obligation under such plan is determined based on actuarial valuation.
Employee Stock Option Scheme (ESOS)
Equity settled share based payments to employees and others providing similar services are measured at fair value of the equity instruments at the grant date. Details regarding the determination of the fair value of equity settled share based payments transactions are set out in note 28.
The fair value determined at the grant date of the equity settled share based payments is expensed on a straight line basis over the vesting period, based on the Company''s estimate of equity instruments that will eventually vest, with a corresponding increase in equity. At the end of each reporting period, the Company revives its estimate of the number of equity instruments expected to vest. The impact of the revision of original estimates, if any, is recognized in Statement of profit and loss such that the cumulative expenses reflect the revised estimate, with a corresponding adjustment to Share based options outstanding account.
The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share.
Reliance Capital Asset Management Employees Benefits Trust
The Reliance Capital Asset Management Employees Benefit Trust is administered by the Company. The Company treats the trust as its extension and is consolidated in Company''s financial statements. There are no shares pending to be allotted in the Trust.
a) Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to owners of the Company by the weighted average number of equity shares outstanding during the financial year, adjusted for bonus element in equity shares issued during the year.
b) Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential equity shares, and the weighted average number of additional equity shares that would have been outstanding assuming the conversion of all dilutive potential equity shares.
All amounts disclosed in the financial statements and notes have been rounded off to the nearest crore as per the requirements of Schedule III, unless otherwise stated.
Mar 31, 2022
1 CORPORATE INFORMATION
Nippon Life India Asset Management Limited (''the Company'') was incorporated on February 24, 1995.
The Company''s principal activity is to act as an investment manager to Nippon India Mutual Fund (''the Fund'') and to provide Portfolio Management Services (''PMS'') and advisory services to clients under Securities and Exchange Board of India (SEBI) Regulations. The Company is registered with SEBI under the SEBI (Mutual Funds) Regulations, 1996.
The equity shares of the Company were listed on National Stock exchange of India Limited and Bombay Stock exchange Limited on November 6, 2017.
2 SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.
(i) Compliance with Ind AS
The financial statements comply in all material aspects with Indian Accounting Standards (Ind AS) notified under Section 133 of the Companies Act, 2013 (the Act) [Companies (Indian Accounting Standards) Rules, 2015] and other relevant provisions of the Act. The financial statements have been prepared on accural and going concern basis. The accounting policies are applied consistently to all the periods presented in the financial statements.
(ii) Historical cost convention
The financial statements have been prepared on a historical cost basis, except for the following assets and liabilities which have been measured at fair value:
a. Certain financial assets and liabilities (including derivatives instruments).
b. Defined benefit plans - plan assets and
c. Equity Settled share based payments
2.2 Property, Plant and Equipment
All items of property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset''s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognized when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred.
Property, Plant & Equipment which are significant to total cost of that item of Property plant & Equipment and having different useful life are accounted separately.
Depreciation methods, estimated useful lives & residual value:
Depreciation is calculated using the straight-line method to allocate their cost, net of their residual values, over their estimated useful lives or, in the case of certain leased furniture, fittings and equipment, the shorter lease term as follows:
The estimated useful lives for the different types of assets are:
|
Asset |
Useful Life |
|
Furniture and fixtures |
10 years |
|
Office equipment |
5 years |
|
IT equipments - computers & printers |
3 years |
|
Vehicles |
8 years |
Leasehold improvements are amortised over the primary period of the lease on straight-line basis or useful life of asset, whichever is lower.
The asset''s residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.
An asset''s carrying amount is written down immediately to its recoverable amount if the asset''s carrying amount is greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with carrying amount and are recognized in the statement of profit or loss.
The Company provides pro-rata depreciation from the day the asset is put to use and for any asset sold, till the date of sale.
Intangible assets are stated at cost of acquisition net of recoverable taxes, accumulated amortization and impairment losses, if any. Such costs include purchase price, borrowing cost, and any cost directly attributable to bringing the asset to its working condition for the intended use, net charges on foreign exchange contracts and adjustments arising from exchange rate variations attributable to the intangible assets.
Subsequent costs are included in the asset''s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the entity and cost can be measured reliably.
Gains or losses arising from derecognition of an Intangible Asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the statement of profit and loss when the asset is derecognised.
Acquisition of rights to manage and administer the schemes of Goldman Sachs Mutual Fund have been stated at cost net of impairment losses, if any.
Goodwill and intangible assets that have an indefinite useful life are not subject to amortization and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount
by which the asset''s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset''s fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or Groups of assets (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period.
The Company assesses at each balance sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset or the recoverable amount of the cash-generating unit to which the asset belongs is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognized in the statement of profit and loss. If at the balance sheet date there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of depreciable historical cost.
The Company has applied IND AS 116 using the partial retrospective approach.
The Company assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
The Company applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. The Group recognizes lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets.
Right of use assets
The Company recognizes right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognized, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease term and the estimated useful lives of the assets.
At the commencement date of the lease, the Company recognizes lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees.
In calculating the present value of lease payments, the Company uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the lease payments (e.g., changes to future payments resulting from a change in an index or rate used to determine such lease payments) or a change in the assessment of an option to purchase the underlying asset.
Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision Maker.
The power to assess the financial performance and position of the Company and make strategic decisions is vested in the Executive Director who has been identified as the Chief Operating Decisions Maker.
2.7 Foreign Currency Translation
Transactions in foreign currencies are recorded at the exchange rate prevailing on the date of transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency closing rates of exchange at the reporting date.
Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates are generally recognized in profit or loss.
Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was measured. The gain or loss arising on translation of non -monetary items measured at fair value is treated in line with the recognition of the gain or loss on the change in fair value of the item(i.e. translation differences on items whose fair value gain or loss is recognized in Other Comprehensive Income or Statement of Profit and Loss are also recognized in Other Comprehensive Income or Statement of Profit and Loss, respectively).
A. Initial Recognition and Measurement
All Financial Assets are initially recognized at fair value. Transaction Costs that are directly attributable to the acquisition or issue of Financial Assets, which are not at Fair Value Through Profit or Loss, are adjusted to the fair value on initial recognition. Purchase and sale of financial assets are recognized using trade date accounting.
B. Subsequent Measurement
Financial Assets measured at Amortized cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest (''SPPI''), and that are not designated at FVPL, are measured at amortized cost. The carrying amount of these assets is adjusted by any expected credit loss allowance recognized and measured as described in note 6. Interest income from these financial assets is recognized using the effective interest rate method.
Financial Assets measured at Fair Value Through Other Comprehensive Income: Financial assets that are held for collection of contractual cash flows and for selling
the assets, where the assets'' cash flows represent solely payments of principal and interest, and that are not designated at FVPL, are measured at fair value through other comprehensive income. Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains and losses on the instrument''s amortized cost which are recognized in profit or loss. When the financial asset is derecognized, the cumulative gain or loss previously recognized in OCI is reclassified from equity to profit or loss. Interest income from these financial assets is included in ''Interest income'' using the effective interest rate method.
Financial Assets measures at Fair Value Through Profit or Loss: Assets that do not meet the criteria for amortized cost or FVOCI are measured at fair value through profit or loss. A gain or loss on a debt investment that is subsequently measured at fair value through profit or loss and is not part of a hedging relationship is recognized in profit or loss in the period in which it arises, unless it arises from debt instruments that were designated at fair value or which are not held for trading. Interest income from these financial assets is included in ''Interest income'' using the effective interest rate method.
C. Equity instruments
All equity investments are measured at fair value with value changes recognized in statement of profit and loss, except for those equity investments for which the Company has elected to present the value changes in ''Other Comprehensive Income'' .
Changes in the fair value of financial assets at fair value through profit or loss are recognized in net gain/loss on fair value changes in the statement of profit or loss. Impairment losses (and reversal of impairment losses) on equity investments measured at FVOCI are not reported separately from other changes in fair value.
D. Impairment of Financial Asset
The Company assesses on a forward looking basis the expected credit losses (ECL) associated with its debt instruments carried at amortized cost and with the exposure arising from loan commitments and financial guarantee contracts. The Company recognizes a loss allowance for such losses at each reporting date. The measurement of ECL reflects:
- An unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes;
- The time value of money; and
- Reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions and forecasts of future economic conditions.
The Company recognizes loss allowance using the expected credit loss (ECL) model for the financial assets which are not fair valued through profit or loss. ECL is measured at an amount equal to the 12 months ECL, unless there has been a significant increase in credit risk from initial recognition in which case those are measured at lifetime ECL. The amount of expected credit losses ( or reversal) that is required to adjust
the loss allowance at the reporting date to the amount that is required to be recognized, is recognized as an expense in the statement of profit or loss.
A. Initial Recognition
All Financial liabilities are recognized at fair value and in case of borrowing, net of directly attributable cost. Fees of recurring nature are directly recognized in the statement of profit and loss as finance cost.
B. Subsequent measurement
Financial liabilities are carried at amortized cost using the effective interest method.
For trade and other payables maturing within one year from the balance sheet date, the carrying amounts approximate fair value due to the short maturity of these instruments.
C. Derecognition
Financial liabilities are derecognized when they are extinguished i.e. when the obligation specified in the contract is discharged, cancelled or expires.
2.10 Financial guarantee contracts
Financial guarantee contracts are contracts that require the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due, in accordance with the terms of a debt instrument.
Financial guarantee contracts are initially measured at fair value and subsequently measured at the higher of:
i. The amount of the loss allowance; and
ii. The premium received on initial recognition less income recognized in accordance with the principles of Ind AS 115.
Revenue is measured at fair value of the consideration received or receivable. Revenue is recognized when (or as) the Company satisfies a performance obligation by transferring a promised good or service (i.e. an asset) to a customer. An asset is transferred when (or as) the customer obtains control of that asset.
When (or as) a performance obligation is satisfied, the Company recognizes as revenue the amount of the transaction price (excluding estimates of variable consideration) that is allocated to that performance obligation.
The Company applies the five-step approach for recognition of revenue:
i. Identification of contract(s) with customers;
ii. Identification of the separate performance obligations in the contract;
iii. Determination of transaction price;
iv. Allocation of transaction price to the separate performance obligations; and
v. Recognition of revenue when (or as) each performance obligation is satisfied.
Revenue Recognition For different heads of Income are as under:
(i) Investment Management Fees (net of tax)
Investment Management fees are recognized on an accrual basis in accordance with Investment Management Agreement and SEBI (Mutual Fund) Regulations, 1996 based on average assets under management (AUM) of Nippon India Mutual Fund schemes.
(ii) Advisory Fees (net of tax)
Advisory fees are recognized on an accrual basis in accordance with agreement entered into with respective investment managers / advisors.
(iii) Portfolio Management Fees (net of tax)
Portfolio Management fees are recognized on an accrual basis in accordance with Portfolio Management Agreement entered with respective clients.
(iv) Interest income
Interest income is recognized using the effective interest rate.
(v) Dividend income
Dividend income is recognized in the statement of profit or loss on the date that the Company''s right to receive payment is established, it is probable that the economic benefits associated with the dividend will flow to the entity and the amount of dividend can be reliably measured. This is generally when the Shareholders approve the dividend.
The tax expense for the period comprises of current tax and deferred income tax. Tax is recognized in Statement of Profit and Loss, except to the extent that it relates to items recognized in the Other Comprehensive Income or in Equity. In which case, the tax is also recognized in Other Comprehensive Income or Equity.
Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the Income Tax Authorities, based on tax rates and laws that are enacted at the Balance sheet date.
Deferred tax is recognized on temporary differences arising between carrying amounts of asset and liabilities in financial statements and corresponding tax bases used in the computation of taxable profit.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on the tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The carrying amount of deferred tax liabilities and assets are reviewed at the end of each reporting period.
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 overdraft.
2.14 New fund offer expenses of mutual fund and PMS schemes
Expenses relating to new fund offer of mutual fund and PMS schemes are charged in the statement of profit and loss in the year in which such expenses are incurred.
2.15 Fund and commission expenses
Prior to October 21,2018, certain scheme related expenses and commission were being borne by the Company in accordance with circulars and guidelines issues by SEBI and the Association of Mutual Funds in India (AMFI). Commission paid for future period for the mutual fund schemes (including for Equity Linked Savings Schemes) until October 21, 2018 is treated as prepaid expenses and is amortised on the contractual period and charged to Statement of Profit and Loss account unless considered recoverable from schemes.Pursuant to circulars issued by SEBI in this regard, after October 21, 2018, these expenses, subject to some exceptions, are being borne by the mutual fund schemes.
Commission is paid to the brokers for Portfolio Management and other services as per the terms of agreement entered into with respective brokers. In case of certain portfolio management schemes and other services, the brokerage expenses are amortised over the tenure of the product or commitment period. Unamortised brokerage is treated as Non-Financial Assets considering the normal operating cycle of the Company.
2.16 Off-setting Financial Instruments
Financial assets and liabilities are offset and the net amount is reported in the balance sheet where there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the Company or the counterparty.
Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to passage of time is recognized as a finance cost.
2.18 Employee-Benefits Expense
(i) Short-term Employee Benefits
The undiscounted amount of short term employee benefits expected to be paid in exchange for the services rendered by employees are recognized as an expense during the period when the employees render the service.
(ii) Post-employment obligations Defined contribution plans
The Company recognizes contribution payable to provident fund scheme as an expense, when the employee renders the related service. If the contribution payable to the scheme for service received before the balance sheet date exceeds the contribution already paid, the deficit payable to the scheme is recognized as a liability after deducting the contribution already paid. If the contribution already paid exceeds the contribution due for services received before the balance sheet date, then excess is recognized as an asset.
Defined benefit plans
The liability or asset recognized in the balance sheet in respect of defined benefit gratuity plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by actuaries using the projected unit credit method.
The present value of the defined benefit obligation denominated in INR is determined by discounting the estimated future cash outflows by reference to market yields at the end of the reporting period on government bonds that have terms approximating to the terms of the related obligation. The estimated future payments which are denominated in a currency other than INR, are discounted using market yields determined by reference to high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms approximating to the terms of the related obligation.
The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. This cost is included in employee benefit expense in the statement of profit or loss.
Re-measurement gains and losses arising from experience adjustments and changes in actuarial assumptions are recognized in the period in which they occur, directly in other comprehensive income. They are included in retained earnings in the statement of changes in equity and in the balance sheet.
(iii) Other long-term employee benefit obligations Leave encashment
The liabilities for earned leave are not expected to be settled wholly within 12 months after the end of the period in which the employees render the related service. They are therefore measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method. The benefits are discounted using the appropriate market yields at the end of the reporting period that have terms approximating to the terms of the related obligation. Remeasurements as a result of experience adjustments and changes in actuarial assumptions are recognized in the statement of profit or loss.
As a long-term incentive plan to employees, the Company has initiated Phantom Stock Option Plan which are cash settlement rights where the employees are entitled to get cash compensation based on agreed formulae. The employees are entitled to receive cash payment equivalent to appreciation in the value over the defined base price. The present value of the obligation under such plan is determined based on actuarial valuation.
Employee Stock Option Scheme (ESOS)
Equity settled share based payments to employees and others providing similar services are measured at fair value of the equity instruments at the grant date. Details regarding the determination of the fair value of equity settled share based payments transactions are set out in note 28.
The fair value determined at the grant date of the equity settled share based payments is expensed on a straight line basis over the vesting period, based on the Company''s estimate of equity instruments that will eventually vest, with a corresponding increase in equity. At the end of each reporting period, the Company revives its estimate of the number of equity instruments expected to vest. The impact of the revision of original estimates, if any, is recognized in Statement of profit and loss such that the cumulative expenses reflect the revised estimate, with a corresponding adjustment to Share based options outstanding account.
The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share.
Reliance Capital Asset Management Employees Benefits Trust
The Reliance Capital Asset Management Employees Benefit Trust is administered by the Company. The Company treats the trust as its extension and is consolidated in Company''s financial statements. There are no shares pending to be allotted in the Trust.
a) Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to owners of the Company by the weighted average number of equity shares outstanding during the financial year, adjusted for bonus element in equity shares issued during the year.
b) Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential equity shares, and the weighted average number of additional equity shares that would have been outstanding assuming the conversion of all dilutive potential equity shares.
All amounts disclosed in the financial statements and notes have been rounded off to the nearest crore as per the requirements of Schedule III, unless otherwise stated.
Mar 31, 2022
1 CORPORATE INFORMATION
Nippon Life India Asset Management Limited (''the Company'') was incorporated on February 24, 1995.
The Company''s principal activity is to act as an investment manager to Nippon India Mutual Fund (''the Fund'') and to provide Portfolio Management Services (''PMS'') and advisory services to clients under Securities and Exchange Board of India (SEBI) Regulations. The Company is registered with SEBI under the SEBI (Mutual Funds) Regulations, 1996.
The equity shares of the Company were listed on National Stock exchange of India Limited and Bombay Stock exchange Limited on November 6, 2017.
2 SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.
(i) Compliance with Ind AS
The financial statements comply in all material aspects with Indian Accounting Standards (Ind AS) notified under Section 133 of the Companies Act, 2013 (the Act) [Companies (Indian Accounting Standards) Rules, 2015] and other relevant provisions of the Act. The financial statements have been prepared on accural and going concern basis. The accounting policies are applied consistently to all the periods presented in the financial statements.
(ii) Historical cost convention
The financial statements have been prepared on a historical cost basis, except for the following assets and liabilities which have been measured at fair value:
a. Certain financial assets and liabilities (including derivatives instruments).
b. Defined benefit plans - plan assets and
c. Equity Settled share based payments
2.2 Property, Plant and Equipment
All items of property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset''s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognized when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred.
Property, Plant & Equipment which are significant to total cost of that item of Property plant & Equipment and having different useful life are accounted separately.
Depreciation methods, estimated useful lives & residual value:
Depreciation is calculated using the straight-line method to allocate their cost, net of their residual values, over their estimated useful lives or, in the case of certain leased furniture, fittings and equipment, the shorter lease term as follows:
The estimated useful lives for the different types of assets are:
|
Asset |
Useful Life |
|
Furniture and fixtures |
10 years |
|
Office equipment |
5 years |
|
IT equipments - computers & printers |
3 years |
|
Vehicles |
8 years |
Leasehold improvements are amortised over the primary period of the lease on straight-line basis or useful life of asset, whichever is lower.
The asset''s residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.
An asset''s carrying amount is written down immediately to its recoverable amount if the asset''s carrying amount is greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with carrying amount and are recognized in the statement of profit or loss.
The Company provides pro-rata depreciation from the day the asset is put to use and for any asset sold, till the date of sale.
Intangible assets are stated at cost of acquisition net of recoverable taxes, accumulated amortization and impairment losses, if any. Such costs include purchase price, borrowing cost, and any cost directly attributable to bringing the asset to its working condition for the intended use, net charges on foreign exchange contracts and adjustments arising from exchange rate variations attributable to the intangible assets.
Subsequent costs are included in the asset''s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the entity and cost can be measured reliably.
Gains or losses arising from derecognition of an Intangible Asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the statement of profit and loss when the asset is derecognised.
Acquisition of rights to manage and administer the schemes of Goldman Sachs Mutual Fund have been stated at cost net of impairment losses, if any.
Goodwill and intangible assets that have an indefinite useful life are not subject to amortization and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount
by which the asset''s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset''s fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or Groups of assets (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period.
The Company assesses at each balance sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset or the recoverable amount of the cash-generating unit to which the asset belongs is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognized in the statement of profit and loss. If at the balance sheet date there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of depreciable historical cost.
The Company has applied IND AS 116 using the partial retrospective approach.
The Company assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
The Company applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. The Group recognizes lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets.
Right of use assets
The Company recognizes right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognized, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease term and the estimated useful lives of the assets.
At the commencement date of the lease, the Company recognizes lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees.
In calculating the present value of lease payments, the Company uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the lease payments (e.g., changes to future payments resulting from a change in an index or rate used to determine such lease payments) or a change in the assessment of an option to purchase the underlying asset.
Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision Maker.
The power to assess the financial performance and position of the Company and make strategic decisions is vested in the Executive Director who has been identified as the Chief Operating Decisions Maker.
2.7 Foreign Currency Translation
Transactions in foreign currencies are recorded at the exchange rate prevailing on the date of transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency closing rates of exchange at the reporting date.
Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates are generally recognized in profit or loss.
Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was measured. The gain or loss arising on translation of non -monetary items measured at fair value is treated in line with the recognition of the gain or loss on the change in fair value of the item(i.e. translation differences on items whose fair value gain or loss is recognized in Other Comprehensive Income or Statement of Profit and Loss are also recognized in Other Comprehensive Income or Statement of Profit and Loss, respectively).
A. Initial Recognition and Measurement
All Financial Assets are initially recognized at fair value. Transaction Costs that are directly attributable to the acquisition or issue of Financial Assets, which are not at Fair Value Through Profit or Loss, are adjusted to the fair value on initial recognition. Purchase and sale of financial assets are recognized using trade date accounting.
B. Subsequent Measurement
Financial Assets measured at Amortized cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest (''SPPI''), and that are not designated at FVPL, are measured at amortized cost. The carrying amount of these assets is adjusted by any expected credit loss allowance recognized and measured as described in note 6. Interest income from these financial assets is recognized using the effective interest rate method.
Financial Assets measured at Fair Value Through Other Comprehensive Income: Financial assets that are held for collection of contractual cash flows and for selling
the assets, where the assets'' cash flows represent solely payments of principal and interest, and that are not designated at FVPL, are measured at fair value through other comprehensive income. Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains and losses on the instrument''s amortized cost which are recognized in profit or loss. When the financial asset is derecognized, the cumulative gain or loss previously recognized in OCI is reclassified from equity to profit or loss. Interest income from these financial assets is included in ''Interest income'' using the effective interest rate method.
Financial Assets measures at Fair Value Through Profit or Loss: Assets that do not meet the criteria for amortized cost or FVOCI are measured at fair value through profit or loss. A gain or loss on a debt investment that is subsequently measured at fair value through profit or loss and is not part of a hedging relationship is recognized in profit or loss in the period in which it arises, unless it arises from debt instruments that were designated at fair value or which are not held for trading. Interest income from these financial assets is included in ''Interest income'' using the effective interest rate method.
C. Equity instruments
All equity investments are measured at fair value with value changes recognized in statement of profit and loss, except for those equity investments for which the Company has elected to present the value changes in ''Other Comprehensive Income'' .
Changes in the fair value of financial assets at fair value through profit or loss are recognized in net gain/loss on fair value changes in the statement of profit or loss. Impairment losses (and reversal of impairment losses) on equity investments measured at FVOCI are not reported separately from other changes in fair value.
D. Impairment of Financial Asset
The Company assesses on a forward looking basis the expected credit losses (ECL) associated with its debt instruments carried at amortized cost and with the exposure arising from loan commitments and financial guarantee contracts. The Company recognizes a loss allowance for such losses at each reporting date. The measurement of ECL reflects:
- An unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes;
- The time value of money; and
- Reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions and forecasts of future economic conditions.
The Company recognizes loss allowance using the expected credit loss (ECL) model for the financial assets which are not fair valued through profit or loss. ECL is measured at an amount equal to the 12 months ECL, unless there has been a significant increase in credit risk from initial recognition in which case those are measured at lifetime ECL. The amount of expected credit losses ( or reversal) that is required to adjust
the loss allowance at the reporting date to the amount that is required to be recognized, is recognized as an expense in the statement of profit or loss.
A. Initial Recognition
All Financial liabilities are recognized at fair value and in case of borrowing, net of directly attributable cost. Fees of recurring nature are directly recognized in the statement of profit and loss as finance cost.
B. Subsequent measurement
Financial liabilities are carried at amortized cost using the effective interest method.
For trade and other payables maturing within one year from the balance sheet date, the carrying amounts approximate fair value due to the short maturity of these instruments.
C. Derecognition
Financial liabilities are derecognized when they are extinguished i.e. when the obligation specified in the contract is discharged, cancelled or expires.
2.10 Financial guarantee contracts
Financial guarantee contracts are contracts that require the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due, in accordance with the terms of a debt instrument.
Financial guarantee contracts are initially measured at fair value and subsequently measured at the higher of:
i. The amount of the loss allowance; and
ii. The premium received on initial recognition less income recognized in accordance with the principles of Ind AS 115.
Revenue is measured at fair value of the consideration received or receivable. Revenue is recognized when (or as) the Company satisfies a performance obligation by transferring a promised good or service (i.e. an asset) to a customer. An asset is transferred when (or as) the customer obtains control of that asset.
When (or as) a performance obligation is satisfied, the Company recognizes as revenue the amount of the transaction price (excluding estimates of variable consideration) that is allocated to that performance obligation.
The Company applies the five-step approach for recognition of revenue:
i. Identification of contract(s) with customers;
ii. Identification of the separate performance obligations in the contract;
iii. Determination of transaction price;
iv. Allocation of transaction price to the separate performance obligations; and
v. Recognition of revenue when (or as) each performance obligation is satisfied.
Revenue Recognition For different heads of Income are as under:
(i) Investment Management Fees (net of tax)
Investment Management fees are recognized on an accrual basis in accordance with Investment Management Agreement and SEBI (Mutual Fund) Regulations, 1996 based on average assets under management (AUM) of Nippon India Mutual Fund schemes.
(ii) Advisory Fees (net of tax)
Advisory fees are recognized on an accrual basis in accordance with agreement entered into with respective investment managers / advisors.
(iii) Portfolio Management Fees (net of tax)
Portfolio Management fees are recognized on an accrual basis in accordance with Portfolio Management Agreement entered with respective clients.
(iv) Interest income
Interest income is recognized using the effective interest rate.
(v) Dividend income
Dividend income is recognized in the statement of profit or loss on the date that the Company''s right to receive payment is established, it is probable that the economic benefits associated with the dividend will flow to the entity and the amount of dividend can be reliably measured. This is generally when the Shareholders approve the dividend.
The tax expense for the period comprises of current tax and deferred income tax. Tax is recognized in Statement of Profit and Loss, except to the extent that it relates to items recognized in the Other Comprehensive Income or in Equity. In which case, the tax is also recognized in Other Comprehensive Income or Equity.
Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the Income Tax Authorities, based on tax rates and laws that are enacted at the Balance sheet date.
Deferred tax is recognized on temporary differences arising between carrying amounts of asset and liabilities in financial statements and corresponding tax bases used in the computation of taxable profit.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on the tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The carrying amount of deferred tax liabilities and assets are reviewed at the end of each reporting period.
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 overdraft.
2.14 New fund offer expenses of mutual fund and PMS schemes
Expenses relating to new fund offer of mutual fund and PMS schemes are charged in the statement of profit and loss in the year in which such expenses are incurred.
2.15 Fund and commission expenses
Prior to October 21,2018, certain scheme related expenses and commission were being borne by the Company in accordance with circulars and guidelines issues by SEBI and the Association of Mutual Funds in India (AMFI). Commission paid for future period for the mutual fund schemes (including for Equity Linked Savings Schemes) until October 21, 2018 is treated as prepaid expenses and is amortised on the contractual period and charged to Statement of Profit and Loss account unless considered recoverable from schemes.Pursuant to circulars issued by SEBI in this regard, after October 21, 2018, these expenses, subject to some exceptions, are being borne by the mutual fund schemes.
Commission is paid to the brokers for Portfolio Management and other services as per the terms of agreement entered into with respective brokers. In case of certain portfolio management schemes and other services, the brokerage expenses are amortised over the tenure of the product or commitment period. Unamortised brokerage is treated as Non-Financial Assets considering the normal operating cycle of the Company.
2.16 Off-setting Financial Instruments
Financial assets and liabilities are offset and the net amount is reported in the balance sheet where there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the Company or the counterparty.
Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to passage of time is recognized as a finance cost.
2.18 Employee-Benefits Expense
(i) Short-term Employee Benefits
The undiscounted amount of short term employee benefits expected to be paid in exchange for the services rendered by employees are recognized as an expense during the period when the employees render the service.
(ii) Post-employment obligations Defined contribution plans
The Company recognizes contribution payable to provident fund scheme as an expense, when the employee renders the related service. If the contribution payable to the scheme for service received before the balance sheet date exceeds the contribution already paid, the deficit payable to the scheme is recognized as a liability after deducting the contribution already paid. If the contribution already paid exceeds the contribution due for services received before the balance sheet date, then excess is recognized as an asset.
Defined benefit plans
The liability or asset recognized in the balance sheet in respect of defined benefit gratuity plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by actuaries using the projected unit credit method.
The present value of the defined benefit obligation denominated in INR is determined by discounting the estimated future cash outflows by reference to market yields at the end of the reporting period on government bonds that have terms approximating to the terms of the related obligation. The estimated future payments which are denominated in a currency other than INR, are discounted using market yields determined by reference to high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms approximating to the terms of the related obligation.
The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. This cost is included in employee benefit expense in the statement of profit or loss.
Re-measurement gains and losses arising from experience adjustments and changes in actuarial assumptions are recognized in the period in which they occur, directly in other comprehensive income. They are included in retained earnings in the statement of changes in equity and in the balance sheet.
(iii) Other long-term employee benefit obligations Leave encashment
The liabilities for earned leave are not expected to be settled wholly within 12 months after the end of the period in which the employees render the related service. They are therefore measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method. The benefits are discounted using the appropriate market yields at the end of the reporting period that have terms approximating to the terms of the related obligation. Remeasurements as a result of experience adjustments and changes in actuarial assumptions are recognized in the statement of profit or loss.
As a long-term incentive plan to employees, the Company has initiated Phantom Stock Option Plan which are cash settlement rights where the employees are entitled to get cash compensation based on agreed formulae. The employees are entitled to receive cash payment equivalent to appreciation in the value over the defined base price. The present value of the obligation under such plan is determined based on actuarial valuation.
Employee Stock Option Scheme (ESOS)
Equity settled share based payments to employees and others providing similar services are measured at fair value of the equity instruments at the grant date. Details regarding the determination of the fair value of equity settled share based payments transactions are set out in note 28.
The fair value determined at the grant date of the equity settled share based payments is expensed on a straight line basis over the vesting period, based on the Company''s estimate of equity instruments that will eventually vest, with a corresponding increase in equity. At the end of each reporting period, the Company revives its estimate of the number of equity instruments expected to vest. The impact of the revision of original estimates, if any, is recognized in Statement of profit and loss such that the cumulative expenses reflect the revised estimate, with a corresponding adjustment to Share based options outstanding account.
The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share.
Reliance Capital Asset Management Employees Benefits Trust
The Reliance Capital Asset Management Employees Benefit Trust is administered by the Company. The Company treats the trust as its extension and is consolidated in Company''s financial statements. There are no shares pending to be allotted in the Trust.
a) Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to owners of the Company by the weighted average number of equity shares outstanding during the financial year, adjusted for bonus element in equity shares issued during the year.
b) Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential equity shares, and the weighted average number of additional equity shares that would have been outstanding assuming the conversion of all dilutive potential equity shares.
All amounts disclosed in the financial statements and notes have been rounded off to the nearest crore as per the requirements of Schedule III, unless otherwise stated.
Mar 31, 2022
1 CORPORATE INFORMATION
Nippon Life India Asset Management Limited (''the Company'') was incorporated on February 24, 1995.
The Company''s principal activity is to act as an investment manager to Nippon India Mutual Fund (''the Fund'') and to provide Portfolio Management Services (''PMS'') and advisory services to clients under Securities and Exchange Board of India (SEBI) Regulations. The Company is registered with SEBI under the SEBI (Mutual Funds) Regulations, 1996.
The equity shares of the Company were listed on National Stock exchange of India Limited and Bombay Stock exchange Limited on November 6, 2017.
2 SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.
(i) Compliance with Ind AS
The financial statements comply in all material aspects with Indian Accounting Standards (Ind AS) notified under Section 133 of the Companies Act, 2013 (the Act) [Companies (Indian Accounting Standards) Rules, 2015] and other relevant provisions of the Act. The financial statements have been prepared on accural and going concern basis. The accounting policies are applied consistently to all the periods presented in the financial statements.
(ii) Historical cost convention
The financial statements have been prepared on a historical cost basis, except for the following assets and liabilities which have been measured at fair value:
a. Certain financial assets and liabilities (including derivatives instruments).
b. Defined benefit plans - plan assets and
c. Equity Settled share based payments
2.2 Property, Plant and Equipment
All items of property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset''s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognized when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred.
Property, Plant & Equipment which are significant to total cost of that item of Property plant & Equipment and having different useful life are accounted separately.
Depreciation methods, estimated useful lives & residual value:
Depreciation is calculated using the straight-line method to allocate their cost, net of their residual values, over their estimated useful lives or, in the case of certain leased furniture, fittings and equipment, the shorter lease term as follows:
The estimated useful lives for the different types of assets are:
|
Asset |
Useful Life |
|
Furniture and fixtures |
10 years |
|
Office equipment |
5 years |
|
IT equipments - computers & printers |
3 years |
|
Vehicles |
8 years |
Leasehold improvements are amortised over the primary period of the lease on straight-line basis or useful life of asset, whichever is lower.
The asset''s residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.
An asset''s carrying amount is written down immediately to its recoverable amount if the asset''s carrying amount is greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with carrying amount and are recognized in the statement of profit or loss.
The Company provides pro-rata depreciation from the day the asset is put to use and for any asset sold, till the date of sale.
Intangible assets are stated at cost of acquisition net of recoverable taxes, accumulated amortization and impairment losses, if any. Such costs include purchase price, borrowing cost, and any cost directly attributable to bringing the asset to its working condition for the intended use, net charges on foreign exchange contracts and adjustments arising from exchange rate variations attributable to the intangible assets.
Subsequent costs are included in the asset''s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the entity and cost can be measured reliably.
Gains or losses arising from derecognition of an Intangible Asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the statement of profit and loss when the asset is derecognised.
Acquisition of rights to manage and administer the schemes of Goldman Sachs Mutual Fund have been stated at cost net of impairment losses, if any.
Goodwill and intangible assets that have an indefinite useful life are not subject to amortization and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount
by which the asset''s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset''s fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or Groups of assets (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period.
The Company assesses at each balance sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset or the recoverable amount of the cash-generating unit to which the asset belongs is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognized in the statement of profit and loss. If at the balance sheet date there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of depreciable historical cost.
The Company has applied IND AS 116 using the partial retrospective approach.
The Company assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
The Company applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. The Group recognizes lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets.
Right of use assets
The Company recognizes right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognized, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease term and the estimated useful lives of the assets.
At the commencement date of the lease, the Company recognizes lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees.
In calculating the present value of lease payments, the Company uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the lease payments (e.g., changes to future payments resulting from a change in an index or rate used to determine such lease payments) or a change in the assessment of an option to purchase the underlying asset.
Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision Maker.
The power to assess the financial performance and position of the Company and make strategic decisions is vested in the Executive Director who has been identified as the Chief Operating Decisions Maker.
2.7 Foreign Currency Translation
Transactions in foreign currencies are recorded at the exchange rate prevailing on the date of transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency closing rates of exchange at the reporting date.
Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates are generally recognized in profit or loss.
Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was measured. The gain or loss arising on translation of non -monetary items measured at fair value is treated in line with the recognition of the gain or loss on the change in fair value of the item(i.e. translation differences on items whose fair value gain or loss is recognized in Other Comprehensive Income or Statement of Profit and Loss are also recognized in Other Comprehensive Income or Statement of Profit and Loss, respectively).
A. Initial Recognition and Measurement
All Financial Assets are initially recognized at fair value. Transaction Costs that are directly attributable to the acquisition or issue of Financial Assets, which are not at Fair Value Through Profit or Loss, are adjusted to the fair value on initial recognition. Purchase and sale of financial assets are recognized using trade date accounting.
B. Subsequent Measurement
Financial Assets measured at Amortized cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest (''SPPI''), and that are not designated at FVPL, are measured at amortized cost. The carrying amount of these assets is adjusted by any expected credit loss allowance recognized and measured as described in note 6. Interest income from these financial assets is recognized using the effective interest rate method.
Financial Assets measured at Fair Value Through Other Comprehensive Income: Financial assets that are held for collection of contractual cash flows and for selling
the assets, where the assets'' cash flows represent solely payments of principal and interest, and that are not designated at FVPL, are measured at fair value through other comprehensive income. Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains and losses on the instrument''s amortized cost which are recognized in profit or loss. When the financial asset is derecognized, the cumulative gain or loss previously recognized in OCI is reclassified from equity to profit or loss. Interest income from these financial assets is included in ''Interest income'' using the effective interest rate method.
Financial Assets measures at Fair Value Through Profit or Loss: Assets that do not meet the criteria for amortized cost or FVOCI are measured at fair value through profit or loss. A gain or loss on a debt investment that is subsequently measured at fair value through profit or loss and is not part of a hedging relationship is recognized in profit or loss in the period in which it arises, unless it arises from debt instruments that were designated at fair value or which are not held for trading. Interest income from these financial assets is included in ''Interest income'' using the effective interest rate method.
C. Equity instruments
All equity investments are measured at fair value with value changes recognized in statement of profit and loss, except for those equity investments for which the Company has elected to present the value changes in ''Other Comprehensive Income'' .
Changes in the fair value of financial assets at fair value through profit or loss are recognized in net gain/loss on fair value changes in the statement of profit or loss. Impairment losses (and reversal of impairment losses) on equity investments measured at FVOCI are not reported separately from other changes in fair value.
D. Impairment of Financial Asset
The Company assesses on a forward looking basis the expected credit losses (ECL) associated with its debt instruments carried at amortized cost and with the exposure arising from loan commitments and financial guarantee contracts. The Company recognizes a loss allowance for such losses at each reporting date. The measurement of ECL reflects:
- An unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes;
- The time value of money; and
- Reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions and forecasts of future economic conditions.
The Company recognizes loss allowance using the expected credit loss (ECL) model for the financial assets which are not fair valued through profit or loss. ECL is measured at an amount equal to the 12 months ECL, unless there has been a significant increase in credit risk from initial recognition in which case those are measured at lifetime ECL. The amount of expected credit losses ( or reversal) that is required to adjust
the loss allowance at the reporting date to the amount that is required to be recognized, is recognized as an expense in the statement of profit or loss.
A. Initial Recognition
All Financial liabilities are recognized at fair value and in case of borrowing, net of directly attributable cost. Fees of recurring nature are directly recognized in the statement of profit and loss as finance cost.
B. Subsequent measurement
Financial liabilities are carried at amortized cost using the effective interest method.
For trade and other payables maturing within one year from the balance sheet date, the carrying amounts approximate fair value due to the short maturity of these instruments.
C. Derecognition
Financial liabilities are derecognized when they are extinguished i.e. when the obligation specified in the contract is discharged, cancelled or expires.
2.10 Financial guarantee contracts
Financial guarantee contracts are contracts that require the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due, in accordance with the terms of a debt instrument.
Financial guarantee contracts are initially measured at fair value and subsequently measured at the higher of:
i. The amount of the loss allowance; and
ii. The premium received on initial recognition less income recognized in accordance with the principles of Ind AS 115.
Revenue is measured at fair value of the consideration received or receivable. Revenue is recognized when (or as) the Company satisfies a performance obligation by transferring a promised good or service (i.e. an asset) to a customer. An asset is transferred when (or as) the customer obtains control of that asset.
When (or as) a performance obligation is satisfied, the Company recognizes as revenue the amount of the transaction price (excluding estimates of variable consideration) that is allocated to that performance obligation.
The Company applies the five-step approach for recognition of revenue:
i. Identification of contract(s) with customers;
ii. Identification of the separate performance obligations in the contract;
iii. Determination of transaction price;
iv. Allocation of transaction price to the separate performance obligations; and
v. Recognition of revenue when (or as) each performance obligation is satisfied.
Revenue Recognition For different heads of Income are as under:
(i) Investment Management Fees (net of tax)
Investment Management fees are recognized on an accrual basis in accordance with Investment Management Agreement and SEBI (Mutual Fund) Regulations, 1996 based on average assets under management (AUM) of Nippon India Mutual Fund schemes.
(ii) Advisory Fees (net of tax)
Advisory fees are recognized on an accrual basis in accordance with agreement entered into with respective investment managers / advisors.
(iii) Portfolio Management Fees (net of tax)
Portfolio Management fees are recognized on an accrual basis in accordance with Portfolio Management Agreement entered with respective clients.
(iv) Interest income
Interest income is recognized using the effective interest rate.
(v) Dividend income
Dividend income is recognized in the statement of profit or loss on the date that the Company''s right to receive payment is established, it is probable that the economic benefits associated with the dividend will flow to the entity and the amount of dividend can be reliably measured. This is generally when the Shareholders approve the dividend.
The tax expense for the period comprises of current tax and deferred income tax. Tax is recognized in Statement of Profit and Loss, except to the extent that it relates to items recognized in the Other Comprehensive Income or in Equity. In which case, the tax is also recognized in Other Comprehensive Income or Equity.
Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the Income Tax Authorities, based on tax rates and laws that are enacted at the Balance sheet date.
Deferred tax is recognized on temporary differences arising between carrying amounts of asset and liabilities in financial statements and corresponding tax bases used in the computation of taxable profit.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on the tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The carrying amount of deferred tax liabilities and assets are reviewed at the end of each reporting period.
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 overdraft.
2.14 New fund offer expenses of mutual fund and PMS schemes
Expenses relating to new fund offer of mutual fund and PMS schemes are charged in the statement of profit and loss in the year in which such expenses are incurred.
2.15 Fund and commission expenses
Prior to October 21,2018, certain scheme related expenses and commission were being borne by the Company in accordance with circulars and guidelines issues by SEBI and the Association of Mutual Funds in India (AMFI). Commission paid for future period for the mutual fund schemes (including for Equity Linked Savings Schemes) until October 21, 2018 is treated as prepaid expenses and is amortised on the contractual period and charged to Statement of Profit and Loss account unless considered recoverable from schemes.Pursuant to circulars issued by SEBI in this regard, after October 21, 2018, these expenses, subject to some exceptions, are being borne by the mutual fund schemes.
Commission is paid to the brokers for Portfolio Management and other services as per the terms of agreement entered into with respective brokers. In case of certain portfolio management schemes and other services, the brokerage expenses are amortised over the tenure of the product or commitment period. Unamortised brokerage is treated as Non-Financial Assets considering the normal operating cycle of the Company.
2.16 Off-setting Financial Instruments
Financial assets and liabilities are offset and the net amount is reported in the balance sheet where there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the Company or the counterparty.
Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to passage of time is recognized as a finance cost.
2.18 Employee-Benefits Expense
(i) Short-term Employee Benefits
The undiscounted amount of short term employee benefits expected to be paid in exchange for the services rendered by employees are recognized as an expense during the period when the employees render the service.
(ii) Post-employment obligations Defined contribution plans
The Company recognizes contribution payable to provident fund scheme as an expense, when the employee renders the related service. If the contribution payable to the scheme for service received before the balance sheet date exceeds the contribution already paid, the deficit payable to the scheme is recognized as a liability after deducting the contribution already paid. If the contribution already paid exceeds the contribution due for services received before the balance sheet date, then excess is recognized as an asset.
Defined benefit plans
The liability or asset recognized in the balance sheet in respect of defined benefit gratuity plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by actuaries using the projected unit credit method.
The present value of the defined benefit obligation denominated in INR is determined by discounting the estimated future cash outflows by reference to market yields at the end of the reporting period on government bonds that have terms approximating to the terms of the related obligation. The estimated future payments which are denominated in a currency other than INR, are discounted using market yields determined by reference to high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms approximating to the terms of the related obligation.
The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. This cost is included in employee benefit expense in the statement of profit or loss.
Re-measurement gains and losses arising from experience adjustments and changes in actuarial assumptions are recognized in the period in which they occur, directly in other comprehensive income. They are included in retained earnings in the statement of changes in equity and in the balance sheet.
(iii) Other long-term employee benefit obligations Leave encashment
The liabilities for earned leave are not expected to be settled wholly within 12 months after the end of the period in which the employees render the related service. They are therefore measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method. The benefits are discounted using the appropriate market yields at the end of the reporting period that have terms approximating to the terms of the related obligation. Remeasurements as a result of experience adjustments and changes in actuarial assumptions are recognized in the statement of profit or loss.
As a long-term incentive plan to employees, the Company has initiated Phantom Stock Option Plan which are cash settlement rights where the employees are entitled to get cash compensation based on agreed formulae. The employees are entitled to receive cash payment equivalent to appreciation in the value over the defined base price. The present value of the obligation under such plan is determined based on actuarial valuation.
Employee Stock Option Scheme (ESOS)
Equity settled share based payments to employees and others providing similar services are measured at fair value of the equity instruments at the grant date. Details regarding the determination of the fair value of equity settled share based payments transactions are set out in note 28.
The fair value determined at the grant date of the equity settled share based payments is expensed on a straight line basis over the vesting period, based on the Company''s estimate of equity instruments that will eventually vest, with a corresponding increase in equity. At the end of each reporting period, the Company revives its estimate of the number of equity instruments expected to vest. The impact of the revision of original estimates, if any, is recognized in Statement of profit and loss such that the cumulative expenses reflect the revised estimate, with a corresponding adjustment to Share based options outstanding account.
The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share.
Reliance Capital Asset Management Employees Benefits Trust
The Reliance Capital Asset Management Employees Benefit Trust is administered by the Company. The Company treats the trust as its extension and is consolidated in Company''s financial statements. There are no shares pending to be allotted in the Trust.
a) Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to owners of the Company by the weighted average number of equity shares outstanding during the financial year, adjusted for bonus element in equity shares issued during the year.
b) Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential equity shares, and the weighted average number of additional equity shares that would have been outstanding assuming the conversion of all dilutive potential equity shares.
All amounts disclosed in the financial statements and notes have been rounded off to the nearest crore as per the requirements of Schedule III, unless otherwise stated.
Mar 31, 2022
1 CORPORATE INFORMATION
Nippon Life India Asset Management Limited (''the Company'') was incorporated on February 24, 1995.
The Company''s principal activity is to act as an investment manager to Nippon India Mutual Fund (''the Fund'') and to provide Portfolio Management Services (''PMS'') and advisory services to clients under Securities and Exchange Board of India (SEBI) Regulations. The Company is registered with SEBI under the SEBI (Mutual Funds) Regulations, 1996.
The equity shares of the Company were listed on National Stock exchange of India Limited and Bombay Stock exchange Limited on November 6, 2017.
2 SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.
(i) Compliance with Ind AS
The financial statements comply in all material aspects with Indian Accounting Standards (Ind AS) notified under Section 133 of the Companies Act, 2013 (the Act) [Companies (Indian Accounting Standards) Rules, 2015] and other relevant provisions of the Act. The financial statements have been prepared on accural and going concern basis. The accounting policies are applied consistently to all the periods presented in the financial statements.
(ii) Historical cost convention
The financial statements have been prepared on a historical cost basis, except for the following assets and liabilities which have been measured at fair value:
a. Certain financial assets and liabilities (including derivatives instruments).
b. Defined benefit plans - plan assets and
c. Equity Settled share based payments
2.2 Property, Plant and Equipment
All items of property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset''s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognized when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred.
Property, Plant & Equipment which are significant to total cost of that item of Property plant & Equipment and having different useful life are accounted separately.
Depreciation methods, estimated useful lives & residual value:
Depreciation is calculated using the straight-line method to allocate their cost, net of their residual values, over their estimated useful lives or, in the case of certain leased furniture, fittings and equipment, the shorter lease term as follows:
The estimated useful lives for the different types of assets are:
|
Asset |
Useful Life |
|
Furniture and fixtures |
10 years |
|
Office equipment |
5 years |
|
IT equipments - computers & printers |
3 years |
|
Vehicles |
8 years |
Leasehold improvements are amortised over the primary period of the lease on straight-line basis or useful life of asset, whichever is lower.
The asset''s residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.
An asset''s carrying amount is written down immediately to its recoverable amount if the asset''s carrying amount is greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with carrying amount and are recognized in the statement of profit or loss.
The Company provides pro-rata depreciation from the day the asset is put to use and for any asset sold, till the date of sale.
Intangible assets are stated at cost of acquisition net of recoverable taxes, accumulated amortization and impairment losses, if any. Such costs include purchase price, borrowing cost, and any cost directly attributable to bringing the asset to its working condition for the intended use, net charges on foreign exchange contracts and adjustments arising from exchange rate variations attributable to the intangible assets.
Subsequent costs are included in the asset''s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the entity and cost can be measured reliably.
Gains or losses arising from derecognition of an Intangible Asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the statement of profit and loss when the asset is derecognised.
Acquisition of rights to manage and administer the schemes of Goldman Sachs Mutual Fund have been stated at cost net of impairment losses, if any.
Goodwill and intangible assets that have an indefinite useful life are not subject to amortization and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount
by which the asset''s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset''s fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or Groups of assets (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period.
The Company assesses at each balance sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset or the recoverable amount of the cash-generating unit to which the asset belongs is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognized in the statement of profit and loss. If at the balance sheet date there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of depreciable historical cost.
The Company has applied IND AS 116 using the partial retrospective approach.
The Company assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
The Company applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. The Group recognizes lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets.
Right of use assets
The Company recognizes right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognized, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease term and the estimated useful lives of the assets.
At the commencement date of the lease, the Company recognizes lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees.
In calculating the present value of lease payments, the Company uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the lease payments (e.g., changes to future payments resulting from a change in an index or rate used to determine such lease payments) or a change in the assessment of an option to purchase the underlying asset.
Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision Maker.
The power to assess the financial performance and position of the Company and make strategic decisions is vested in the Executive Director who has been identified as the Chief Operating Decisions Maker.
2.7 Foreign Currency Translation
Transactions in foreign currencies are recorded at the exchange rate prevailing on the date of transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency closing rates of exchange at the reporting date.
Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates are generally recognized in profit or loss.
Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was measured. The gain or loss arising on translation of non -monetary items measured at fair value is treated in line with the recognition of the gain or loss on the change in fair value of the item(i.e. translation differences on items whose fair value gain or loss is recognized in Other Comprehensive Income or Statement of Profit and Loss are also recognized in Other Comprehensive Income or Statement of Profit and Loss, respectively).
A. Initial Recognition and Measurement
All Financial Assets are initially recognized at fair value. Transaction Costs that are directly attributable to the acquisition or issue of Financial Assets, which are not at Fair Value Through Profit or Loss, are adjusted to the fair value on initial recognition. Purchase and sale of financial assets are recognized using trade date accounting.
B. Subsequent Measurement
Financial Assets measured at Amortized cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest (''SPPI''), and that are not designated at FVPL, are measured at amortized cost. The carrying amount of these assets is adjusted by any expected credit loss allowance recognized and measured as described in note 6. Interest income from these financial assets is recognized using the effective interest rate method.
Financial Assets measured at Fair Value Through Other Comprehensive Income: Financial assets that are held for collection of contractual cash flows and for selling
the assets, where the assets'' cash flows represent solely payments of principal and interest, and that are not designated at FVPL, are measured at fair value through other comprehensive income. Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains and losses on the instrument''s amortized cost which are recognized in profit or loss. When the financial asset is derecognized, the cumulative gain or loss previously recognized in OCI is reclassified from equity to profit or loss. Interest income from these financial assets is included in ''Interest income'' using the effective interest rate method.
Financial Assets measures at Fair Value Through Profit or Loss: Assets that do not meet the criteria for amortized cost or FVOCI are measured at fair value through profit or loss. A gain or loss on a debt investment that is subsequently measured at fair value through profit or loss and is not part of a hedging relationship is recognized in profit or loss in the period in which it arises, unless it arises from debt instruments that were designated at fair value or which are not held for trading. Interest income from these financial assets is included in ''Interest income'' using the effective interest rate method.
C. Equity instruments
All equity investments are measured at fair value with value changes recognized in statement of profit and loss, except for those equity investments for which the Company has elected to present the value changes in ''Other Comprehensive Income'' .
Changes in the fair value of financial assets at fair value through profit or loss are recognized in net gain/loss on fair value changes in the statement of profit or loss. Impairment losses (and reversal of impairment losses) on equity investments measured at FVOCI are not reported separately from other changes in fair value.
D. Impairment of Financial Asset
The Company assesses on a forward looking basis the expected credit losses (ECL) associated with its debt instruments carried at amortized cost and with the exposure arising from loan commitments and financial guarantee contracts. The Company recognizes a loss allowance for such losses at each reporting date. The measurement of ECL reflects:
- An unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes;
- The time value of money; and
- Reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions and forecasts of future economic conditions.
The Company recognizes loss allowance using the expected credit loss (ECL) model for the financial assets which are not fair valued through profit or loss. ECL is measured at an amount equal to the 12 months ECL, unless there has been a significant increase in credit risk from initial recognition in which case those are measured at lifetime ECL. The amount of expected credit losses ( or reversal) that is required to adjust
the loss allowance at the reporting date to the amount that is required to be recognized, is recognized as an expense in the statement of profit or loss.
A. Initial Recognition
All Financial liabilities are recognized at fair value and in case of borrowing, net of directly attributable cost. Fees of recurring nature are directly recognized in the statement of profit and loss as finance cost.
B. Subsequent measurement
Financial liabilities are carried at amortized cost using the effective interest method.
For trade and other payables maturing within one year from the balance sheet date, the carrying amounts approximate fair value due to the short maturity of these instruments.
C. Derecognition
Financial liabilities are derecognized when they are extinguished i.e. when the obligation specified in the contract is discharged, cancelled or expires.
2.10 Financial guarantee contracts
Financial guarantee contracts are contracts that require the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due, in accordance with the terms of a debt instrument.
Financial guarantee contracts are initially measured at fair value and subsequently measured at the higher of:
i. The amount of the loss allowance; and
ii. The premium received on initial recognition less income recognized in accordance with the principles of Ind AS 115.
Revenue is measured at fair value of the consideration received or receivable. Revenue is recognized when (or as) the Company satisfies a performance obligation by transferring a promised good or service (i.e. an asset) to a customer. An asset is transferred when (or as) the customer obtains control of that asset.
When (or as) a performance obligation is satisfied, the Company recognizes as revenue the amount of the transaction price (excluding estimates of variable consideration) that is allocated to that performance obligation.
The Company applies the five-step approach for recognition of revenue:
i. Identification of contract(s) with customers;
ii. Identification of the separate performance obligations in the contract;
iii. Determination of transaction price;
iv. Allocation of transaction price to the separate performance obligations; and
v. Recognition of revenue when (or as) each performance obligation is satisfied.
Revenue Recognition For different heads of Income are as under:
(i) Investment Management Fees (net of tax)
Investment Management fees are recognized on an accrual basis in accordance with Investment Management Agreement and SEBI (Mutual Fund) Regulations, 1996 based on average assets under management (AUM) of Nippon India Mutual Fund schemes.
(ii) Advisory Fees (net of tax)
Advisory fees are recognized on an accrual basis in accordance with agreement entered into with respective investment managers / advisors.
(iii) Portfolio Management Fees (net of tax)
Portfolio Management fees are recognized on an accrual basis in accordance with Portfolio Management Agreement entered with respective clients.
(iv) Interest income
Interest income is recognized using the effective interest rate.
(v) Dividend income
Dividend income is recognized in the statement of profit or loss on the date that the Company''s right to receive payment is established, it is probable that the economic benefits associated with the dividend will flow to the entity and the amount of dividend can be reliably measured. This is generally when the Shareholders approve the dividend.
The tax expense for the period comprises of current tax and deferred income tax. Tax is recognized in Statement of Profit and Loss, except to the extent that it relates to items recognized in the Other Comprehensive Income or in Equity. In which case, the tax is also recognized in Other Comprehensive Income or Equity.
Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the Income Tax Authorities, based on tax rates and laws that are enacted at the Balance sheet date.
Deferred tax is recognized on temporary differences arising between carrying amounts of asset and liabilities in financial statements and corresponding tax bases used in the computation of taxable profit.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on the tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The carrying amount of deferred tax liabilities and assets are reviewed at the end of each reporting period.
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 overdraft.
2.14 New fund offer expenses of mutual fund and PMS schemes
Expenses relating to new fund offer of mutual fund and PMS schemes are charged in the statement of profit and loss in the year in which such expenses are incurred.
2.15 Fund and commission expenses
Prior to October 21,2018, certain scheme related expenses and commission were being borne by the Company in accordance with circulars and guidelines issues by SEBI and the Association of Mutual Funds in India (AMFI). Commission paid for future period for the mutual fund schemes (including for Equity Linked Savings Schemes) until October 21, 2018 is treated as prepaid expenses and is amortised on the contractual period and charged to Statement of Profit and Loss account unless considered recoverable from schemes.Pursuant to circulars issued by SEBI in this regard, after October 21, 2018, these expenses, subject to some exceptions, are being borne by the mutual fund schemes.
Commission is paid to the brokers for Portfolio Management and other services as per the terms of agreement entered into with respective brokers. In case of certain portfolio management schemes and other services, the brokerage expenses are amortised over the tenure of the product or commitment period. Unamortised brokerage is treated as Non-Financial Assets considering the normal operating cycle of the Company.
2.16 Off-setting Financial Instruments
Financial assets and liabilities are offset and the net amount is reported in the balance sheet where there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the Company or the counterparty.
Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to passage of time is recognized as a finance cost.
2.18 Employee-Benefits Expense
(i) Short-term Employee Benefits
The undiscounted amount of short term employee benefits expected to be paid in exchange for the services rendered by employees are recognized as an expense during the period when the employees render the service.
(ii) Post-employment obligations Defined contribution plans
The Company recognizes contribution payable to provident fund scheme as an expense, when the employee renders the related service. If the contribution payable to the scheme for service received before the balance sheet date exceeds the contribution already paid, the deficit payable to the scheme is recognized as a liability after deducting the contribution already paid. If the contribution already paid exceeds the contribution due for services received before the balance sheet date, then excess is recognized as an asset.
Defined benefit plans
The liability or asset recognized in the balance sheet in respect of defined benefit gratuity plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by actuaries using the projected unit credit method.
The present value of the defined benefit obligation denominated in INR is determined by discounting the estimated future cash outflows by reference to market yields at the end of the reporting period on government bonds that have terms approximating to the terms of the related obligation. The estimated future payments which are denominated in a currency other than INR, are discounted using market yields determined by reference to high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms approximating to the terms of the related obligation.
The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. This cost is included in employee benefit expense in the statement of profit or loss.
Re-measurement gains and losses arising from experience adjustments and changes in actuarial assumptions are recognized in the period in which they occur, directly in other comprehensive income. They are included in retained earnings in the statement of changes in equity and in the balance sheet.
(iii) Other long-term employee benefit obligations Leave encashment
The liabilities for earned leave are not expected to be settled wholly within 12 months after the end of the period in which the employees render the related service. They are therefore measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method. The benefits are discounted using the appropriate market yields at the end of the reporting period that have terms approximating to the terms of the related obligation. Remeasurements as a result of experience adjustments and changes in actuarial assumptions are recognized in the statement of profit or loss.
As a long-term incentive plan to employees, the Company has initiated Phantom Stock Option Plan which are cash settlement rights where the employees are entitled to get cash compensation based on agreed formulae. The employees are entitled to receive cash payment equivalent to appreciation in the value over the defined base price. The present value of the obligation under such plan is determined based on actuarial valuation.
Employee Stock Option Scheme (ESOS)
Equity settled share based payments to employees and others providing similar services are measured at fair value of the equity instruments at the grant date. Details regarding the determination of the fair value of equity settled share based payments transactions are set out in note 28.
The fair value determined at the grant date of the equity settled share based payments is expensed on a straight line basis over the vesting period, based on the Company''s estimate of equity instruments that will eventually vest, with a corresponding increase in equity. At the end of each reporting period, the Company revives its estimate of the number of equity instruments expected to vest. The impact of the revision of original estimates, if any, is recognized in Statement of profit and loss such that the cumulative expenses reflect the revised estimate, with a corresponding adjustment to Share based options outstanding account.
The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share.
Reliance Capital Asset Management Employees Benefits Trust
The Reliance Capital Asset Management Employees Benefit Trust is administered by the Company. The Company treats the trust as its extension and is consolidated in Company''s financial statements. There are no shares pending to be allotted in the Trust.
a) Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to owners of the Company by the weighted average number of equity shares outstanding during the financial year, adjusted for bonus element in equity shares issued during the year.
b) Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential equity shares, and the weighted average number of additional equity shares that would have been outstanding assuming the conversion of all dilutive potential equity shares.
All amounts disclosed in the financial statements and notes have been rounded off to the nearest crore as per the requirements of Schedule III, unless otherwise stated.
Mar 31, 2022
1 CORPORATE INFORMATION
Nippon Life India Asset Management Limited (''the Company'') was incorporated on February 24, 1995.
The Company''s principal activity is to act as an investment manager to Nippon India Mutual Fund (''the Fund'') and to provide Portfolio Management Services (''PMS'') and advisory services to clients under Securities and Exchange Board of India (SEBI) Regulations. The Company is registered with SEBI under the SEBI (Mutual Funds) Regulations, 1996.
The equity shares of the Company were listed on National Stock exchange of India Limited and Bombay Stock exchange Limited on November 6, 2017.
2 SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.
(i) Compliance with Ind AS
The financial statements comply in all material aspects with Indian Accounting Standards (Ind AS) notified under Section 133 of the Companies Act, 2013 (the Act) [Companies (Indian Accounting Standards) Rules, 2015] and other relevant provisions of the Act. The financial statements have been prepared on accural and going concern basis. The accounting policies are applied consistently to all the periods presented in the financial statements.
(ii) Historical cost convention
The financial statements have been prepared on a historical cost basis, except for the following assets and liabilities which have been measured at fair value:
a. Certain financial assets and liabilities (including derivatives instruments).
b. Defined benefit plans - plan assets and
c. Equity Settled share based payments
2.2 Property, Plant and Equipment
All items of property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset''s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognized when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred.
Property, Plant & Equipment which are significant to total cost of that item of Property plant & Equipment and having different useful life are accounted separately.
Depreciation methods, estimated useful lives & residual value:
Depreciation is calculated using the straight-line method to allocate their cost, net of their residual values, over their estimated useful lives or, in the case of certain leased furniture, fittings and equipment, the shorter lease term as follows:
The estimated useful lives for the different types of assets are:
|
Asset |
Useful Life |
|
Furniture and fixtures |
10 years |
|
Office equipment |
5 years |
|
IT equipments - computers & printers |
3 years |
|
Vehicles |
8 years |
Leasehold improvements are amortised over the primary period of the lease on straight-line basis or useful life of asset, whichever is lower.
The asset''s residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.
An asset''s carrying amount is written down immediately to its recoverable amount if the asset''s carrying amount is greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with carrying amount and are recognized in the statement of profit or loss.
The Company provides pro-rata depreciation from the day the asset is put to use and for any asset sold, till the date of sale.
Intangible assets are stated at cost of acquisition net of recoverable taxes, accumulated amortization and impairment losses, if any. Such costs include purchase price, borrowing cost, and any cost directly attributable to bringing the asset to its working condition for the intended use, net charges on foreign exchange contracts and adjustments arising from exchange rate variations attributable to the intangible assets.
Subsequent costs are included in the asset''s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the entity and cost can be measured reliably.
Gains or losses arising from derecognition of an Intangible Asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the statement of profit and loss when the asset is derecognised.
Acquisition of rights to manage and administer the schemes of Goldman Sachs Mutual Fund have been stated at cost net of impairment losses, if any.
Goodwill and intangible assets that have an indefinite useful life are not subject to amortization and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount
by which the asset''s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset''s fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or Groups of assets (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period.
The Company assesses at each balance sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset or the recoverable amount of the cash-generating unit to which the asset belongs is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognized in the statement of profit and loss. If at the balance sheet date there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of depreciable historical cost.
The Company has applied IND AS 116 using the partial retrospective approach.
The Company assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
The Company applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. The Group recognizes lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets.
Right of use assets
The Company recognizes right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognized, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease term and the estimated useful lives of the assets.
At the commencement date of the lease, the Company recognizes lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees.
In calculating the present value of lease payments, the Company uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the lease payments (e.g., changes to future payments resulting from a change in an index or rate used to determine such lease payments) or a change in the assessment of an option to purchase the underlying asset.
Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision Maker.
The power to assess the financial performance and position of the Company and make strategic decisions is vested in the Executive Director who has been identified as the Chief Operating Decisions Maker.
2.7 Foreign Currency Translation
Transactions in foreign currencies are recorded at the exchange rate prevailing on the date of transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency closing rates of exchange at the reporting date.
Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates are generally recognized in profit or loss.
Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was measured. The gain or loss arising on translation of non -monetary items measured at fair value is treated in line with the recognition of the gain or loss on the change in fair value of the item(i.e. translation differences on items whose fair value gain or loss is recognized in Other Comprehensive Income or Statement of Profit and Loss are also recognized in Other Comprehensive Income or Statement of Profit and Loss, respectively).
A. Initial Recognition and Measurement
All Financial Assets are initially recognized at fair value. Transaction Costs that are directly attributable to the acquisition or issue of Financial Assets, which are not at Fair Value Through Profit or Loss, are adjusted to the fair value on initial recognition. Purchase and sale of financial assets are recognized using trade date accounting.
B. Subsequent Measurement
Financial Assets measured at Amortized cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest (''SPPI''), and that are not designated at FVPL, are measured at amortized cost. The carrying amount of these assets is adjusted by any expected credit loss allowance recognized and measured as described in note 6. Interest income from these financial assets is recognized using the effective interest rate method.
Financial Assets measured at Fair Value Through Other Comprehensive Income: Financial assets that are held for collection of contractual cash flows and for selling
the assets, where the assets'' cash flows represent solely payments of principal and interest, and that are not designated at FVPL, are measured at fair value through other comprehensive income. Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains and losses on the instrument''s amortized cost which are recognized in profit or loss. When the financial asset is derecognized, the cumulative gain or loss previously recognized in OCI is reclassified from equity to profit or loss. Interest income from these financial assets is included in ''Interest income'' using the effective interest rate method.
Financial Assets measures at Fair Value Through Profit or Loss: Assets that do not meet the criteria for amortized cost or FVOCI are measured at fair value through profit or loss. A gain or loss on a debt investment that is subsequently measured at fair value through profit or loss and is not part of a hedging relationship is recognized in profit or loss in the period in which it arises, unless it arises from debt instruments that were designated at fair value or which are not held for trading. Interest income from these financial assets is included in ''Interest income'' using the effective interest rate method.
C. Equity instruments
All equity investments are measured at fair value with value changes recognized in statement of profit and loss, except for those equity investments for which the Company has elected to present the value changes in ''Other Comprehensive Income'' .
Changes in the fair value of financial assets at fair value through profit or loss are recognized in net gain/loss on fair value changes in the statement of profit or loss. Impairment losses (and reversal of impairment losses) on equity investments measured at FVOCI are not reported separately from other changes in fair value.
D. Impairment of Financial Asset
The Company assesses on a forward looking basis the expected credit losses (ECL) associated with its debt instruments carried at amortized cost and with the exposure arising from loan commitments and financial guarantee contracts. The Company recognizes a loss allowance for such losses at each reporting date. The measurement of ECL reflects:
- An unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes;
- The time value of money; and
- Reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions and forecasts of future economic conditions.
The Company recognizes loss allowance using the expected credit loss (ECL) model for the financial assets which are not fair valued through profit or loss. ECL is measured at an amount equal to the 12 months ECL, unless there has been a significant increase in credit risk from initial recognition in which case those are measured at lifetime ECL. The amount of expected credit losses ( or reversal) that is required to adjust
the loss allowance at the reporting date to the amount that is required to be recognized, is recognized as an expense in the statement of profit or loss.
A. Initial Recognition
All Financial liabilities are recognized at fair value and in case of borrowing, net of directly attributable cost. Fees of recurring nature are directly recognized in the statement of profit and loss as finance cost.
B. Subsequent measurement
Financial liabilities are carried at amortized cost using the effective interest method.
For trade and other payables maturing within one year from the balance sheet date, the carrying amounts approximate fair value due to the short maturity of these instruments.
C. Derecognition
Financial liabilities are derecognized when they are extinguished i.e. when the obligation specified in the contract is discharged, cancelled or expires.
2.10 Financial guarantee contracts
Financial guarantee contracts are contracts that require the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due, in accordance with the terms of a debt instrument.
Financial guarantee contracts are initially measured at fair value and subsequently measured at the higher of:
i. The amount of the loss allowance; and
ii. The premium received on initial recognition less income recognized in accordance with the principles of Ind AS 115.
Revenue is measured at fair value of the consideration received or receivable. Revenue is recognized when (or as) the Company satisfies a performance obligation by transferring a promised good or service (i.e. an asset) to a customer. An asset is transferred when (or as) the customer obtains control of that asset.
When (or as) a performance obligation is satisfied, the Company recognizes as revenue the amount of the transaction price (excluding estimates of variable consideration) that is allocated to that performance obligation.
The Company applies the five-step approach for recognition of revenue:
i. Identification of contract(s) with customers;
ii. Identification of the separate performance obligations in the contract;
iii. Determination of transaction price;
iv. Allocation of transaction price to the separate performance obligations; and
v. Recognition of revenue when (or as) each performance obligation is satisfied.
Revenue Recognition For different heads of Income are as under:
(i) Investment Management Fees (net of tax)
Investment Management fees are recognized on an accrual basis in accordance with Investment Management Agreement and SEBI (Mutual Fund) Regulations, 1996 based on average assets under management (AUM) of Nippon India Mutual Fund schemes.
(ii) Advisory Fees (net of tax)
Advisory fees are recognized on an accrual basis in accordance with agreement entered into with respective investment managers / advisors.
(iii) Portfolio Management Fees (net of tax)
Portfolio Management fees are recognized on an accrual basis in accordance with Portfolio Management Agreement entered with respective clients.
(iv) Interest income
Interest income is recognized using the effective interest rate.
(v) Dividend income
Dividend income is recognized in the statement of profit or loss on the date that the Company''s right to receive payment is established, it is probable that the economic benefits associated with the dividend will flow to the entity and the amount of dividend can be reliably measured. This is generally when the Shareholders approve the dividend.
The tax expense for the period comprises of current tax and deferred income tax. Tax is recognized in Statement of Profit and Loss, except to the extent that it relates to items recognized in the Other Comprehensive Income or in Equity. In which case, the tax is also recognized in Other Comprehensive Income or Equity.
Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the Income Tax Authorities, based on tax rates and laws that are enacted at the Balance sheet date.
Deferred tax is recognized on temporary differences arising between carrying amounts of asset and liabilities in financial statements and corresponding tax bases used in the computation of taxable profit.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on the tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The carrying amount of deferred tax liabilities and assets are reviewed at the end of each reporting period.
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 overdraft.
2.14 New fund offer expenses of mutual fund and PMS schemes
Expenses relating to new fund offer of mutual fund and PMS schemes are charged in the statement of profit and loss in the year in which such expenses are incurred.
2.15 Fund and commission expenses
Prior to October 21,2018, certain scheme related expenses and commission were being borne by the Company in accordance with circulars and guidelines issues by SEBI and the Association of Mutual Funds in India (AMFI). Commission paid for future period for the mutual fund schemes (including for Equity Linked Savings Schemes) until October 21, 2018 is treated as prepaid expenses and is amortised on the contractual period and charged to Statement of Profit and Loss account unless considered recoverable from schemes.Pursuant to circulars issued by SEBI in this regard, after October 21, 2018, these expenses, subject to some exceptions, are being borne by the mutual fund schemes.
Commission is paid to the brokers for Portfolio Management and other services as per the terms of agreement entered into with respective brokers. In case of certain portfolio management schemes and other services, the brokerage expenses are amortised over the tenure of the product or commitment period. Unamortised brokerage is treated as Non-Financial Assets considering the normal operating cycle of the Company.
2.16 Off-setting Financial Instruments
Financial assets and liabilities are offset and the net amount is reported in the balance sheet where there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the Company or the counterparty.
Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to passage of time is recognized as a finance cost.
2.18 Employee-Benefits Expense
(i) Short-term Employee Benefits
The undiscounted amount of short term employee benefits expected to be paid in exchange for the services rendered by employees are recognized as an expense during the period when the employees render the service.
(ii) Post-employment obligations Defined contribution plans
The Company recognizes contribution payable to provident fund scheme as an expense, when the employee renders the related service. If the contribution payable to the scheme for service received before the balance sheet date exceeds the contribution already paid, the deficit payable to the scheme is recognized as a liability after deducting the contribution already paid. If the contribution already paid exceeds the contribution due for services received before the balance sheet date, then excess is recognized as an asset.
Defined benefit plans
The liability or asset recognized in the balance sheet in respect of defined benefit gratuity plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by actuaries using the projected unit credit method.
The present value of the defined benefit obligation denominated in INR is determined by discounting the estimated future cash outflows by reference to market yields at the end of the reporting period on government bonds that have terms approximating to the terms of the related obligation. The estimated future payments which are denominated in a currency other than INR, are discounted using market yields determined by reference to high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms approximating to the terms of the related obligation.
The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. This cost is included in employee benefit expense in the statement of profit or loss.
Re-measurement gains and losses arising from experience adjustments and changes in actuarial assumptions are recognized in the period in which they occur, directly in other comprehensive income. They are included in retained earnings in the statement of changes in equity and in the balance sheet.
(iii) Other long-term employee benefit obligations Leave encashment
The liabilities for earned leave are not expected to be settled wholly within 12 months after the end of the period in which the employees render the related service. They are therefore measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method. The benefits are discounted using the appropriate market yields at the end of the reporting period that have terms approximating to the terms of the related obligation. Remeasurements as a result of experience adjustments and changes in actuarial assumptions are recognized in the statement of profit or loss.
As a long-term incentive plan to employees, the Company has initiated Phantom Stock Option Plan which are cash settlement rights where the employees are entitled to get cash compensation based on agreed formulae. The employees are entitled to receive cash payment equivalent to appreciation in the value over the defined base price. The present value of the obligation under such plan is determined based on actuarial valuation.
Employee Stock Option Scheme (ESOS)
Equity settled share based payments to employees and others providing similar services are measured at fair value of the equity instruments at the grant date. Details regarding the determination of the fair value of equity settled share based payments transactions are set out in note 28.
The fair value determined at the grant date of the equity settled share based payments is expensed on a straight line basis over the vesting period, based on the Company''s estimate of equity instruments that will eventually vest, with a corresponding increase in equity. At the end of each reporting period, the Company revives its estimate of the number of equity instruments expected to vest. The impact of the revision of original estimates, if any, is recognized in Statement of profit and loss such that the cumulative expenses reflect the revised estimate, with a corresponding adjustment to Share based options outstanding account.
The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share.
Reliance Capital Asset Management Employees Benefits Trust
The Reliance Capital Asset Management Employees Benefit Trust is administered by the Company. The Company treats the trust as its extension and is consolidated in Company''s financial statements. There are no shares pending to be allotted in the Trust.
a) Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to owners of the Company by the weighted average number of equity shares outstanding during the financial year, adjusted for bonus element in equity shares issued during the year.
b) Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential equity shares, and the weighted average number of additional equity shares that would have been outstanding assuming the conversion of all dilutive potential equity shares.
All amounts disclosed in the financial statements and notes have been rounded off to the nearest crore as per the requirements of Schedule III, unless otherwise stated.
Mar 31, 2022
1 CORPORATE INFORMATION
Nippon Life India Asset Management Limited (''the Company'') was incorporated on February 24, 1995.
The Company''s principal activity is to act as an investment manager to Nippon India Mutual Fund (''the Fund'') and to provide Portfolio Management Services (''PMS'') and advisory services to clients under Securities and Exchange Board of India (SEBI) Regulations. The Company is registered with SEBI under the SEBI (Mutual Funds) Regulations, 1996.
The equity shares of the Company were listed on National Stock exchange of India Limited and Bombay Stock exchange Limited on November 6, 2017.
2 SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.
(i) Compliance with Ind AS
The financial statements comply in all material aspects with Indian Accounting Standards (Ind AS) notified under Section 133 of the Companies Act, 2013 (the Act) [Companies (Indian Accounting Standards) Rules, 2015] and other relevant provisions of the Act. The financial statements have been prepared on accural and going concern basis. The accounting policies are applied consistently to all the periods presented in the financial statements.
(ii) Historical cost convention
The financial statements have been prepared on a historical cost basis, except for the following assets and liabilities which have been measured at fair value:
a. Certain financial assets and liabilities (including derivatives instruments).
b. Defined benefit plans - plan assets and
c. Equity Settled share based payments
2.2 Property, Plant and Equipment
All items of property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset''s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognized when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred.
Property, Plant & Equipment which are significant to total cost of that item of Property plant & Equipment and having different useful life are accounted separately.
Depreciation methods, estimated useful lives & residual value:
Depreciation is calculated using the straight-line method to allocate their cost, net of their residual values, over their estimated useful lives or, in the case of certain leased furniture, fittings and equipment, the shorter lease term as follows:
The estimated useful lives for the different types of assets are:
|
Asset |
Useful Life |
|
Furniture and fixtures |
10 years |
|
Office equipment |
5 years |
|
IT equipments - computers & printers |
3 years |
|
Vehicles |
8 years |
Leasehold improvements are amortised over the primary period of the lease on straight-line basis or useful life of asset, whichever is lower.
The asset''s residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.
An asset''s carrying amount is written down immediately to its recoverable amount if the asset''s carrying amount is greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with carrying amount and are recognized in the statement of profit or loss.
The Company provides pro-rata depreciation from the day the asset is put to use and for any asset sold, till the date of sale.
Intangible assets are stated at cost of acquisition net of recoverable taxes, accumulated amortization and impairment losses, if any. Such costs include purchase price, borrowing cost, and any cost directly attributable to bringing the asset to its working condition for the intended use, net charges on foreign exchange contracts and adjustments arising from exchange rate variations attributable to the intangible assets.
Subsequent costs are included in the asset''s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the entity and cost can be measured reliably.
Gains or losses arising from derecognition of an Intangible Asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the statement of profit and loss when the asset is derecognised.
Acquisition of rights to manage and administer the schemes of Goldman Sachs Mutual Fund have been stated at cost net of impairment losses, if any.
Goodwill and intangible assets that have an indefinite useful life are not subject to amortization and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount
by which the asset''s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset''s fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or Groups of assets (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period.
The Company assesses at each balance sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset or the recoverable amount of the cash-generating unit to which the asset belongs is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognized in the statement of profit and loss. If at the balance sheet date there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of depreciable historical cost.
The Company has applied IND AS 116 using the partial retrospective approach.
The Company assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
The Company applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. The Group recognizes lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets.
Right of use assets
The Company recognizes right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognized, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease term and the estimated useful lives of the assets.
At the commencement date of the lease, the Company recognizes lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees.
In calculating the present value of lease payments, the Company uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the lease payments (e.g., changes to future payments resulting from a change in an index or rate used to determine such lease payments) or a change in the assessment of an option to purchase the underlying asset.
Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision Maker.
The power to assess the financial performance and position of the Company and make strategic decisions is vested in the Executive Director who has been identified as the Chief Operating Decisions Maker.
2.7 Foreign Currency Translation
Transactions in foreign currencies are recorded at the exchange rate prevailing on the date of transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency closing rates of exchange at the reporting date.
Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates are generally recognized in profit or loss.
Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was measured. The gain or loss arising on translation of non -monetary items measured at fair value is treated in line with the recognition of the gain or loss on the change in fair value of the item(i.e. translation differences on items whose fair value gain or loss is recognized in Other Comprehensive Income or Statement of Profit and Loss are also recognized in Other Comprehensive Income or Statement of Profit and Loss, respectively).
A. Initial Recognition and Measurement
All Financial Assets are initially recognized at fair value. Transaction Costs that are directly attributable to the acquisition or issue of Financial Assets, which are not at Fair Value Through Profit or Loss, are adjusted to the fair value on initial recognition. Purchase and sale of financial assets are recognized using trade date accounting.
B. Subsequent Measurement
Financial Assets measured at Amortized cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest (''SPPI''), and that are not designated at FVPL, are measured at amortized cost. The carrying amount of these assets is adjusted by any expected credit loss allowance recognized and measured as described in note 6. Interest income from these financial assets is recognized using the effective interest rate method.
Financial Assets measured at Fair Value Through Other Comprehensive Income: Financial assets that are held for collection of contractual cash flows and for selling
the assets, where the assets'' cash flows represent solely payments of principal and interest, and that are not designated at FVPL, are measured at fair value through other comprehensive income. Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains and losses on the instrument''s amortized cost which are recognized in profit or loss. When the financial asset is derecognized, the cumulative gain or loss previously recognized in OCI is reclassified from equity to profit or loss. Interest income from these financial assets is included in ''Interest income'' using the effective interest rate method.
Financial Assets measures at Fair Value Through Profit or Loss: Assets that do not meet the criteria for amortized cost or FVOCI are measured at fair value through profit or loss. A gain or loss on a debt investment that is subsequently measured at fair value through profit or loss and is not part of a hedging relationship is recognized in profit or loss in the period in which it arises, unless it arises from debt instruments that were designated at fair value or which are not held for trading. Interest income from these financial assets is included in ''Interest income'' using the effective interest rate method.
C. Equity instruments
All equity investments are measured at fair value with value changes recognized in statement of profit and loss, except for those equity investments for which the Company has elected to present the value changes in ''Other Comprehensive Income'' .
Changes in the fair value of financial assets at fair value through profit or loss are recognized in net gain/loss on fair value changes in the statement of profit or loss. Impairment losses (and reversal of impairment losses) on equity investments measured at FVOCI are not reported separately from other changes in fair value.
D. Impairment of Financial Asset
The Company assesses on a forward looking basis the expected credit losses (ECL) associated with its debt instruments carried at amortized cost and with the exposure arising from loan commitments and financial guarantee contracts. The Company recognizes a loss allowance for such losses at each reporting date. The measurement of ECL reflects:
- An unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes;
- The time value of money; and
- Reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions and forecasts of future economic conditions.
The Company recognizes loss allowance using the expected credit loss (ECL) model for the financial assets which are not fair valued through profit or loss. ECL is measured at an amount equal to the 12 months ECL, unless there has been a significant increase in credit risk from initial recognition in which case those are measured at lifetime ECL. The amount of expected credit losses ( or reversal) that is required to adjust
the loss allowance at the reporting date to the amount that is required to be recognized, is recognized as an expense in the statement of profit or loss.
A. Initial Recognition
All Financial liabilities are recognized at fair value and in case of borrowing, net of directly attributable cost. Fees of recurring nature are directly recognized in the statement of profit and loss as finance cost.
B. Subsequent measurement
Financial liabilities are carried at amortized cost using the effective interest method.
For trade and other payables maturing within one year from the balance sheet date, the carrying amounts approximate fair value due to the short maturity of these instruments.
C. Derecognition
Financial liabilities are derecognized when they are extinguished i.e. when the obligation specified in the contract is discharged, cancelled or expires.
2.10 Financial guarantee contracts
Financial guarantee contracts are contracts that require the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due, in accordance with the terms of a debt instrument.
Financial guarantee contracts are initially measured at fair value and subsequently measured at the higher of:
i. The amount of the loss allowance; and
ii. The premium received on initial recognition less income recognized in accordance with the principles of Ind AS 115.
Revenue is measured at fair value of the consideration received or receivable. Revenue is recognized when (or as) the Company satisfies a performance obligation by transferring a promised good or service (i.e. an asset) to a customer. An asset is transferred when (or as) the customer obtains control of that asset.
When (or as) a performance obligation is satisfied, the Company recognizes as revenue the amount of the transaction price (excluding estimates of variable consideration) that is allocated to that performance obligation.
The Company applies the five-step approach for recognition of revenue:
i. Identification of contract(s) with customers;
ii. Identification of the separate performance obligations in the contract;
iii. Determination of transaction price;
iv. Allocation of transaction price to the separate performance obligations; and
v. Recognition of revenue when (or as) each performance obligation is satisfied.
Revenue Recognition For different heads of Income are as under:
(i) Investment Management Fees (net of tax)
Investment Management fees are recognized on an accrual basis in accordance with Investment Management Agreement and SEBI (Mutual Fund) Regulations, 1996 based on average assets under management (AUM) of Nippon India Mutual Fund schemes.
(ii) Advisory Fees (net of tax)
Advisory fees are recognized on an accrual basis in accordance with agreement entered into with respective investment managers / advisors.
(iii) Portfolio Management Fees (net of tax)
Portfolio Management fees are recognized on an accrual basis in accordance with Portfolio Management Agreement entered with respective clients.
(iv) Interest income
Interest income is recognized using the effective interest rate.
(v) Dividend income
Dividend income is recognized in the statement of profit or loss on the date that the Company''s right to receive payment is established, it is probable that the economic benefits associated with the dividend will flow to the entity and the amount of dividend can be reliably measured. This is generally when the Shareholders approve the dividend.
The tax expense for the period comprises of current tax and deferred income tax. Tax is recognized in Statement of Profit and Loss, except to the extent that it relates to items recognized in the Other Comprehensive Income or in Equity. In which case, the tax is also recognized in Other Comprehensive Income or Equity.
Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the Income Tax Authorities, based on tax rates and laws that are enacted at the Balance sheet date.
Deferred tax is recognized on temporary differences arising between carrying amounts of asset and liabilities in financial statements and corresponding tax bases used in the computation of taxable profit.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on the tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The carrying amount of deferred tax liabilities and assets are reviewed at the end of each reporting period.
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 overdraft.
2.14 New fund offer expenses of mutual fund and PMS schemes
Expenses relating to new fund offer of mutual fund and PMS schemes are charged in the statement of profit and loss in the year in which such expenses are incurred.
2.15 Fund and commission expenses
Prior to October 21,2018, certain scheme related expenses and commission were being borne by the Company in accordance with circulars and guidelines issues by SEBI and the Association of Mutual Funds in India (AMFI). Commission paid for future period for the mutual fund schemes (including for Equity Linked Savings Schemes) until October 21, 2018 is treated as prepaid expenses and is amortised on the contractual period and charged to Statement of Profit and Loss account unless considered recoverable from schemes.Pursuant to circulars issued by SEBI in this regard, after October 21, 2018, these expenses, subject to some exceptions, are being borne by the mutual fund schemes.
Commission is paid to the brokers for Portfolio Management and other services as per the terms of agreement entered into with respective brokers. In case of certain portfolio management schemes and other services, the brokerage expenses are amortised over the tenure of the product or commitment period. Unamortised brokerage is treated as Non-Financial Assets considering the normal operating cycle of the Company.
2.16 Off-setting Financial Instruments
Financial assets and liabilities are offset and the net amount is reported in the balance sheet where there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the Company or the counterparty.
Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to passage of time is recognized as a finance cost.
2.18 Employee-Benefits Expense
(i) Short-term Employee Benefits
The undiscounted amount of short term employee benefits expected to be paid in exchange for the services rendered by employees are recognized as an expense during the period when the employees render the service.
(ii) Post-employment obligations Defined contribution plans
The Company recognizes contribution payable to provident fund scheme as an expense, when the employee renders the related service. If the contribution payable to the scheme for service received before the balance sheet date exceeds the contribution already paid, the deficit payable to the scheme is recognized as a liability after deducting the contribution already paid. If the contribution already paid exceeds the contribution due for services received before the balance sheet date, then excess is recognized as an asset.
Defined benefit plans
The liability or asset recognized in the balance sheet in respect of defined benefit gratuity plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by actuaries using the projected unit credit method.
The present value of the defined benefit obligation denominated in INR is determined by discounting the estimated future cash outflows by reference to market yields at the end of the reporting period on government bonds that have terms approximating to the terms of the related obligation. The estimated future payments which are denominated in a currency other than INR, are discounted using market yields determined by reference to high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms approximating to the terms of the related obligation.
The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. This cost is included in employee benefit expense in the statement of profit or loss.
Re-measurement gains and losses arising from experience adjustments and changes in actuarial assumptions are recognized in the period in which they occur, directly in other comprehensive income. They are included in retained earnings in the statement of changes in equity and in the balance sheet.
(iii) Other long-term employee benefit obligations Leave encashment
The liabilities for earned leave are not expected to be settled wholly within 12 months after the end of the period in which the employees render the related service. They are therefore measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method. The benefits are discounted using the appropriate market yields at the end of the reporting period that have terms approximating to the terms of the related obligation. Remeasurements as a result of experience adjustments and changes in actuarial assumptions are recognized in the statement of profit or loss.
As a long-term incentive plan to employees, the Company has initiated Phantom Stock Option Plan which are cash settlement rights where the employees are entitled to get cash compensation based on agreed formulae. The employees are entitled to receive cash payment equivalent to appreciation in the value over the defined base price. The present value of the obligation under such plan is determined based on actuarial valuation.
Employee Stock Option Scheme (ESOS)
Equity settled share based payments to employees and others providing similar services are measured at fair value of the equity instruments at the grant date. Details regarding the determination of the fair value of equity settled share based payments transactions are set out in note 28.
The fair value determined at the grant date of the equity settled share based payments is expensed on a straight line basis over the vesting period, based on the Company''s estimate of equity instruments that will eventually vest, with a corresponding increase in equity. At the end of each reporting period, the Company revives its estimate of the number of equity instruments expected to vest. The impact of the revision of original estimates, if any, is recognized in Statement of profit and loss such that the cumulative expenses reflect the revised estimate, with a corresponding adjustment to Share based options outstanding account.
The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share.
Reliance Capital Asset Management Employees Benefits Trust
The Reliance Capital Asset Management Employees Benefit Trust is administered by the Company. The Company treats the trust as its extension and is consolidated in Company''s financial statements. There are no shares pending to be allotted in the Trust.
a) Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to owners of the Company by the weighted average number of equity shares outstanding during the financial year, adjusted for bonus element in equity shares issued during the year.
b) Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential equity shares, and the weighted average number of additional equity shares that would have been outstanding assuming the conversion of all dilutive potential equity shares.
All amounts disclosed in the financial statements and notes have been rounded off to the nearest crore as per the requirements of Schedule III, unless otherwise stated.
Mar 31, 2018
a Basis of Preparation of Financial Statements
The accompanying standalone financial statements are prepared and presented under the historical cost convention, on the accrual basis of accounting unless otherwise stated in accordance with the Generally Accepted Accounting Principles (GAAP) in India and comply with the Accounting Standards specified under Section 1 33 of the Companies Act, 201 3 (the âActâ), read with relevant rules of the Companies (Accounts) Rules, 2014 and relevant provisions of the Act. These financial statements are presented in Indian rupees rounded to the nearest crore except otherwise stated. The Company complies with the prudential norms relating to income recognition, asset classification and provisioning for non-performing assets and other matters as applicable to a CIC.
All assets and liabilities have been classified as current or non-current as per the Companyâs normal operating cycle and other criteria set out in Schedule III to the Act. Based on the nature of the services and their realisation in cash and cash equivalents, the Company has ascertained its operating cycle as twelve months for the purpose of current or non-current classification of assets and liabilities.
b Use of Estimates
The preparation of financial statements requires estimates and assumptions to be made that affect the reported amount of assets and liabilities, disclosure of contingent liabilities on the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Difference between the actual results and estimates are recognised in the period in which the results are known / materialised.
c Revenue Recognition
i) Interest income:
Interest income is recognised as it accrues on a time proportion basis taking into account the amount outstanding and the rate applicable except in the case of Non-Performing Assets (âNPAsâ) where it is recognised on realisation basis.
ii) Dividend income:
Dividend income is recognised when the right to receive payment is established.
iii) Income from investments:
Profit / (Loss) earned from sale of securities is recognised on trade date basis. The cost of securities is computed based on weighted average basis.
iv) Lease rental income:
Lease rental income is recognised in the Statement of Profit and Loss on a straight-line basis over the lease term.
v) Discount on investments:
The difference between the acquisition cost and face value of debt instruments is recognised as interest income over the tenor of the instrument on straight-line basis.
vi) Redemption premium on investments:
Redemption premium on investments is recognised as income over the tenor of the investment.
vii) Management fee income:
Management fee income towards support services is accounted as and when services are rendered and it becomes due on contractual terms with the parties.
d Fixed assets
i) Tangible assets
Leased assets
All assets given on operating lease are shown as fixed assets net of depreciation and impairment loss, if any. Initial direct costs in respect of leases are expensed in the year in which such costs are incurred.
Own assets
Tangible assets are stated at cost of acquisition less accumulated depreciation and impairment loss, if any. Cost includes acquisition cost which is directly attributable to bring the asset to its working condition for its intended use.
ii) Intangible assets
Intangible assets are recognised where it is probable that the future economic benefit attributable to the assets will flow to the Company and itâs cost can be reliably measured. Intangible assets are stated at cost of acquisition less accumulated amortisation.
e Depreciation / Amortisation
Depreciation on fixed assets is provided as follows:
i) Tangible assets
Depreciation on Property, Plant and Equipment is provided in accordance with the provisions of Schedule II to the Act. Tangible assets are depreciated on straight-line basis method over the useful life of assets, as prescribed in Part C of Schedule II to the Act.
The estimated useful lives for the different types of assets are:
(i) Furniture and Fixtures - 10 years
(ii) Office equipments - 5 years
(iii) Computers - 3 years
(iv) Vehicles - 8 years
(v) Plant & Machinery given on lease - 8 years
(vi) Data processing machineries given on lease - 3 years
(vii) Vehicles given on lease - 8 years
(viii) Buildings - 60 years
ii) Intangible assets are amortised on straight-line basis over the useful life of the asset up to a maximum of 5 years commencing from the month in which such asset is first installed.
The Company provides pro-rata depreciation from the day the asset is put to use and for any asset sold, till the date of sale.
f Impairment of assets
The Company assesses at each balance sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset is less than the carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognised in the Statement of Profit and Loss. If at the balance sheet date there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of depreciable historical cost.
g Investments
Investments are classified as long-term or current based on intention of the management at the time of purchase. Current investments are valued, scrip wise at cost or market value, whichever is lower. Long-term investments are carried at carrying cost less diminution in value which is other than temporary, determined separately for each individual investment scrip wise.
An investment property is accounted for in accordance with cost model. The cost of any shares in a co-operative society or a company, the holding of which is directly related to the right to hold the investment property, is added to the carrying amount of the investment property.
h Loan origination / acquisition cost
All direct cost incurred for the loan origination is amortised over the tenure of the loan.
i Provisions for Non-Performing Assets (NPA) and doubtful debts
Loans and advances, receivables are identified as bad / doubtful based on the duration of the delinquency. NPA provisions are made based on the managementâs assessment of the degree of impairment and the level of provisioning meets the NBFC prudential norms prescribed by the Reserve Bank of India.
j Provisions for standard assets
Provisions on standard assets are made as per para 1 3 of Master Direction - Non-Banking Financial Company - Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 201 6, para 1 8 of RBI CIC Directions.
k Market linked debentures (MLDs)
The Company has issued certain non-convertible debentures, the rate of interest on which is linked to performance of specified indices over the period of the debentures. The Company hedges its interest rate risk on MLD by taking positions in future & options based on specified indices. Any gain / loss on these hedge positions are netted against with interest expense on MLD and resultant ânet lossâ is recognised in Statement of Profit and Loss immediately, however ânet gainâ, if any, is ignored.
l Discount on commercial paper
The difference between the issue price and the redemption value of commercial papers is apportioned on time basis and recognised as discounting expense.
m Foreign currency transactions
Transactions denominated in foreign currencies are recorded at the exchange rate prevailing at the time of the transaction. Exchange differences, if any, arising out of transactions settled during the year are recognised in the Statement of Profit and Loss.
Monetary assets and liabilities denominated in foreign currencies at the year end are restated at year end rates. n Employee benefits
i) Provident fund:
Companyâs contributions to the recognised provident fund, which is a defined contribution scheme, are charged to the Statement of Profit and Loss.
ii) Gratuity:
The Companyâs gratuity benefit scheme is a defined benefit plan. The Companyâs net obligation in respect of the gratuity benefit scheme is calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value, and the fair value of any plan assets, if any, is deducted.
The present value of the obligation under such defined benefit plan is determined based on actuarial valuation using the Projected Accrued Benefit Method (same as Projected Unit Credit Method), which recognises each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation.
The obligation is measured at the present value of the estimated future cash flows. The discount rates used for determining the present value of the obligation under defined benefit plan, are based on the market yields on Government securities as at the balance sheet date.
Actuarial gains and losses are recognised immediately in the Statement of Profit and Loss.
iii) Leave encashment:
Leave encashment which is a defined benefit, is accrued for based on an actuarial valuation at the balance sheet date carried out by an independent actuary.
iv) Phantom Shares:
As a long-term incentive plan to employees, the Company has initiated Phantom Stock Option Plan which are cash settlement rights where the employees are entitled to get cash compensation based on agreed formulae linked to market value of group company shares upon exercise of phantom stock options over notional or hypothetical shares, whereby instead of becoming entitled to buy the actual shares on vesting, they become entitled to cash payment equivalent to appreciation in the value over defined base price of shares. The present value of the obligation under such plan is determined based on actuarial valuation.
o Employee Stock Option Scheme (ESOS)
The employees of the Company and its subsidiaries are entitled for grant of stock options (equity shares), based on the eligibility criteria set in ESOS plan of the Company. The employee compensation expenses are accounted on the basis of âintrinsic value methodâ as prescribed by the Guidance Note on Employee share based payments issued by the Institute of Chartered Accountants of India as required by the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014. The excess, if any, of quoted market price over the exercise price on the date of grant would be recognised as compensation cost over the vesting period. The Company recognises compensation cost on the basis of estimated number of stock options expected to vest.
p Borrowing costs
Borrowing costs, which are directly attributable to the acquisition / construction of fixed assets, till the time such assets are ready for intended use, are capitalised as part of the cost of the assets. Other borrowing costs are recognised as an expense in the year in which they are incurred. Brokerage costs directly attributable to a borrowing are expensed over the tenure of the borrowing.
q Operating leases
Lease payments for assets taken on an operating lease are recognised as an expense in the Statement of Profit and Loss on a straight-line basis over the lease term.
r Earnings per share
The basic earnings per share is computed by dividing the net profit / loss attributable to the equity shareholders for the period by the weighted average number of equity shares outstanding during the reporting year. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue equity shares were exercised or converted during the year. Diluted earnings per share is computed by dividing the net profit / loss after tax by the weighted average number of equity shares and dilutive potential equity shares outstanding during the year.
In computing dilutive earnings per share, only potential equity shares that are dilutive and that reduce profit / increase loss per share are included.
s Taxation
- Current tax
Provision for current tax is made after taking into consideration benefits admissible under the provisions of the Income Tax Act, 1 961. Minimum Alternative Tax (MAT) credit entitlement is recognised where there is convincing evidence that the same can be realised in future.
- Deferred tax
The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognised using the tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax assets are recognised only to the extent there is reasonable certainty that the assets can be realised in future. However, where there is unabsorbed depreciation or carried forward loss under taxation laws, deferred tax assets are recognised only if there is virtual certainty of realisation of such assets. Deferred tax assets are reviewed as at each balance sheet date and written down or written up to reflect the amount that is reasonably / virtually certain (as the case may be) to be realised.
t Provisions, contingent liabilities and contingent assets
The Company creates a provision when there is a present obligation as a result of past events and it is probable that there will be outflow of resources and a reliable estimate of the obligation can be made of the amount of the obligation. Contingent liabilities are not recognised but are disclosed in the notes to the financial statements. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources. When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made.
Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. If it is no longer probable that the outflow of resources would be required to settle the obligation, the provision is reversed.
Contingent assets are neither recognised nor disclosed in the financial statements.
u Cash and cash equivalents
In the cash flow statements, cash and cash equivalents includes cash in hand, balance in banks and fixed deposits without lien with original maturities of three months or less.
Mar 31, 2018
1.1 Basis of preparation
The accompanying financial statements have been prepared and presented on the accrual basis of accounting and comply with the Accounting Standards under section 133 of Companies Act 2013, read with Rule 7 of Companies (Accounts) Rule 2014 and other accounting principles generally accepted in India, to the extent applicable. The financial statements are presented in Indian Rupees rounded to the nearest crore except otherwise stated. The accounting policies set out below have been applied consistently to the years prescribed in the financial statements except otherwise disclosed separately.
1.2 use of estimates
The preparation of the financial statements, in conformity with generally accepted accounting principles (GAAP), requires management to make estimates and assumptions that affect the reported amount of assets, liabilities and disclosure of contingent liabilities on the date of the financial statements. The estimates and assumptions used in the accompanying financial statements are based upon Managementâs evaluation of the relevant facts and circumstances as of the date of the financial statements. Actual results may differ from the estimates and assumptions used in preparing the accompanying financial statements. Any revision to accounting estimates is recognised prospectively in current and future periods.
1.3 Operating Cycle
Based on the nature of its activities, the Company has determined its operating cycle as 12 months for the purpose of classification of its assets and liabilities as current and noncurrent.
1.4 Fixed assets and depreciation/amortisation
Fixed assets are stated at cost of acquisition less accumulated depreciation. Cost includes all expenses incidental to the acquisition of the fixed assets.
Depreciation on fixed assets is provided on straight line basis at the rates and in the manner prescribed in Schedule II to the Companies Act, 2013 which are mentioned as under :
Leasehold improvements are amortised over the primary period of the lease on straight-line basis or useful life of asset, whichever is lower.
Intangible assets comprising of software purchased / developed and licensing costs are amortised over the useful life of the software up to a maximum of three years commencing from the date on which such software is first utilised.
Goodwill is amortised over estimated useful life or five years, whichever is lower.
Acquisition of rights to manage and administer the schemes of Goldman Sachs Mutual Fund has been amortised equally over a period of 10 years.
The Company provides pro-rata depreciation from the day the asset is put to use and for any asset sold, till the date of sale.
1.5 Impairment of assets
The Company assesses at each balance sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset or the recoverable amount of the cash-generating unit to which the asset belongs is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognized in the statement of profit and loss. If at the balance sheet date there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of depreciable historical cost.
1.6 Investments
Purchase and sale of investments are recorded on trade date.
Investments are classified as long term or current based on intention of the management at the time of purchase. Investments that are intended to be held for not more than 1 year from the date on which such investments are made, are classified as current. All other investments are classified as long term investments.
Long-term investments are stated at cost of acquisition. Provision for diminution is made to recognise a decline, other than temporary, in the value of investments.
Current investments are valued at the lower of cost and fair value. The comparison of cost and net realisable value is done separately in respect of each individual investment.
1.7 Cash and cash equivalent
Cash and cash equivalent represent cash in hand, balance with scheduled banks and current account and short term deposits with bank with original maturity of three months or less.
1.8 Revenue recognition
Revenue is recognised when there is reasonable certainty of its ultimate realisation/collection.
Revenue From Operation: Investment Management Fees (net of tax)
Investment Management fees are recognised on an accrual basis in accordance with Investment Management Agreement and SEBI (Mutual Fund) Regulations, 1996 based on average assets under management (AUM) of Reliance Mutual Fund schemes.
Advisory Fees (net of tax)
Advisory fees are recognised on an accrual basis in accordance with agreement entered into with respective investment managers / advisors.
Portfolio Management Fees (net of tax)
Portfolio Management fees are recognised on an accrual basis in accordance with Portfolio Management Agreement entered with respective clients.
Other Income:
The gains/ losses on sale of investments are recognised in the statement of profit and loss on the trade day. Profit or loss on sale of investments is determined on weighted average cost basis.
Interest income is accounted on a time proportion basis.
Dividend income is recognised when the right to receive dividend is established.
1.9 Transactions in foreign currency
Foreign currency transactions are recorded at the rates of exchange prevailing on the date of the transaction. Exchange differences, if any arising out of transactions settled during the year are recognised in the statement of profit and loss.
Monetary assets and liabilities denominated in foreign currencies as at the balance sheet date are translated at the closing exchange rate on that date. The exchange differences, if any, are recognised in the statement of profit and loss and related assets and liabilities are accordingly restated in the balance sheet.
1.10 Employee Benefits Provident Fund
The Company expenses its contribution to the statutory provident fund, a defined contribution scheme, made at 12% of the basic salary of each employee.
Gratuity
The Companyâs gratuity benefit scheme is a defined benefit plan. The Companyâs net obligation in respect of the gratuity benefit scheme is calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value, and the fair value of any plan assets, if any, is deducted.
The present value of the obligation under such defined benefit plan is determined based on actuarial valuation using the Projected Unit Credit Method, which recognises each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation.
The obligation is measured at the present value of the estimated future cash flows. 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.
Actuarial gains and losses are recognised immediately in the statement of profit and loss.
Benefits in respect of gratuity, a defined benefit scheme, and superannuation, a defined contribution scheme, as applicable to employees of the Company are annually funded with the Reliance Life Insurance Company Limited and Birla Sun Life Insurance Company Limited respectively.
Leave Encashment
Leave Encashment which is a defined benefit, is accrued based on an actuarial valuation at the balance sheet date carried out by an independent actuary.
Compensated absences
The employees of the Company are entitled to compensated absence. The employees can carry forward a portion of the unutilized accrued leave balance and utilize it in future periods. The Company records an obligation for compensated absences in the period in which the employee renders the service that increases the entitlement. The Company measures the expected cost of compensated absence as the amount that the Company expects to pay as a result of the unused entitlement that has accumulated at the balance sheet date.
Phantom Shares
As a long term incentive plan to employees, the Company has initiated Phantom stock option plan which are cash settlement rights where the employees are entitled to get cash compensation based on formulae linked to fair market value of shares upon exercise of phantom stock options over notional or hypothetical shares, whereby instead of becoming entitled to buy the actual shares on vesting, they become entitled to cash payment equivalent to appreciation in the value over defined base price of shares. The present value of the obligation under such plan is determined based on actuarial valuation.
Employee Stock option plan (âESOPâ)
The employees of the Company and its subsidiaries are entitled for grant of stock options (equity shares), based on the eligibility criteria set in ESOP plan of the Company. The employee compensation expenses are accounted on the basis of âintrinsic value methodâ as prescribed by the Guidance Note on Employee share based payments issued by the Institute of Chartered Accountants of India as required by the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014. The excess, if any, of quoted market price over the exercise price on the date of grant would be recognised as compensation cost over the vesting period. The Company recognises compensation expense on the basis of estimated number of stock options expected to vest.
1.11 New fund offer expenses of mutual fund and PMS schemes
Expenses relating to new fund offer of mutual fund and PMS schemes are charged in the statement of profit and loss in the year in which such expenses are incurred except for distribution cost which is recognised over the duration or clawback period of the scheme for close ended and open ended schemes respectively.
1.12 Fund expenses
Expenses incurred on behalf of schemes of Reliance Mutual Fund are recognised in the statement of profit and loss under brokerage, incentives, marketing, advertisement and publicity expenses unless considered recoverable from the schemes in accordance with the provisions of SEBI (Mutual Fund) Regulations, 1996.
Expenses directly incurred for the schemes of Reliance Mutual Fund are charged to the statement of profit and loss under respective heads. Distribution cost is recognised over the duration or clawback period of the scheme for close ended and open ended schemes respectively.
1.13 Operating leases
Leases where the lessor effectively retains substantially all the risks and benefits of ownership over the lease term are classified as Operating Leases. Operating lease rentals are recognised as an expense on straight line basis over the lease period.
1.14 Income Tax
Income tax expense comprises current tax (i.e. amount of tax for the period determined in accordance with the income tax law), deferred tax charge or credit (reflecting the tax effects of timing differences between accounting income and taxable income for the year).
Current tax
Provision for current tax is recognised on an annual basis under the taxes payable method, based on estimated tax liability computed after taking credit for allowances and exemption in accordance with Indian Income Tax Act, 1961. In case of matters under appeal due to disallowance or otherwise, full provision is made when the said liabilities are accepted by the Company.
Deferred tax
The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognised using the tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax assets are recognised only to the extent there is reasonable certainty that the assets can be realised in future. However, where there is unabsorbed depreciation or carried forward loss under taxation laws, deferred tax assets are recognised only to the extent there is a virtual certainty of realisation of such assets. Deferred tax assets are reviewed as at each balance sheet date and written down or written up to reflect the amount that is reasonable/ virtually certain (as the case may be) to be realised.
1.15 earnings per share
The basic earnings per share is computed by dividing the net profit attributable to the equity shareholders by weighted average number of equity shares outstanding during the reporting year.
Number of equity shares used in computing diluted earnings per share comprises the weighted average number of shares considered for deriving basic earnings per share and also weighted average number of equity shares which would have been issued on the conversion of all dilutive potential shares. In computing diluted earnings per share only potential equity shares that are dilutive are included.
1.16 Contingencies and provisions
The Company creates a provision when there is present obligation as a result of a past event that probably requires an outflow of resources and a reliable estimate can be made of the amount of the obligation. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources. When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made. Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. If it is no longer probable that the outflow of resources would be required to settle the obligation, the provision is reversed. Contingent assets are not recognised in the financial statements.
Mar 31, 2017
1.1. Basis of preparations
The accompanying financial statements have been prepared and pressured on the accrual basis of accounting and comply with the Accounting Standards under section 133 of Companies Act 2013, read with Rule 7 of Companies (Accounts) Rule 2014 and other accounting principles generally accepted in India, to the extend applicable. The financial statements are presented in Indian Rupees. The accounting policies out below have been applied consistemly to the period prescribed in the financial statements except otherwise disclosed separately. The financial statements are presented in Indian Rupees.
1.2. The preparations of the financial statements in conformity with generally accepted accounting principles (GAAP), requires management to make estimates and assumptions that affect the reported amount of assets, liabilities and disclosed of contingent liabilities on the date of the financial statements. The estimates and assumptions used in the accompanying financial statements are based upon Managementâs evaluation of the relevant focus and circumstances as of the date of the financial statements. Actual results may differ from the estimates and assumption used in preparing the accompanying financial statements. Any revision to accounting estimates is recognised prospectively in current and further periods.
1.3. Fixed assets and depreciation/Amortisation
Fixed assets are stated at cost of acquisition less accumulated depreciation. Cost included in expenses incidental to the acquisition of the fixed assets.
Depreciation on fixed assets is provided on straight line basis at the rates and in the manner prescribed in Schedule II to the Companies Act, 2013 which are mentioned as under:
Leasehold improvements are amortised over the primary period of the lease on straight-line basis or useful life of asset, whichever is lower.
Intangible assets conspiring of software purchased / developed and listing costs are amortised over the usedul life of the software up to a maximum of three years commencing from the date on which such software is fertilised.
Goodwill is amositised over estimated useful life or five years, whichever is lower.
Acquisition of rights to manage and administer the schemes of Goldman Sachs Mutual Fund has been amortised equality over a period of 10 years.
The Company provides pro-rata depreciation from the day the assets is put to use and for any asset and till the date of sale.
1.4. Impairment of assets
The company assesses at each balance sheet date, whether there is any indication that an asset may be impaired. If any such indication assets, the company estimates the recoverable amount of the assets. If such recoverable amount of the asset or the recoverable amount of the cash-generating until to which the asset belongs is less than its carrying amount, the carrying amount is reduces to its recoverable amounts. The reduction is treated as an impairment loss and is recognized in the statement of profit and loss. If at the balance sheet date there is an indication that a previously accepted requirement loos no longer exists, the recoverable amounts is reassessed and the asset is reflected as the recoverable amount subject of maximum of depreciable historical cost.
1.5. Investments
Purchase and sale of investments are recorded on trade.
Investments are classified as long term or current based on maximum of the management at she time of purchase. Investments that are year ended to be held for not more than. I year from the date on which such investments are under are classified as current. All other investments are classified as long term investments.
Long-term investments are stated at cost of acquisition. Provision for diminution of made to recognised a decline, other than temporary, in the value of investments.
Current investments are valued as the lower of cost or not realisable value. The comparison of coasted net realisable value as done separately in respect of cash individual investment.
1.6. Revenue recognition
Revenue is recognised when there is reasonable certainly of its ultimate realisation collections.
Revenue From Operation:
Investment Management Fees (net of service tax)
Investment Management fees are recognised on an accrual basis in accordance with Investment Management Agreement and SEBI (Mutual Fund) Regulations, 1996 based on average assets under management (AUM) of Reliance Mutual Fund Schemes.
Advisory Fess (net of service tax)
Advisory Fess are recognised on an accrual basis in accordance with agreement entered into with respective investment managers / advisors.
Portfolio, Management Fess (net of service tax)
Portfolio Management fees are recognised on an accrual basis in accordance with portfolio Management Agreement external with respective clients.
Other Income:
Profit or Less on Sale of Investments
The gains / Losses on sale of investments are recognised in the statements of profit and loss on the trade day. Profit or loss on sale of investments is determined on weighted average cost basis.
Interest income is accounted on a time proportion basis.
Dividend income is recognised when the right to received dividend is established.
1.7. Transactions in foreign currency
Foreign currency transactions are recorded at the rates of exchange prevailing on the date of the transaction. Exchange differences, if any arising out of transactions settled during the year are recognised in the statement of profit and loss.
Monetary assets and liabilities denominated in foreign currencies as at the balance sheet date are translated at the closing exchange rate on that date. The exchange differences, if any, are recognised in the statement of profit and loss and related assets and liabilities are accordingly restated in the balance sheet.
1.8. Employee Benefits
Provident Fund
The Company expenses is contribution to the statutory provident fund, a defined contribution scheme, made at 12% of the basic salary of each employee.
Gratuity
The Companyâs gratuity benefit scheme is a defined benefit plan. The Companyâs net obligation in respect of the gratuity benefit scheme is calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods, that benefit is discounted to determine its present value, and the fair value of any plan assets, if any, is deducted.
The present value of the obligation under such defined benefit plan is determined based on actuarial valuation using the projected unit credit method, which recognises each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to trade up the final obligation.
The obligation is measured at the present value of the estimated future cash flows. The disclosed rate is based on the prevailing market yields of Indian government securities as at the balance sheet date for the estimated turn of the obligations.
Actuarial gains and losses are recognised immediately in the statement of profit and loss.
Benefits is respect of gratuity, a defined benefits scheme, and superannuation, a defined contribution scheme, as applicable to employees of the Company are annually funded with the Reliance Life Insurance Company Limited and Birla Sun Life Insurance Company Limited respectively.
Leave Encashment
Leave Encashment which is a defined benefit, as accrued based on an actuarial valuation at the balance sheet date carried out by an independent actuary.
Compensated absences
The employees of the Company are entitled to compensated absence. The employees can carry forward a portion of the unutilized accrued leave balance and utilize it in future periods. The company records an obligation for compensated absences in the period in which the employee renders the service that increases the entitlement. The Company measures the expected cost of compensated absence as the amount that the company expects to pay as a result of the unitised entitlement that has accumulated at the balance sheet date.
Phantoms Shares
As a long term incentive plan to employees, the Company has initated Phantoms stock options plan which are cash settlement rights where the employees are entitled to get cash compensation based on formulise linked to fair market value of shares upon exercise of phantom stock options over motional or hypothetical shares, whereby instead of becoming entitled to buy the actual shares on vesting, they become entitled to cash payment equivalent to appreciation in the value over defined base price of shares. The present value of the obligation under such plan is determined based on actuarial valuations.
1.9. New fund offer expenses of mutual fund and PMS schemes
Expenses relating to new fund offer of mutual fund and PMS schemes are charged in the statement of profit and loss in the year in which such expenses are incurred except for distribution cost which is recognised over the duration or drawback period of the scheme for close ended and open ended schemes respectively.
1.10. Fund expenses
Expenses incurred on behalf of schemes of Reliance Mutual Fund are recognised in the statement of profit and loss under marketing and publicity expenses unless considered recoverable from the schemes in accordance with the provisions of SEBI (Mutual Fund) Regulations, 1996.
Expenses directly incurred for the schemes of Reliance Mutual Fund are charged to the statement of profit and loss under respective basis. Distribution costs is recognised over the duration or drawback period of the scheme for close ended and open ended schemes respectively.
1.11. Operating Leases
Leases where the lessor effectively retains substantially all the risks and benefits of ownership over the lease term are classified as Operating Leases. Operating lease rentals are recognised as an expense on straight line basis over the lease period.
1.12. Tax
Current tax
Income tax expense conspired current tax (i.e. amount of tax for the period determined in accordance with the income tax law), deferred tax charge or credit (reflecting the tax effects of raising differences between accounting income and taxable income for the year). Provision for income tax, is recognised on, an annual basis under the taxes payable method, based on estimated tax liability computed after taking credit for allowances and exemption in accordance with Indian Income Tax Act, 1961. In case of matters under appeal due to disallowance or otherwise, full provision is made when the said liabilities are accepted by the company.
Deferred tax
The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognised using the tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax assets are recognised only to the extent there is reasonable certainly that the assets can be realised in future. However, where there is unabsorbed depreciation of carried forward loss under taxation laws, deferred tax assets are recognised only to the extent there is a virtual certainly of realisation of such assets. Deferred tax assets are reviewed as at each balance sheet date and written down or written up to reflect the amount that is reasonable / actually certain (as the case may be) to be realised.
1.13. Earnings per
The basic earnings per share is computed by dividing the net profit attributable to the equity shareholders by weighted average number of equity shares outstanding during the reporting year.
Number of equity shares used in computing diluted earnings per share comprises the weighted average number of shares considered for deriving basis earnings per share and also weighted average number of equity shares which would have been issued on the conversion of all dilutive potential shares. In competing diluted earnings per share only potential equity shares that are dilutive are included.
1.14. Contingencies and Provisions
The company creates a provision when there is present obligation as a result of a past event that probably requires an outflow of resources and a reliable estimate can be made of the amount of the obligation. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not require an outflow of resources. When there is a possible obligation or a present obligation in respect of which the like of outflow of resources is remote, no provision or disclosure is made. Provision 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. Contingent assets are not recognised in the financial statements.
Mar 31, 2017
1 Background
Reliance Capital Limited (''the Company'') is registered as Non-Banking Financial Company (NBFC) as defined under section 45 - IA of the Reserve Bank of India Act, 1934 (RBI). Before demerger, the Company was principally engaged in lending and investing activities. Post Demerger of its commercial finance business, the Company has positioned itself as a Core Investment Company (''CIC'') and in terms of the Core Investment Companies (Reserve Bank) Directions, 2016 (RBI CIC Directions). As a CIC, the Company is primarily a holding company, holding investments in its subsidiaries and other group companies. The Company''s subsidiaries are engaged in a wide array of businesses in the financial service sector.
2 Significant Accounting Policies
a Basis of Preparation of Standalone Financial Statements
The accompanying standalone financial statements are prepared and presented under the historical cost convention, on the accrual basis of accounting unless otherwise stated in accordance with the generally accepted accounting principles (GAAP) in India and comply with the Accounting Standards specified under section 133 of the Companies Act, 2013 (The Act), read with Rule 7 of the Companies (Accounts) Rules, 2014 and relevant provisions of the Act. These financial statements are presented in Indian rupees rounded to the nearest crore except otherwise stated.
All assets and liabilities have been classified as current or non-current as per the Company''s normal operating cycle and other criteria set out in Schedule III to the Act. Based on the nature of the services and their realization in cash and cash equivalents, the Company has ascertained its operating cycle as twelve months for the purpose of current or non-current classification of assets and liabilities.
The Company complies, with the prudential norms relating to income recognition, asset classification and provisioning for bad and doubtful debts and other matters, specified in the directions issued by the Reserve Bank of India in terms of "Master Direction - Non-Banking Financial Company - Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016" issued by the Reserve Bank of India ("RBI") vide their Notification No. RBI/DNBR/201 6-17/45 Master Direction DNBR. PD. 008/03.10.1 1 9/2016-17 dated September 1, 2016, as applicable to the Company before demerger and has taken necessary measures so as to comply with the prudential norms applicable to CIC and has commenced adherence to those norms e.g. Concentration norms, Leverage ratio, Capital to Risk Assets Ratio (CRAR) etc. as of March 31, 2017. Accordingly, the Company has prepared and presented its financial statements and disclosures for the year ended March 31, 2017 as per RBI Directions applicable to CIC. The above is in line with the Company''s communications with RBI.
b Use of Estimates
The preparation of financial statements requires estimates and assumptions to be made that affect the reported amount of assets and liabilities, disclosure of contingent liabilities on the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Difference between the actual results and estimates are recognized in the period in which the results are known/materialized.
c Revenue Recognition
i) Interest income:
Interest income is recognized as it accrues on a time proportion basis taking into account the amount outstanding and the rate applicable except in the case of nonperforming assets ("NPAs") where it is recognized, upon realization.
ii) Dividend income:
Dividend income is recognized when the right to receive payment is established.
iii) Income from investments:
Profit / (Loss) earned from sale of securities is recognized on trade date basis. The cost of securities is computed based on weighted average basis.
iv) Lease rental income:
Lease rental income is recognized in the Statement of Profit and Loss on a straight-line basis over the lease term.
v) Discount on investments:
The difference between the acquisition cost and face value of debt instruments is recognized as interest income over the tenor of the instrument on straight-line basis.
vi) Redemption premium on investments:
Redemption premium on investments is recognized as finance income over the tenor of the investments.
vii) Share of profits or losses in partnership firm:
Share of profits / losses in partnership firm is accounted for once the amount of the share of profit/loss is ascertained and credited/debited to the Company''s account in the books of the partnership firm.
viii) Loan processing fee income:
Loan processing fee income is accounted for upfront upon processing of loan as and when it becomes due.
ix) Management fee income:
Management fee income towards support services is accounted as and when services are rendered and it becomes due on contractual terms with the parties.
x) Income from assignment / securitization:
In case of assignment / securitization of loans, the assets are derecognized when all the rights, title, future receivables and interest thereof along with all the risks and rewards of ownership are transferred to the purchasers of assigned/ securitized loans in accordance with the Guidelines issued by Reserve Bank of India vide RBI/2012-13/170 DNBS. PD. No. 301 /3.10.01 /201 2-1 3 dated August 21, 2012. The profit if any, as reduced by the estimated provision for loss/ expenses and incidental expenses related to the transaction, is recognized as gain or loss arising on assignment / securitization over the tenure of the deal. Loss arising from these transactions if any are recognized immediately in the statement of profit and loss.
xi) Servicing fee income:
Servicing fees received is accounted for based on the underlying deal structure of the transaction as per the agreement. d Fixed assets - Property, Plant & Equipments
i) Tangible assets Leased assets
All assets given on operating lease are shown as fixed assets net of depreciation and impairment loss, if any. Initial direct costs in respect of leases are expensed in the year in which such costs are incurred.
Own assets
Tangible Assets are stated at cost of acquisition less accumulated depreciation and impairment loss if any. Cost includes acquisition cost which is directly attributable to bring the asset to its working condition for its intended use.
ii) Intangible assets
Intangible assets are recognized where it is probable that the future economic benefit attributable to the assets will flow to the Company and its cost can be reliably measured. Intangible assets are stated at cost of acquisition less accumulated amortization.
Expenditure incurred on acquisition / development of intangible assets which are not put / ready to use at the reporting date is disclosed under intangible assets under development.
e Depreciation / Amortization
Depreciation on fixed assets is provided as follows:
i) Tangible assets
Depreciation on Property, Plant and Equipment is provided in accordance with the provisions of Schedule II of the Companies Act, 2013. Tangible assets are depreciated on straight line basis method over the useful life of assets, as prescribed in Part C of Schedule II of the Companies Act, 2013.
The estimated useful lives for the different types of assets are :
(i) Furniture and Fixtures -10 years
(ii) Office equipments - 5 years
(iii) Computers - 3 years
(iv) Vehicles - 8 years
(v) Plant & Machinery given on lease - 8 years
(vi) Data processing machineries given on lease - 3 years
(vii) Vehicles given on lease - 8 years
(viii) Buildings - 60 years
ii) Intangible Assets are amortized on straight-line basis over the useful life of the asset up to a maximum of 5 years commencing from the month in which such asset is first installed.
The Company provides pro-rata depreciation from the day the asset is put to use and for any asset sold, till the date of sale.
f Impairment of assets
The Company assesses at each balance sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset is less than the carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognized in the Statement of Profit and Loss. If at the balance sheet date there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of depreciable historical cost.
g Investments
Investments are classified as long term or current based on intention of the management at the time of purchase. Current investments are valued, scrip wise at cost and market value, whichever is lower. Long-term investments are carried at carrying cost less diminution in value which is other than temporary, determined separately for each individual investment scrip wise.
An investment property is accounted for in accordance with cost model. The cost of any shares in a co-operative society or a company, the holding of which is directly related to the right to hold the investment property, is added to the carrying amount of the investment property.
h Repossessed assets
Assets repossessed against the settlement of loans are carried in the balance sheet at outstanding loan amount. The classification and provision is based on the underlying Days Past Due (DPD) for these loans.
i Loan origination/acquisition cost
All direct cost incurred for the loan origination is amortized over the tenure of the loan.
j Security of loans given
Housing loans / loans against property granted are secured by equitable registered mortgage of property and / or undertaking to create a security. Other secured loans are secured against hypothecation of respective assets.
k Provisions for Non Performing Assets (NPA) and doubtful debts
Loans and advances, receivables are identified as bad/ doubtful based on the duration of the delinquency. The duration is set at appropriate levels for each product. NPA provisions are made based on the management''s assessment of the degree of impairment and the level of provisioning meets the CIC Master Directions as prescribed by the Reserve Bank of India.
l Provisions for standard assets
Provisions for standard assets are made as per para 18 of CIC Master Directions as prescribed by the Reserve Bank of India.
m Market linked debentures (MLD)
The Company has issued certain non-convertible debentures, the rate of interest which is linked to performance of specified indices over the period of the debentures. The Company hedges its interest rate risk on MLD by taking positions in future & options based on specified indices. Any gain/loss on these hedge positions are netted against with interest expense on MLD and resultant ''net loss / gain'' is recognized in Statement of Profit and Loss.
n Discount on commercial paper
The difference between the issue price and the redemption value of commercial papers is apportioned on time basis and recognized as discounting expense.
o Foreign currency transactions
Transactions denominated in foreign currencies are recorded at the exchange rate prevailing at the time of the transaction. Exchange differences, if any arising out of transactions settled during the year are recognized in the Statement of Profit and Loss.
Monetary assets and liabilities denominated in foreign currencies at the yearend are restated at year end rates.
p Employee benefits
i) Provident fund: Company''s contributions to the recognized provident fund, which is a defined contribution scheme, are charged to the Statement of Profit and Loss.
ii) Gratuity: The Company''s gratuity benefit scheme is a defined benefit plan. The Company''s net obligation in respect of the gratuity benefit scheme is calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value, and the fair value of any plan assets, if any, is deducted.
The present value of the obligation under such defined benefit plan is determined based on actuarial valuation using the Projected Unit Credit Method, which recognises each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation.
The obligation is measured at the present value of the estimated future cash flows. The discount rates used for determining the present value of the obligation under defined benefit plan, are based on the market yields on Government securities as at the balance sheet date.
Actuarial gains and losses are recognized immediately in the Statement of Profit and Loss.
iii) Leave encashment: Leave encashment which is a defined benefit, is accrued for based on an actuarial valuation at the balance sheet date carried out by an independent actuary.
iv) Phantom Shares: As a long term incentive plan to employees, the Company has initiated Phantom stock option plan which are cash settlement rights where the employees are entitled to get cash compensation based on agreed formulae linked to market value of group company shares upon exercise of phantom stock options over notional or hypothetical shares, whereby instead of becoming entitled to buy the actual shares on vesting, they become entitled to cash payment equivalent to appreciation in the value over defined base price of shares. The present value of the obligation under such plan is determined based on actuarial valuation.
q Employee Stock Option Scheme ("ESOS")
The employees of the Company and its subsidiaries are entitled for grant of stock options (equity shares), based on the eligibility criteria set in ESOS plan of the Company. The employee compensation expenses are accounted on the basis of "intrinsic value method" as prescribed by the Guidance Note on Employee share based payments issued by the Institute of Chartered Accountants of India as required by the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014. The excess, if any, of quoted market price over the exercise price on the date of grant would be recognized as compensation cost over the vesting period. The Company recognizes compensation cost on the basis of estimated number of stock options expected to vest.
r Borrowing costs
Borrowing costs, which are directly attributable to the acquisition / construction of fixed assets, till the time such assets are ready for intended use, are capitalized as part of the cost of the assets. Other borrowing costs are recognized as an expense in the year in which they are incurred. Brokerage costs directly attributable to a borrowing are expensed over the tenure of the borrowing.
s Operating leases
Lease payments for assets taken on an operating lease are recognized as an expense in the Statement of Profit and Loss on a straight-line basis over the lease term.
t Earnings per share
The basic earnings per share is computed by dividing the net profit / (loss) after tax attributable to the equity shareholders for the period by the weighted average number of equity shares outstanding during the reporting year. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue equity shares were exercised or converted during the year. Diluted earnings per share, is computed by dividing the net profit / (loss) after tax by the weighted average number of equity shares and dilutive potential equity shares outstanding during the year.
In computing dilutive earnings per share, only potential equity shares that are dilutive and that reduce profit / increase loss per share are included. u Taxation
- Current Tax
Provision for current tax is made after taking into consideration benefits admissible under the provisions of the Income Tax Act, 1961. Minimum Alternative Tax (MAT) credit entitlement is recognized where there is convincing evidence that the same can be realised in future.
- Deferred tax
The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognized using the tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax assets are recognized when there is reasonable certainty that the assets can be realised in future; however, where there is unabsorbed depreciation or carried forward loss under taxation laws, deferred tax assets are recognized to the extent there is virtual certainty of realization of such assets. Deferred tax assets are reviewed as at each balance sheet date and written down or written up to reflect the amount that is reasonably / virtually certain (as the case may be) to be realized.
v Provisions, contingent liabilities and contingent assets
The Company creates a provision when there is a present obligation as a result of past events and it is probable that there will be outflow of resources and a reliable estimate of the obligation can be made of the amount of the obligation. Contingent liabilities are not recognized but are disclosed in the notes to the financial statements. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources. When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made.
Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. If it is no longer probable that the outflow of resources would be required to settle the obligation, the provision is reversed.
Contingent assets are not recognized nor disclosed in the financial statements.
3 Previous year figures has been regrouped / reclassified wherever necessary. The figures for the previous year includes figures of Commercial Finance Business of the Company demerged with Reliance Commercial Finance Limited (formerly Reliance Gilts Limited) with effect from April 1, 2016 i.e. the Appointed Date and therefore to that extent not strictly comparable to that of current year''s figures.
(e) The Company has one class of equity shares having a par value of Rs, 10 per share. Each shareholder is eligible for one vote per share held. In the event of liquidation of the Company, the holder of equity shares will be entitled to receive remaining assets of the Company. The distribution will be in proportion to the number of equity shares held by the shareholder.
The Board of Directors have recommended a dividend of 105 per cent [Rs, 10.50 (Previous year Rs, 10) per equity share] for the year subject to the approval of the members of the Company at the ensuing Annual General Meeting. 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 the Companies (Accounting Standards) Amendment, Rules 2016 dated March 30, 2016, the Company has not accounted for proposed dividend as a liability as at March 31, 2017. Accordingly, the proposed dividend of Rs, 265 crore and tax thereon Rs, 25 crore (net of dividend distribution tax setoff receivable from subsidiaries) are not recognized as liability in the financial statements for the year ended March 31, 2017.
(g) As on March 31, 2017, 14,76,167 equity shares (Previous year 6,21,809 equity shares) are held by custodian against which depository receipts have been issued.
* Includes Rs, 846 crore (Previous year Rs, 846 crore) created pursuant to the scheme of amalgamation approved by High Court which shall for all regulatory and accounting purposes be considered to be part of the owned funds / net worth of the Company.
** Includes Rs, 3 837 crore (Previous year Rs, 3 837 crore) created pursuant to scheme of amalgamation approved by High Court.
*** Created pursuant to section 45-IC of Reserve Bank of India Act, 1934.
a. Cash Credits amounting to Rs, Nil (Previous year Rs, 3 crore) referred above are secured by pari passu first charge on all present and future book debts (only performing assets), receivables and loan assets pertaining only to the Company''s commercial finance division which has been demerged as on April 1, 2016.
b. Short term loan amounting to Rs, Nil (Previous year Rs, 675 crore) referred above are secured by pari passu first charge on all present and future book debts (only performing assets), receivables and loan assets pertaining only to the Company''s commercial finance division which has been demerged as on April 1, 2016.
c. In respect of Commercial Papers maximum amount outstanding during the year was Rs, 4 074 crore (Previous year Rs, 5 499 crore).
Disclosure of amounts payable to vendors as defined under the "Micro, Small and Medium Enterprise Development Act, 2006" is based on the information available with the Company regarding the status of registration of such vendors under the said Act. There are no overdue principal amounts / interest payable amounts for delayed payments to such vendors at the Balance Sheet date. There are no delays in payment made to such suppliers during the year or for any earlier years and accordingly there is no interest paid or outstanding interest in this regard in respect of payments made during the year or brought forward from previous years.
Mar 31, 2016
1 Background
Reliance Capital Limited (''the Company'') is registered as a Non-Banking Financial Company (''NBFC'') as defined under Section 45-IA of the Reserve Bank of India Act, 1934. The Company is principally engaged in lending and investing activities.
2 Significant Accounting Policies
a Basis of Preparation of Standalone Financial Statements
The accompanying standalone financial statements are prepared and presented under the historical cost convention, on the accrual basis of accounting unless otherwise stated in accordance with the generally accepted accounting principles (GAAP) in India and comply with the Accounting Standards specified under section 133 of the Companies Act, 2013 (The Act), read with Rule 7 of the Companies (Accounts) Rules, 2014 and relevant provisions of the Act. These financial statements are presented in Indian rupees rounded to the nearest crore except otherwise stated.
All assets and liabilities have been classified as current or non-current as per the Company''s normal operating cycle and other criteria set out in Schedule III to the Act. Based on the nature of the services and their realization in cash and cash equivalents, the Company has ascertained its operating cycle as twelve months for the purpose of current or non-current classification of assets and liabilities.
The Company complies in all material respects, with the prudential norms relating to income recognition, asset classification and provisioning for bad and doubtful debts and other matters, specified in the directions issued by the Reserve Bank of India in terms of Systemically Important Non-Banking Financial (Non-Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2015 issued vide Reserve Bank of India (''RBI'') Notification No. DNBR.009/CGM (CDS)-2015 dated March 27, 2015, as applicable to the Company.
b Use of Estimates
The preparation of financial statements requires estimates and assumptions to be made that affect the reported amount of assets and liabilities, disclosure of contingent liabilities on the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Difference between the actual results and estimates are recognized in the period in which the results are known/materialized.
c Revenue Recognition
i) Interest income:
Interest income is recognized as it accrues on a time proportion basis taking into account the amount outstanding and the rate applicable except in the case of nonperforming assets ("NPAs") where it is recognized, upon realization.
ii) Dividend income:
Dividend income is recognized when the right to receive payment is established.
iii) Income from investments:
Profit / (Loss) earned from sale of securities is recognized on trade date basis. The cost of securities is computed based on weighted average basis.
iv) Lease rental income:
Lease rental income is recognized in the Statement of Profit and Loss on a straight-line basis over the lease term.
v) Discount on investments:
The difference between the acquisition cost and face value of debt instruments is recognized as interest income over the tenor of the instrument on straight-line basis.
vi) Redemption premium on investments :
Redemption premium on investments is recognized as finance income over the tenor of the investments.
vii) Share of profits or losses in partnership firm:
Share of profits / losses in partnership firm is accounted for once the amount of the share of profit/loss is ascertained and credited/debited to the Company''s account in the books of the partnership firm.
viii) Loan processing fee income:
Loan processing fee income is accounted for upfront upon processing of loan as and when it becomes due.
ix) Management fee income:
Management fee income towards support services is accounted as and when services are rendered and it becomes due on contractual terms with the parties.
x) Income from assignment / securitization:
In case of assignment / securitization of loans, the assets are derecognized when all the rights, title, future receivables and interest thereof along with all the risks and rewards of ownership are transferred to the purchasers of assigned/ securitized loans in accordance with the Guidelines issued by Reserve Bank of India vide RBI/2012-13/170 DnbS. PD. No. 301/3.10.01/2012-13 dated August 21, 2012. The profit if any, as reduced by the estimated provision for loss/ expenses and incidental expenses related to the transaction, is recognized as gain or loss arising on assignment / securitization over the tenure of the deal. Loss arising from these transactions if any are recognized immediately in the statement of profit and loss.
xi) Servicing fee income:
Servicing fees received is accounted for based on the underlying deal structure of the transaction as per the agreement.
d Fixed assets
i) Tangible assets Leased assets
All assets given on operating lease are shown as fixed assets net of depreciation and impairment loss, if any. Initial direct costs in respect of leases are expensed in the year in which such costs are incurred.
Own assets
Tangible Assets are stated at cost of acquisition less accumulated depreciation and impairment loss if any. Cost includes acquisition cost which is directly attributable to bring the asset to its working condition for its intended use.
ii) Intangible assets
Intangible assets are recognized where it is probable that the future economic benefit attributable to the assets will flow to the Company and its cost can be reliably measured. Intangible assets are stated at cost of acquisition less accumulated amortization.
Expenditure incurred on acquisition / development of intangible assets which are not put / ready to use at the reporting date is disclosed under intangible assets under development.
e Depreciation / Amortization
Depreciation on fixed assets is provided as follows:
i) Tangible assets
The Company has provided for depreciation over the useful life of the assets as prescribed under part C of Schedule II of the Companies Act, 2013 as per straight line method except Plant & Machinery and data processing machineries given on lease where useful life is considered 8 years and 5 years, respectively based on management''s assessments of useful life in respect of these assets. Lease hold improvements are amortized over the primary period of the lease on straight-line basis.
ii) Intangible Assets are amortized on straight-line basis over the useful life of the asset up to a maximum of 5 years commencing from the month in which such asset is first installed.
The Company provides pro-rata depreciation from the day the asset is put to use and for any asset sold, till the date of sale.
f Impairment of assets
The Company assesses at each balance sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset is less than the carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognized in the Statement of Profit and Loss. If at the balance sheet date there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of depreciable historical cost.
g Investments
Investments are classified as long term or current based on intention of the management at the time of purchase. Current investments are valued, scrip wise at cost and fair value, whichever is lower. Long-term investments are carried at carrying cost less diminution in value which is other than temporary, determined separately for each individual investment scrip wise.
An investment property is accounted for in accordance with cost model. The cost of any shares in a co-operative society or a company, the holding of which is directly related to the right to hold the investment property, is added to the carrying amount of the investment property.
h Repossessed assets
Assets repossessed against the settlement of loans are carried in the balance sheet at outstanding loan amount. The classification and provision is based on the underlying Days Past Due (DPD) for these loans.
i Loan origination/acquisition cost
All direct cost incurred for the loan origination is amortized over the tenure of the loan.
j Security of loans given
Housing loans / loans against property granted are secured by equitable registered mortgage of property and / or undertaking to create a security. Other secured loans are secured against hypothecation of respective assets.
k Provisions for Non Performing Assets (NPA) and doubtful debts
Loans and advances, receivables are identified as bad/ doubtful based on the duration of the delinquency. The duration is set at appropriate levels for each product. NPA provisions are made based on the management''s assessment of the degree of impairment and the level of provisioning meets the NBFC prudential norms prescribed by the Reserve Bank of India.
l Provisions for standard assets
Provisions for standard assets are made as per para 10 of the Systemically Important Non-Banking Financial (Non-Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2015.
m Market linked debentures (MLD)
The Company has issued certain non-convertible debentures, the rate of interest which is linked to performance of specified indices over the period of the debentures. The Company hedges its interest rate risk on MLD by taking positions in future & options based on specified indices. Any gain/loss on these hedge positions are netted against with interest expense on MLD and resultant ''net loss'' is recognized in Statement of Profit and Loss immediately, however ''net gain'' if any, is ignored.
n Discount on commercial paper
The difference between the issue price and the redemption value of commercial papers is apportioned on time basis and recognized as discounting expense.
o Foreign currency transactions
Transactions denominated in foreign currencies are recorded at the exchange rate prevailing at the time of the transaction. Exchange differences, if any arising out of transactions settled during the year are recognized in the Statement of Profit and Loss.
Monetary assets and liabilities denominated in foreign currencies at the yearend are restated at year end rates. p Employee benefits
i) Provident fund: Company''s contributions to the recognized provident fund, which is a defined contribution scheme, are charged to the Statement of Profit and Loss.
ii) Gratuity: The Company''s gratuity benefit scheme is a defined benefit plan. The Company''s net obligation in respect of the gratuity benefit scheme is calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value, and the fair value of any plan assets, if any, is deducted.
The present value of the obligation under such defined benefit plan is determined based on actuarial valuation using the Projected Unit Credit Method, which recognizes each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation.
The obligation is measured at the present value of the estimated future cash flows. The discount rates used for determining the present value of the obligation under defined benefit plan, are based on the market yields on Government securities as at the balance sheet date.
Actuarial gains and losses are recognized immediately in the Statement of Profit and Loss.
iii) Leave encashment: Leave encashment which is a defined benefit, is accrued for based on an actuarial valuation at the balance sheet date carried out by an independent actuary.
iv) Phantom Shares: As a long term incentive plan to employees, the Company has initiated Phantom stock option plan which are cash settlement rights where the employees are entitled to get cash compensation based on agreed formulae linked to market value of group company shares upon exercise of phantom stock options over notional or hypothetical shares, whereby instead of becoming entitled to buy the actual shares on vesting, they become entitled to cash payment equivalent to appreciation in the value over defined base price of shares. The present value of the obligation under such plan is determined based on actuarial valuation.
q Employee Stock Option Scheme ("ESOS")
The employees of the Company and its subsidiaries are entitled for grant of stock options (equity shares), based on the eligibility criteria set in ESOS plan of the Company. The employee compensation expenses are accounted on the basis of "intrinsic value method" as prescribed by the Guidance Note on Employee share based payments issued by the Institute of Chartered Accountants of India as required by the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014. The excess, if any, of quoted market price over the exercise price on the date of grant would be recognized as compensation cost over the vesting period. The Company recognizes compensation cost on the basis of estimated number of stock options expected to vest.
r Borrowing costs
Borrowing costs, which are directly attributable to the acquisition / construction of fixed assets, till the time such assets are ready for intended use, are capitalized as part of the cost of the assets. Other borrowing costs are recognized as an expense in the year in which they are incurred. Brokerage costs directly attributable to a borrowing are expensed over the tenure of the borrowing.
s Operating leases
Lease payments for assets taken on an operating lease are recognized as an expense in the Statement of Profit and Loss on a straight-line basis over the lease term.
t Earnings per share
The basic earnings per share is computed by dividing the net profit / (loss) after tax attributable to the equity shareholders for the period by the weighted average number of equity shares outstanding during the reporting year. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue equity shares were exercised or converted during the year. Diluted earnings per share, is computed by dividing the net profit / (loss) after tax by the weighted average number of equity shares and dilutive potential equity shares outstanding during the year.
In computing dilutive earnings per share, only potential equity shares that are dilutive and that reduce profit / increase loss per share are included.
u Taxation
- Current Tax
Provision for current tax is made after taking into consideration benefits admissible under the provisions of the Income Tax Act, 1961. Minimum Alternative Tax (MAT) credit entitlement is recognized where there is convincing evidence that the same can be realized in future.
The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognized using the tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax assets are recognized when there is reasonable certainty that the assets can be realized in future; however, where there is unabsorbed depreciation or carried forward loss under taxation laws, deferred tax assets are recognized to the extent there is virtual certainty of realization of such assets. Deferred tax assets are reviewed as at each balance sheet date and written down or written up to reflect the amount that is reasonably / virtually certain (as the case may be) to be realized.
v Provisions, contingent liabilities and contingent assets
The Company creates a provision when there is a present obligation as a result of past events and it is probable that there will be outflow of resources and a reliable estimate of the obligation can be made of the amount of the obligation. Contingent liabilities are not recognized but are disclosed in the notes to the financial statements. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources. When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made.
Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. If it is no longer probable that the outflow of resources would be required to settle the obligation, the provision is reversed.
Contingent assets are not recognized nor disclosed in the financial statements.
3 Previous year figures has been regrouped / reclassified wherever necessary
(e) The Company has one class of equity shares having a par value of '' 10 per share. Each shareholder is eligible for one vote per share held. In the event of liquidation of the Company, the holder of equity shares will be entitled to receive remaining assets of the Company. The distribution will be in proportion to the number of equity shares held by the shareholder.
For the year ended March 31,2016, the amount of per share dividend recognized as distributable to equity shareholders is '' 10 (March 31, 2015 '' 9). The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting,
(g) As on March 31, 2016, 6,21,809 equity shares (Previous year 5,98,1 66 equity shares) are held by custodian against which depository receipts have been issued.
(h) In Extraordinary General Meeting held on January 23, 2015, the members of the Company have duly approved, vide e-voting, Preferential Allotment of 70,00,000 equity shares of Rs, 10 each at a premium of Rs, 520 per share aggregating to Rs, 371 crore to Sumitomo Mitsui Trust Bank Limited of Japan which were allotted on March 12, 2015.
* Includes Rs, 846 crore (Previous year Rs, 846 crore) created pursuant to the Scheme of Amalgamation approved by High Court which shall for all regulatory and accounting purposes be considered to be part of the owned funds / net worth of the Company.
** During the year ended March 31, 2015, the Securities and Exchange Board of India (SEBI) has issued the "SEBI (Share Based Employee Benefits) Regulations, 2014 (''the Regulation'') which requires the accounting treatment for employee share based payments to be based on the Guidance Note on Accounting for Employee Share Based Payments issued by the Institute of Chartered Accountants of India (the Guidance Note). Accordingly, based on the requirements of the Guidance Note, the Company has not considered the ESOS Trust for inclusion in the standalone financial statements for the year ended March 31, 2015 and March 31, 2016. Consequently, these financial statements do not include the assets and liabilities of the ESOS Trust and to that extent. The Company has disclosed the loan to ESOS Trust under long term loans and advances.
*** Includes Rs, 3 837 crore (Previous year Rs, 3 837 crore) created pursuant to Scheme of Amalgamation approved by High Court.
**** Created pursuant to Section 45-IC of Reserve Bank of India Act, 1934.
a. Cash Credit facilities amounting to Rs, 3 crore (Previous year Rs, 1 crore) referred above are secured by pari passu first charge on all present and future book debts, receivables and loan assets pertaining only to the Company''s commercial finance division.
b. Short term loan amounting to Rs, 675 crore (Previous year Rs, 540 crore) referred above are secured by pari passu first charge on all present and future book debt, receivables and loan assets pertaining only to the Company''s commercial finance division.
c. In respect of Commercial Papers maximum amount outstanding during the year was Rs, 5 499 crore (Previous year Rs, 5 055 crore).
3. Investment in 38,85,24,405 (Previous year 38,85,24,405) equity shares of Reliance Life Insurance Company Limited, 9,000 (Previous year 9,000) equity shares of Reliance CWT India Limited and Nil (Previous year 30,000) equity shares of Viscount Management Services Limited are carried at fair value i.e. at amount transferred under the Scheme of Amalgamation.
4. During the year, Reliance Life Insurance Company Limited ceased to be an associate and has become a subsidiary of the Company
5. Land of Rs, 29 crore and Building of Rs, 109 crore representing Investment in Property are acquired against the settlement of loans. Freehold Land includes Rs, 13 crore and Buildings Rs, 49 crore acquired against settlement of loan has been reclassified and transferred from fixed assets to investment in properties during the year.
6. The Company has been allotted warrants without paying any consideration at the time of allotment.
7. The Company has entered into a joint venture with KGS Developers Limited in respect of real estate project development. The Company has invested '' 85 crore in the financial year 2008-09 and is entitled to share the Profit / Loss equally. However assets, liabilities, revenue and expenses related to the project are not included in the financial statements of the Company as it does not meet the definition criteria of a Joint Venture under AS 27 ''''Financial Reporting of Interests in Joint Ventures".
8. Investments includes Rs, 67 crore (Previous year Rs, 61 crore) of equity shares given as collateral/pledge towards margin with brokers.
9. Investments in Nil equity shares of TV18 Broadcast Limited amounting to Rs, Nil crore (Previous year 22,90,393 equity shares of Rs, 5 crore) and 33,1 97 equity shares of Jindal Saw Limited amounting to Rs, 29,96,693 (Previous year 33,1 97 equity shares of Rs, 29,96,693) are given to comply with the margin requirements, thus theses securities are not in the name of Company.
10. During the year, Nippon Life Insurance Company (NLIC), has acquired 9% equity shareholding in Reliance Capital Asset Management Limited (subsidiary of the Company) and 23% equity shareholding in Reliance Life Insurance Company Limited.
In respect of balances with Scheduled Banks in Fixed deposit accounts, Rs, 42 crore (Previous year Rs, 206 crore) is kept as credit enhancement towards securitization / assignment transaction, Rs, 5 33 932 (Previous year Rs, 3 23 502) is kept as deposit with sales tax authority, Rs, 5 00 000 (Previous year Rs, 5 00 000) is kept as deposit with the Pension Fund Regulatory and Development Authority (PFRDA) and Rs, 32 crore (Previous year Rs, Nil) is kept as deposit with stock exchanges for margins.
Mar 31, 2015
A Basis of Preparation of Standalone Financial Statements
The accompanying standalone financial statements are prepared and
presented under the historical cost convention, on the accrual basis of
accounting unless otherwise stated in accordance with the generally
accepted accounting principles (GAAP) in India and comply with the
Accounting Standards specified under section 133 of the Companies Act,
2013 (The Act), read with Rule 7 of the Companies (Accounting
Standards) Rules 2014 and relevant provisions of Companies Act, 2013.
These financial statements are presented in Indian rupees rounded to the
nearest crore except otherwise stated.
All assets and liabilities have been classified as current or
non-current as per the Company''s normal operating cycle and other
criteria set out in Schedule III to the Companies Act, 2013. Based on
the nature of the services and their realisation in cash and cash
equivalents, the Company has ascertained its operating cycle as twelve
months for the purpose of current or non-current classification of
assets and liabilities.
The Company complies in all material respects, with the prudential
norms relating to income recognition, asset classification and
provisioning for bad and doubtful debts and other matters, specified in
the directions issued by the Reserve Bank of India in terms of
Systemically Important Non-Banking Financial (Non-Deposit Accepting or
Holding) Companies Prudential Norms (Reserve Bank) Directions, 2015
vide Reserve Bank of India (''RBI'') Notification No. DNBR.009/CGM
(CDS)-2015 dated March 27, 2015, as applicable to the Company.
b Use of Estimates
The preparation of financial statements requires estimates and
assumptions to be made that affect the reported amount of assets and
liabilities and disclosure of contingent liabilities on the date of the
financial statements and the reported amount of revenues and expenses
during the reporting period. Difference between the actual results and
estimates are recognised in the period in which the results are
known/materialised.
c Revenue Recognition
i) Interest income:
Interest income is recognised as it accrues on a time proportion basis
taking into account the amount outstanding and the rate applicable
except in the case of non performing assets ("NPAs ") where it is
recognised, upon realisation.
ii) Dividend income:
Dividend income is recognised when the right to receive payment is
established.
iii) Income from investments:
Profit / (Loss) earned from sale of securities is recognised on trade
date basis. The cost of securities is computed based on weighted
average basis.
iv) Lease rental income:
Lease rental income is recognized in the Statement of Profit and Loss on
a straight-line basis over the lease term. v) Discount on investments:
The difference between the acquisition cost and face value of debt
instruments is recognised as interest income over the tenor of the
instrument on straight-line basis.
vi) Redemption premium on investments :
Redemption premium on investments is recognised as income over the
tenor of the investment.
vii) Share of profits or losses in partnership firm:
Share of profits / losses in partnership firm is accounted for once the
amount of the share of profit/loss is ascertained and credited/debited
to the Company''s account in the books of the partnership firm.
viii) Loan processing fee income:
Loan processing fee income is accounted for upfront as and when it
becomes due.
ix) Management fee income:
Management fee income towards support services is accounted as and when
it becomes due on contractual terms with the parties.
x) Income from assignment / securitization:
In case of assignment / securitisation of loans, the assets are
derecognised when all the rights, title, future receivables and
interest thereof along with all the risks and rewards of ownership are
transferred to the purchasers of assigned/ securitised loans in
accordance with the Guidelines issued by Reserve Bank of India vide
RBI/2012-13/170 DNBS. PD. No. 301/3.10.01/2012-13 dated August 21,
2012. The profit if any, as reduced by the estimated provision for loss/
expenses and incidental expenses related to the transaction, is
recognised as gain or loss arising on assignment / securitisation over
the tenure of the deal. Loss arising from these transactions if any
will be recognised immediately in the statement of profit and loss.
xi) Servicing fee income:
Servicing fees received is accounted for based on the underlying deal
structure of the transaction as per the agreement.
d Fixed assets
i) Tangible assets
Leased assets
All assets given on operating lease are shown as fixed assets net of
depreciation and impairment loss, if any. Initial direct costs in
respect of leases are expensed in the year in which such costs are
incurred.
Own assets
Tangible Assets are stated at cost of acquisition less accumulated
depreciation and impairment loss if any. Cost includes acquisition cost
which is directly attributable to bring the asset to its working
condition for its intended use.
ii) Intangible assets
Intangible assets are recognised where it is probable that the future
economic benefit attributable to the assets will flow to the Company and
its cost can be reliably measured. Intangible assets are stated at cost
of acquisition less accumulated amortisation.
Expenditure incurred on acquisition / development of intangible assets
which are not put / ready to use at the reporting date is disclosed
under intangible assets under development.
Depreciation / Amortisation
Depreciation on fixed assets is provided as follows:
i) Tangible assets
The Company has provided for depreciation over the useful life of the
assets as prescribed under part C of Schedule II of the Companies Act,
2013 as per straight line method except Plant & Machinery and data
processing machineries given on lease where useful life is considered 8
years and 5 years, respectively based on management''s assessments of
useful life in respect of these assets. Lease hold improvements are
amortised over the primary period of the lease on straight-line basis.
ii) Intangible Assets are amortised on straight line basis over the
useful life of the asset up to a maximum of five years commencing from
the month in which such asset is first installed.
The Company provides pro-rata depreciation from the day the asset is
put to use and for any asset sold, till the date of sale.
Impairment of assets
The Company assesses at each balance sheet date whether there is any
indication that an asset may be impaired. If any such indication
exists, the Company estimates the recoverable amount of the asset. If
such recoverable amount of the asset is less than the carrying amount,
the carrying amount is reduced to its recoverable amount. The reduction
is treated as an impairment loss and is recognised in the Statement of
Profit and Loss. If at the balance sheet date there is an indication
that a previously assessed impairment loss no longer exists, the
recoverable amount is reassessed and the asset is reflected at the
recoverable amount subject to a maximum of depreciable historical cost.
g Investments
Investments are classified as long term or current based on intention of
the management at the time of purchase. Current investments are valued,
scrip wise at cost or fair value, whichever is lower. Long-term
investments are carried at carrying cost less diminution in value which
is other than temporary, determined separately for each individual
investment script wise.
h Repossessed assets
Assets repossessed against the settlement of loans are carried in the
balance sheet at outstanding loan amount. The classification and
provision is based on the underlying Days Past Due (DPD) for these
loans.
i Loan origination/acquisition cost
All direct cost incurred for the loan origination is amortised over the
tenure of the loan.
j Security of loans given
Housing loans / loans against property granted are secured by equitable
registered mortgage of property and / or undertaking to create a
security. Other Secured loans are secured against hypothecation of
respective assets.
k Provisions for Non Performing Assets (NPA) and doubtful debts
Loans and advances, receivables are identified as bad/ doubtful based on
the duration of the delinquency. The duration is set at appropriate
levels for each product. NPA provisions are made based on the
management''s assessment of the degree of impairment and the level of
provisioning which meets the NBFC prudential norms prescribed by
Reserve Bank of India.
l Provisions for standard assets
Provisions for standard assets are made as per para 10 of the
Systematically Important Non-Banking Financial (Non Accepting or
Holding) Companies Prudential Norms (Reserve Bank) directions, 2015.
m Market linked debentures (MLD)
The Company has issued certain non-convertible debentures, the rate of
interest which is linked to performance of specified indices over the
period of the debentures. The Company hedges its interest rate risk on
MLD by taking positions in future & options based on specified indices.
Any gain/loss on these hedge positions are netted against with interest
expense on MLD and resultant ''net loss'' is recognised in Statement of
Profit and Loss immediately, however ''net gain'' if any, is ignored.
n Discount on commercial paper
The difference between the issue price and the redemption value of
commercial papers is apportioned on time basis and recognised as
discounting expense.
o Foreign currency transactions
Transactions denominated in foreign currencies are recorded at the
exchange rate prevailing at the time of the transaction. Exchange
differences, if any arising out of transactions settled during the year
are recognised in the Statement of Profit and Loss.
Monetary assets and liabilities denominated in foreign currencies at
the year end are restated at year end rates.
p Employee benefits
i) Provident fund: Company''s contributions to the recognised provident
fund, which is a defined contribution scheme, are charged to the
Statement of Profit and Loss.
ii) Gratuity: The Company''s gratuity benefit scheme is a defined benefit
plan. The Company''s net obligation in respect of the gratuity benefit
scheme is calculated by estimating the amount of future benefit that
employees have earned in return for their service in the current and
prior periods; that benefit is discounted to determine its present
value, and the fair value of any plan assets, if any, is deducted.
The present value of the obligation under such defined benefit plan is
determined based on actuarial valuation using the Projected Unit Credit
Method, which recognises each period of service as giving rise to
additional unit of employee benefit entitlement and measures each unit
separately to build up the final obligation.
The obligation is measured at the present value of the estimated future
cash flows. The discount rates used for determining the present value of
the obligation under defined benefit plan, are based on the market yields
on Government securities as at the balance sheet date.
Actuarial gains and losses are recognised immediately in the Statement
of Profit and Loss. iii) Leave encashment: Leave encashment which is a
defined benefit, is accrued for based on an actuarial valuation at the
balance sheet date carried out by an independent actuary.
q Employee Stock Option Scheme ("ESOS ")
The Employees Stock Option Scheme ("the Scheme ") provides for grant of
equity shares of the Company to directors (including whole-time)
(excluding independent directors) and employees of the Company, the
Holding Company and its subsidiaries. The Scheme provides that
employees are granted an option to acquire equity shares of the Company
that vests in a graded manner. The options may be exercised within a
specified period. The Company follows the intrinsic value method to
account for its stock-based employee compensation plans. Compensation
cost is measured as the excess, if any, of the fair market price of the
underlying stock over the exercise price on the grant date and is
amortised over the vesting period of the option on a straight line
basis.
The fair market price is the latest closing price, immediately prior to
the date of the Board / Committee meeting in which the options are
granted, on the stock exchange on which the shares of the Company are
listed. If the shares are listed on more than one stock exchange, then
the stock exchange where there is highest trading volume on the said
date is considered.
r Borrowing costs
Borrowing costs, which are directly attributable to the acquisition /
construction of fixed assets, till the time such assets are ready for
intended use, are capitalised as part of the cost of the assets. Other
borrowing costs are recognised as an expense in the year in which they
are incurred. Brokerage costs directly attributable to a borrowing are
expensed over the tenure of the borrowing.
s Operating leases
Lease payments for assets taken on an operating lease are recognised as
an expense in the Statement of Profit and Loss on a straight line basis
over the lease term.
t Earnings per share
The basic earning per share is computed by dividing the net profit /
loss attributable to the equity shareholders for the period by the
weighted average number of equity shares outstanding during the
reporting year. Diluted earnings per share reflect the potential
dilution that could occur if securities or other contracts to issue
equity shares were exercised or converted during the year. Diluted
earnings per share, is computed by dividing the net profit / loss after
tax by the weighted average number of equity shares and dilutive
potential equity shares outstanding during the year.
In computing dilutive earnings per share, only potential equity shares
that are dilutive and that reduce profit per share are included.
u Taxation
- Current Tax
Provision for current tax is made after taking into consideration
benefits admissible under the provisions of the Income Tax Act, 1961.
Minimum Alternative Tax (MAT) credit entitlement is recognised where
there is convincing evidence that the same can be realised in future.
- Deferred tax
The deferred tax charge or credit and the corresponding deferred tax
liabilities or assets are recognised using the tax rates that have been
enacted or substantively enacted by the balance sheet date. Deferred
tax assets are recognised only to the extent there is reasonable
certainty that the assets can be realised in future; however, where
there is unabsorbed depreciation or carried forward loss under taxation
laws, deferred tax assets are recognised only if there is virtual
certainty of realisation of such assets. Deferred tax assets are
reviewed as at each balance sheet date and written down or written up
to reflect the amount that is reasonably / virtually certain (as the
case may be) to be realised.
v Provisions, contingent liabilities and contingent assets
The Company creates a provision when there is a present obligation as a
result of past events and it is probable that there will be outflow of
resources and a reliable estimate of the obligation can be made of the
amount of the obligation. Contingent liabilities are not recognised
but are disclosed in the notes to the financial statements. A disclosure
for a contingent liability is made when there is a possible obligation
or a present obligation that may, but probably will not, require an
outflow of resources. When there is a possible obligation or a present
obligation in respect of which the likelihood of outflow of resources is
remote, no provision or disclosure is made.
Provisions are reviewed at each balance sheet date and adjusted to
reflect the current best estimate. If it is no longer probable that the
outflow of resources would be required to settle the obligation, the
provision is reversed. Contingent assets are not recognised nor
disclosed in the financial statements.
Mar 31, 2014
The accompanying financial statements are prepared and presented under
the historical cost convention, on the accrual basis of accounting
unless otherwise stated in accordance with the Generally Accepted
Accounting Principles (GAAP) in India and comply with the Accounting
Standards prescribed by the Companies (Accounting Standards) Rules,
2006 and the relevant provisions of the Companies Act, 1956 read with
the general circular 15/2013 dated September 13, 2013 of the Ministry
of Corporate affairs in respect of section 133 of the Companies Act,
2013. These financial statements are presented in Indian rupees rounded
to the nearest crore except otherwise stated.
All assets and liabilities have been classifed as current or
non-current as per the Company''s normal operating cycle and other
criteria set out in revised Schedule VI to the Companies Act, 1956.
Based on the nature of the services and their realisation in cash and
cash equivalents, the Company has ascertained its operating cycle as
twelve months for the purpose of current or non-current classifcation
of assets and liabilities.
The Company complies in all material respects, with the prudential
norms relating to income recognition, asset classifcation and
provisioning for bad and doubtful debts and other matters, specifed in
the directions issued by the Reserve Bank of India in terms of
Non-Banking Financial Companies Prudential Norms (Reserve Bank)
Directions, 2007, as applicable to the Company.
b Use of Estimates
The preparation of financial statements requires estimates and
assumptions to be made that affect the reported amount of assets and
liabilities and disclosure of contingent liabilities on the date of the
financial statements and the reported amount of revenues and expenses
during the reporting period. Difference between the actual results and
estimates are recognised in the period in which the results are
known/materialised.
c Revenue Recognition
i) Interest income:
Interest income is recognised as it accrues on a time proportion basis
taking into account the amount outstanding and the rate applicable
except in the case of non performing assets (''NPAs'') where it is
recognised, upon realisation.
ii) Dividend income: Dividend income is recognised when the right to
receive payment is established.
iii) Income from investments:
profit earned from sale of securities is recognised on trade date basis.
The cost of securities is computed on weighted average basis.
iv) Lease rental income:
Lease rental income is recognized in the Statement of profit and Loss on
a straight-line basis over the lease term.
v) Discount on investments:
The difference between the acquisition cost and face value of debt
instruments is recognised as interest income over the tenor of the
instrument on straight-line basis.
vi) Redemption premium on investments: Redemption premium on
investments is recognised as income over the tenor of the investment.
vii) Share of profits or losses in partnership frm:
Share of profits / losses in partnership frm is accounted for once the
amount of the share of profit/loss is ascertained and credited/debited
to the Company''s account in the books of the partnership frm.
viii) Loan processing fee income:
Loan processing fee income is accounted upfront as and when it becomes
due.
ix) Management fee income:
Management fee income towards support services is accounted as and when
it becomes due on contractual terms with the parties.
x) Income from assignment / securitisation:
In case of assignment / securitisation of loans, the assets are
derecognised when all the rights, title, future receivables and
interest thereof along with all the risks and rewards of ownership are
transferred to the purchasers of assigned/ securitised loans in
accordance with Reserve Bank of India Guideline no RBI/2012-13/170
DNBS. PD. No. 301/3.10.01/2012-13 dated August 21, 2012. The profit, if
any, as reduced by the estimated provision for loss/ expenses and
incidental expenses related to the transaction, is recognised as gain
or loss arising on assignment / securitisation over the tenure of the
deal. Loss arising from these transactions, if any, will be recognised
immediately in the statement of profit and loss.
d Fixed assets
i) Tangible assets Leased assets
All assets given on operating lease are shown as fixed assets net of
depreciation and impairment loss, if any. Initial direct costs in
respect of leases are expensed in the year in which such costs are
incurred.
Own assets
Fixed Assets are stated at cost of acquisition less accumulated
depreciation and impairment loss if any. Cost includes all expenses
incidental to the acquisition of the fixed assets.
ii) Intangible assets
Intangible assets are recognised where it is probable that the future
economic benefit attributable to the assets will fow to the Company and
its cost can be reliably measured. Intangible assets are stated at cost
of acquisition less accumulated amortisation.
Expenditure incurred on acquisition / development of intangible assets
which are not put / ready to use at the reporting date is disclosed
under intangible assets under development.
e Depreciation / Amortisation
Depreciation on fixed assets is provided as follows:
i) Tangible Assets
1) Leased assets: Depreciated on Straight Line Method over the useful
life of assets. The estimated useful lives for the different types of
assets are:
a) Plant & equipments
1) Energy Saving Equipments - 15 years
2) Specialized Machinery used in manufacturing -10 years
3) General Plant & Machinery - 8 years
b) Data processing machineries  5 years
c) Vehicle for personal use  8 years
d) Vehicle for commercial use  Taxi  8 years other than Taxi - 6
years
2) Own Assets: All assets other than lease hold improvements, on
Written Down Value method at the rates and in the manner prescribed in
Schedule XIV to the Companies Act, 1956 and lease hold improvements are
amortised over the primary period of the lease on straight-line basis.
ii) Intangible Assets are amortised on straight line basis over the
useful life of the asset up to a maximum of five years commencing from
the month in which such asset is first installed. The Company provides
pro-rata depreciation from the day the asset is put to use and for any
asset sold, till the date of sale.
f Impairment of assets
The Company assesses at each balance sheet date whether there is any
indication that an asset may be impaired. If any such indication
exists, the Company estimates the recoverable amount of the asset. If
such recoverable amount of the asset is less than the carrying amount,
the carrying amount is reduced to its recoverable amount. The reduction
is treated as an impairment loss and is recognised in the Statement of
profit and Loss. If at the balance sheet date there is an indication
that a previously assessed impairment loss no longer exists, the
recoverable amount is reassessed and the asset is refected at the
recoverable amount subject to a maximum of depreciable historical cost.
g Investments
Investments are classifed as long term or current based on intention of
the management at the time of purchase. Current investments are valued,
scrip wise at cost or fair value, whichever is lower. Long-term
investments are carried at carrying cost less diminution in value which
is other than temporary, determined separately for each individual
investment.
h Repossessed assets
Assets repossessed against the settlement of loans are carried in the
balance sheet at outstanding loan amount. The classifcation and
provision is based on the underlying Days Past Due (DPD) for these
loans.
i Loan origination / acquisition cost
All direct cost incurred for the loan origination is amortised over the
tenure of the loan.
j Security of loans given
Housing loans / loans against property granted are secured by equitable
registered mortgage of property and / or undertaking to create a
security. Other Secured loans are secured against hypothecation of
respective assets.
k Provisions for Non Performing Assets (NPA) and doubtful debts
NPA including loans and advances, receivables are identifed as bad /
doubtful based on the duration of the delinquency. The duration is set
at appropriate levels for each product. NPA provisions are made based
on the management''s assessment of the degree of impairment and the
level of provisioning meets the NBFC prudential norms prescribed by
Reserve Bank of India.
l Provisions for standard assets
Provisions for standard assets are made as per the Reserve Bank of
India notifcation DNBS.PD.CC.No.207/ 03.02.002 /2010-11 dated January
17, 2011.
m Market Linked Debentures (MLDs)
The Company has issued certain non-convertible debentures, the rate of
interest which is linked to performance of specifed indices over the
period of the debentures.
The Company hedges its interest rate risk on MLD by taking positions in
future & options based on specifed indices. Any gain/loss on these
hedge positions are netted against with interest expense on MLD and
resultant ''net loss'' is recognised in Statement of profit and Loss
immediately, however ''net gain'' if any, is ignored.
n Discount on commercial paper
The difference between the issue price and the redemption value of
commercial papers is apportioned on time basis and recognised as
discounting expense.
o Foreign currency transactions
Transactions denominated in foreign currencies are recorded at the
exchange rate prevailing at the time of the transaction. Exchange
differences, if any, arising out of transactions settled during the
year are recognised in the Statement of profit and Loss. Monetary
assets and liabilities denominated in foreign currencies at the year
end are restated at year end rates.
p Employee benefits
i) Provident fund:
Company''s contributions to the recognised provident fund, which is a
Defined contribution scheme, are charged to the Statement of profit and
Loss.
ii) Gratuity:
The Company''s gratuity benefit scheme is a Defined benefit plan. The
Company''s net obligation in respect of the gratuity benefit scheme is
calculated by estimating the amount of future benefit that employees
have earned in return for their service in the current and prior
periods; that benefit is discounted to determine its present value, and
the fair value of any plan assets, if any, is deducted.
The present value of the obligation under such Defined benefit plan is
determined based on actuarial valuation using the Projected Unit Credit
Method, which recognises each period of service as giving rise to
additional unit of employee benefit entitlement and measures each unit
separately to build up the fnal obligation.
The obligation is measured at the present value of the estimated future
cash flows. The discount rates used for determining the present value of
the obligation under Defined benefit plan, are based on the market yields
on Government securities as at the balance sheet date.
Actuarial gains and losses are recognised immediately in the Statement
of profit and Loss.
iii) Leave encashment:
Leave encashment which is a Defined benefit, is accrued for based on an
actuarial valuation at the balance sheet date carried out by an
independent actuary.
The employees of the Company are entitled to compensated absence. The
employees can carry forward a portion of the unutilised accrued leave
balance and utilise it in future periods. The Company records an
obligation for compensated absences in the period in which the employee
renders the service that increases the entitlement.
q Employees Stock Option Scheme (''ESOS'')
The Employees Stock Option Scheme ("the Scheme") provides for grant of
equity shares of the Company to directors (including whole-time) and
employees of the Company, the Holding Company and its subsidiaries. The
Scheme provides that employees are granted an option to acquire equity
shares of the Company that vests in a graded manner. The options may be
exercised within a specifed period. The Company follows the intrinsic
value method to account for its stock- based employee compensation
plans. Compensation cost is measured as the excess, if any, of the fair
market price of the underlying stock over the exercise price on the
grant date and is amortised over the vesting period of the option on a
straight line basis.
The fair market price is the latest closing price, immediately prior to
the date of the Board /Committee meeting in which the options are
granted, on the stock exchange on which the shares of the Company are
listed. If the shares are listed on more than one stock exchange, then
the stock exchange where there is highest trading volume on the said
date is considered.
r Borrowing costs
Borrowing costs, which are directly attributable to the acquisition /
construction of fixed assets, till the time such assets are ready for
intended use, are capitalised as part of the cost of the assets. Other
borrowing costs are recognised as an expense in the year in which they
are incurred. Brokerage costs directly attributable to a borrowing are
expensed over the tenure of the borrowing.
s Operating lease
Lease payments for assets taken on an operating lease are recognised as
an expense in the Statement of profit and Loss on a straight line basis
over the lease term.
t Earnings per share
The basic earnings per share is computed by dividing the net profit /
loss attributable to the equity shareholders for the period by the
weighted average number of equity shares outstanding during the
reporting year. Diluted earnings per share refect the potential
dilution that could occur if securities or other contracts to issue
equity shares were exercised or converted during the year. Diluted
earnings per share, is computed by dividing the net profit / loss after
tax by the weighted average number of equity shares and dilutive
potential equity shares outstanding during the year.
In computing dilutive earnings per share, only potential equity shares
that are dilutive and that reduce profit / increase loss per share are
included.
u Taxation
- Current tax
Provision for current tax is made after taking into consideration
benefits admissible under the provisions of the Income Tax Act, 1961.
Minimum Alternative Tax (MAT) credit entitlement is recognised where
there is convincing evidence that the same can be realised in future.
- Deferred tax
The deferred tax charge or credit and the corresponding deferred tax
liabilities or assets are recognised using the tax rates that have been
enacted or substantively enacted by the balance sheet date. Deferred
tax assets are recognised only to the extent there is reasonable
certainty that the assets can be realised in future; however, where
there is unabsorbed depreciation or carried forward loss under taxation
laws, deferred tax assets are recognised only if there is virtual
certainty of realisation of such assets. Deferred tax assets are
reviewed as at each balance sheet date and written down or written up
to refect the amount that is reasonably / virtually certain (as the
case may be) to be realised.
v Provisions, contingent liabilities and contingent assets
The Company creates a provision when there is a present obligation as a
result of past events and it is probable that there will be outflow of
resources and a reliable estimate of the obligation can be made of the
amount of the obligation. Contingent liabilities are not recognised
but are disclosed in the notes to the financial statements. A disclosure
for a contingent liability is made when there is a possible obligation
or a present obligation that may, but probably will not, require an
outflow of resources. When there is a possible obligation or a present
obligation in respect of which the likelihood of outflow of resources is
remote, no provision or disclosure is made.
Provisions are reviewed at each balance sheet date and adjusted to
refect 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. Contingent assets are not recognised in the
financial statements. However, contingent assets are assessed
continually and if it is virtually certain that an economic benefit will
arise, the asset and related income are recognised in the period in
which the change occurs. 3 Previous year fgures has been regrouped
/reclassifed wherever necessary.
(f) The Company has one class of equity shares having a par value of Rs.
10 per share. Each shareholder is eligible for one vote per share held.
In the event of liquidation of the Company, the holder of equity shares
will be entitled to receive remaining assets of the Company. The
distribution will be in proportion to the number of equity shares held
by the shareholder. For the year ended March 31, 2014, the amount of
per share dividend recognised as distributable to equity shareholders
is Rs. 8.50 (March 31, 2013 Rs. 8). The dividend proposed by the Board of
Directors is subject to the approval of the shareholders in the ensuing
Annual General Meeting.
(h) As on March 31, 2014, 6 37 035 equity shares (Previous year 5 07
101 equity shares) are held by custodian against which depository
receipts have been issued.
(i) In terms of SEBI (ESOS and ESPS) Guidelines, 1999 and recent
opinion of the Expert Advisory Committee (EAC) of the Institute of
Chartered Accountants of India (the ICAI) the accounting treatment for
the equity shares of the company held by the RCAP ESOS Trust as at
March 31, 2014 has been given in Standalone Financial Statements of the
Company. The said Trust is holding 16,00,000 equity shares of Rs. 10 each
of the Company. Face value of the said shares are presented as
deduction from the paid up share capital and balance Rs. 60 crore being
an amount exceeding the said face value are presented as deduction from
the Securities Premium with corresponding adjustment to the loan
receivable from the Trust.
Mar 31, 2013
A Basis of Preparation of Financial Statements
The accompanying financial statements are prepared and presented under
the historical cost convention, on the accrual basis of accounting
unless otherwise stated in accordance with the generally accepted
accounting principles (GAAP) in India and comply with the Accounting
Standards prescribed by the Companies (Accounting Standards) Rules,
2006 and the relevant provisions of the Companies Act, 1956 to the
extent applicable. These financial statements are presented in Indian
rupees rounded to the nearest crore.
All assets and liabilities have been classified as current or
non-current as per the Company''s normal operating cycle and other
criteria set out in Revised Schedule VI to the Companies Act, 1956.
Based on the nature of the services and their realisation in cash and
cash equivalents, the Company has ascertained its operating cycle as
twelve months for the purpose of current or non-current classification
of assets and liabilities.
The Company complies in all material respects, with the prudential
norms relating to income recognition, asset classification and
provisioning for bad and doubtful debts and other matters, specified in
the directions issued by the Reserve Bank of India in terms of
Non-Banking Financial Companies Prudential Norms (Reserve Bank)
Directions, 2007, as applicable to the Company.
b Use of Estimates
The preparation of financial statements requires estimates and
assumptions to be made that affect the reported amount of assets and
liabilities and disclosure of contingent liabilities on the date of the
financial statements and the reported amount of revenues and expenses
during the reporting period. Difference between the actual results and
estimates are recognised in the period in which the results are
known/materialised.
c Revenue Recognition
i) Interest income:
Interest income is recognised as it accrues on a time proportion basis
taking into account the amount outstanding and the rate applicable
except in the case of non performing assets ("NPAs") where it is
recognised, upon realisation.
ii) Dividend income:
Dividend income is recognised when the right to receive payment is
established.
iii) Income from investments:
Profit earned from sale of securities is recognised on trade date
basis. The cost of securities is computed on weighted average basis.
iv) Lease rental income:
Lease rental income is recognised in the Statement of Profit and Loss
on a straight-line basis over the lease term.
v) Discount on investments:
The difference between the acquisition cost and face value of debt
instruments is recognised as interest income over the tenor of the
instrument on straight-line basis.
vi) Redemption premium on investments:
Redemption premium on investments is recognised as income over the
tenor of the investment.
vii) Share of profits or losses in partnership firm:
Share of profits / losses in partnership firm is accounted for once the
amount of the share of profit/loss is ascertained and credited/debited
to the Company''s account in the books of the partnership firm.
viii) Loan processing fee income:
Loan processing fee income is accounted for upfront as and when it
becomes due.
ix) Management fee income:
Management fee income towards support services is accounted as and when
it becomes due on contractual terms with the parties.
x) Income from assignment / securitisation:
In case of assignment / securitization of loans, the assets are
derecognized when all the rights, title, future receivables and
interest thereof along with all the risks and rewards of ownership are
transferred to the purchasers of assigned/ securtised loans. The profit
if any, as reduced by the estimated provision for loss/expenses and
incidental expenses related to the transaction, is recognised as gain
or loss arising on assignment / securitization over the tenure of the
deal. Loss arising from these transactions if any will be recognised
immediately in the statement of profit and loss account.
d Fixed assets
i) Tangible assets
- Lease assets
All assets given on operating lease are shown as fixed assets net of
depreciation and impairment loss, if any. Initial direct costs in
respect of leases are expensed in the year in which such costs are
incurred.
- Own assets
Fixed assets are stated at cost of acquisition less accumulated
depreciation and impairment loss if any. Cost includes all expenses
incidental to the acquisition of the fixed assets.
ii) Intangible assets
- Intangible assets are recognised where it is probable that the future
economic benefit attributable to the assets will flow to the Company
and its cost can be reliably measured. Intangible assets are stated at
cost of acquisition less accumulated amortisation.
- Expenditure incurred on acquisition / development of intangible
assets which are not put / ready to use at the reporting date us
disclosed under intangible assets under development.
e Depreciation / Amortisation
Depreciation on Tangible assets is provided as follows:
i) Leased assets: Depreciated on Straight Line Method over the useful
life of assets. The estimated useful life for the different types of
assets are :
a) Plant & equipments - 8 years
b) Data processing machineries - 5 years
c) Vehicle for personal use - 8 years
d) Vehicle for commercial use - 8 years other than Taxi - 6 years
ii) Own Assets: All assets other than lease hold improvements, on
Written Down Value method at the rates and in the manner prescribed in
Schedule XIV to the Companies Act, 1956 and lease hold improvements are
amortised over the primary period of the lease on straight-line basis.
iii) Intangible Assets are amortised on straight line basis over the
useful life of the asset up to a maximum of five years commencing from
the month in which such asset is first installed.
The Company provides pro-rata depreciation from the day the asset is
put to use and for any asset sold, till the date of sale.
f Impairment of assets
The Company assesses at each balance sheet date whether there is any
indication that an asset may be impaired. If any such indication
exists, the Company estimates the recoverable amount of the asset. If
such recoverable amount of the asset is less than the carrying amount,
the carrying amount is reduced to its recoverable amount. The reduction
is treated as an impairment loss and is recognised in the Statement of
Profit and Loss. If at the balance sheet date there is an indication
that a previously assessed impairment loss no longer exists, the
recoverable amount is reassessed and the asset is reflected at the
recoverable amount subject to a maximum of depreciable historical cost.
g Investments
Investments are classified as long term or current based on intention
of the management at the time of purchase. Current investments are
valued, scrip wise at cost or fair value, whichever is lower. Long-term
investments are carried at carrying cost less diminution in value which
is other than temporary, determined separately for each individual
investment.
h Repossessed assets
Assets repossessed against the settlement of loans are carried in the
balance sheet at outstanding loan amount. The classification and
provision is based on the underlying Days Past Due (DPD) for these
loans.
i Loan origination / acquisition cost
All direct cost incurred for the loan origination is amortised over the
tenure of the loan.
j Security of loans given
Housing loans / loans against property granted are secured by equitable
registered mortgage of property and / or undertaking to create a
security. Other Secured loans are secured against hypothecation of
respective assets.
k Provisions for Non Performing Assets (NPA) and doubtful debts
NPA including loans and advances, receivables are identified as bad/
doubtful based on the duration of the delinquency. The duration is set
at appropriate levels for each product. NPA provisions are made based
on the management''s assessment of the degree of impairment and the
level of provisioning meets the NBFC prudential norms prescribed by
Reserve Bank of India.
l Provisions for standard assets
Provisions for standard assets are made as per the Reserve Bank of
India notification DNBS.PD.CC.No.207/ 03.02.002 /2010-11 dated January
17, 2011.
m Market linked debentures (MLD)
The Company has issued certain non-convertible debentures, the rate of
interest which is linked to performance of specified indices over the
period of the debentures.
The Company hedges its interest rate risk on MLD by taking positions in
future & options based on specified indices. Any gain/loss on these
hedge positions are netted against with interest expense on MLD and
resultant ''net loss'' is recognised in Statement of Profit and Loss
immediately, however ''net gain'' if any, is ignored.
n Discount on commercial paper
The difference between the issue price and the redemption value of
commercial papers is apportioned on time basis and recognised as
discounting expense.
o Foreign currency transactions
Transactions denominated in foreign currencies are recorded at the
exchange rate prevailing at the time of the transaction. Exchange
differences, if any arising out of transactions settled during the year
are recognised in the Statement of Profit and Loss. Monetary assets
and liabilities denominated in foreign currencies at the year end are
restated at year end rates.
p Employee benefits
i) Provident fund:
Company''s contributions to the recognised provident fund, which is a
defined contribution scheme, are charged to the Statement of Profit and
Loss.
ii) Gratuity:
The Company''s gratuity benefit scheme is a defined benefit plan. The
Company''s net obligation in respect of the gratuity benefit scheme is
calculated by estimating the amount of future benefit that employees
have earned in return for their service in the current and prior
periods; that benefit is discounted to determine its present value, and
the fair value of any plan assets, if any, is deducted.
The present value of the obligation under such defined benefit plan is
determined based on actuarial valuation using the Projected Accrued
Benefit Method (same as Projected Unit Credit Method), which recognises
each period of service as giving rise to additional unit of employee
benefit entitlement and measures each unit separately to build up the
final obligation.
The obligation is measured at the present value of the estimated future
cash flows. The discount rates used for determining the present value
of the obligation under defined benefit plan, are based on the market
yields on Government securities as at the balance sheet date.
Actuarial gains and losses are recognised immediately in the Statement
of Profit and Loss.
iii) Leave encashment:
Leave encashment which is a defined benefit, is accrued for based on an
actuarial valuation at the balance sheet date carried out by an
independent actuary.
The employees of the Company are entitled to compensated absence. The
employees can carry forward a portion of the unutilised accrued leave
balance and utilise it in future periods. The Company records an
obligation for compensated absences in the period in which the employee
renders the service that increases the entitlement. The Company
measures the expected cost of compensated absence as the amount that
the Company expects to pay as a result of the unused entitlement that
has accumulated at the balance sheet date.
q Employee Stock Option Scheme ("ESOS")
The Employees Stock Option Scheme ("the Scheme") provides for grant of
equity shares of the Company to directors (including whole-time) and
employees of the Company and its subsidiaries. The Scheme provides that
employees are granted an option to acquire equity shares of the Company
that vests in a graded manner. The options may be exercised within a
specified period. The Company follows the intrinsic value method to
account for its stock-based employee compensation plans. Compensation
cost is measured as the excess, if any, of the fair market price of the
underlying stock over the exercise price on the grant date and is
amortised over the vesting period of the option on a straight line
basis. The fair market price is the latest closing price, immediately
prior to the date of the Board /Commitee meeting in which the options
are granted, on the stock exchange on which the shares of the Company
are listed. If the shares are listed on more than one stock exchange,
then the stock exchange where there is highest trading volume on the
said date is considered.
r Borrowing costs
Borrowing costs, which are directly attributable to the acquisition /
construction of fixed assets, till the time such assets are ready for
intended use, are capitalised as part of the cost of the assets. Other
borrowing costs are recognised as an expense in the year in which they
are incurred. Brokerage costs directly attributable to a borrowing are
expensed over the tenure of the borrowing.
s Operating lease
Lease payments for assets taken on an operating lease are recognised as
an expense in the Statement of Profit and Loss on a straight line basis
over the lease term.
t Earning per share
The basic earning per share is computed by dividing the net profit /
loss attributable to the equity shareholders for the period by the
weighted average number of equity shares outstanding during the
reporting year. Diluted earnings per share reflect the potential
dilution that could occur if securities or other contracts to issue
equity shares were exercised or converted during the year. Diluted
earnings per share, is computed by dividing the net profit / loss after
tax by the weighted average number of equity shares and dilutive
potential equity shares outstanding during the year.
In computing dilutive earnings per share, only potential equity shares
that are dilutive and that reduce profit / increase loss per share are
included.
u Taxation
- Current tax
Provision for current tax is made after taking into consideration
benefits admissible under the provisions of the Income Tax Act, 1961.
Minimum Alternative Tax (MAT) credit entitlement is recognised where
there is convincing evidence that the same can be realised in future.
- Deferred tax
The deferred tax charge or credit and the corresponding deferred tax
liabilities or assets are recognised using the tax rates that have been
enacted or substantively enacted by the balance sheet date. Deferred
tax assets are recognised only to the extent there is reasonable
certainty that the assets can be realised in future; however, where
there is unabsorbed depreciation or carried forward loss under taxation
laws, deferred tax assets are recognised only if there is virtual
certainty of realisation of such assets. Deferred tax assets are
reviewed as at each balance sheet date and written down or written up
to reflect the amount that is reasonably / virtually certain (as the
case may be) to be realised.
v Provisions, contingent liabilities and contingent assets
The Company creates a provision when there is a present obligation as a
result of past events and it is probable that there will be outflow of
resources and a reliable estimate of the obligation can be made of the
amount of the obligation. Contingent liabilities are not recognised
but are disclosed in the notes to the financial statements. A
disclosure for a contingent liability is made when there is a possible
obligation or a present obligation that may, but probably will not,
require an outflow of resources. When there is a possible obligation or
a present obligation in respect of which the likelihood of outflow of
resources is remote, no provision or disclosure is made.
Provisions are reviewed at each balance sheet date and adjusted to
reflect the current best estimate. If it is no longer probable that the
outflow of resources would be required to settle the obligation, the
provision is reversed.
Contingent assets are not recognised in the financial statements.
However, contingent assets are assessed continually and if it is
virtually certain that an economic benefit will arise, the asset and
related income are recognised in the period in which the change occurs.
Mar 31, 2012
A Basis of Preparation of Financial Statements
The accompanying financial statements are prepared and presented under the historical cost convention, on the accrual basis of accounting unless otherwise stated and comply with the Accounting Standards prescribed by the Companies (Accounting Standards) Rules, 2006 and the relevant provisions of the Companies Act, 1956 to the extent applicable.
The Company complies in all material respects, with the prudential norms relating to income recognition, asset classifcation and provisioning for bad and doubtful debts and other matters, specifed in the directions issued by the Reserve Bank of India in terms of Non-Banking Financial Companies Prudential Norms (Reserve Bank) Directions, 2007, as applicable to it.
b Use of Estimates
The preparation of financial statements requires estimates and assumptions to be made that affect the reported amount of assets and liabilities and disclosure of contingent liabilities on the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Difference between the actual results and estimates are recognised in the period in which the results are known/materialised.
c Revenue Recognition
i) Interest income:
Interest income is recognised as it accrues on a time proportion basis taking into account the amount outstanding and the rate applicable except in the case of non performing assets ("NPAs") where it is recognised, upon realisation.
ii) Dividend income:
Dividend income is recognised when the right to receive payment is established.
iii) Income from investments: profit earned from sale of securities is recognised on trade date basis. The cost of securities is computed based on weighted average basis.
iv) Lease rental income:
Lease rental income is recognised in the Statement of profit and Loss on a straight-line basis over the lease term.
v) Discount on investments:
The difference between the acquisition cost and face value of debt instruments is recognised as interest income over the tenor of the instrument on straight-line basis.
vi) Redemption premium on investments in preference shares:
Redemption premium on investments in preference shares is recognised as income over the tenor of the investments.
vii) Share of profits or losses in partnership frm:
Share of profits / losses in partnership frm is accounted for once the amount of the share of profit/loss is ascertained and credited/debited to the Company's account in the books of the partnership frm.
viii) Loan processing fee income:
Loan processing fee income is recognised as and when it becomes due.
ix) Management fee income:
Management fee income towards support services is accounted as and when it becomes due on contractual terms with the parties.
x) Income from assignment / securitisation:
a) In case of assignment of loans, the assets are de-recognised when all the rights, title, future receivables and interest thereof along with all the risks and rewards of ownership are transferred to the purchasers of assigned loans. On de-recognition, the difference between book value of the loans assigned and consideration received, as reduced by the estimated provision for loss/expenses and incidental expenses related to the transaction, is recognised as gain or loss arising on assignment.
b) In case of securitisation of loans, the transferred loans are de-recognised and gains/losses are accounted for only if the company surrenders the rights to benefits specifed in the underlying securitised loan contract. In accordance with the Reserve Bank of India guidelines for securitisation of standard assets ,the Company recognises any loss arising from securitisation immediately at the time of sale and premium arising from securitisation is amortised over the life of securities issued or to be issued by the special purpose vehicle to which the assets are sold. Income on retained interest in securitised assets is booked on accrual basis.
d Fixed assets
Fixed assets are stated at cost of acquisition less accumulated depreciation and impairment loss if any. Cost includes all expenses incidental to the acquisition of the fixed assets.
e Leased assets
All assets given on operating lease are shown as fixed assets net of depreciation and impairment loss if any. Initial direct costs in respect of leases are expensed in the year in which such costs are incurred.
f Intangible assets
Intangible assets are recognised where it is probable that the future economic beneft attributable to the assets will fow to the Company and its cost can be reliably measured. Intangible assets are stated at cost of acquisition less accumulated amortisation.
g Depreciation / Amortisation
i) Leased assets: Depreciated on straight-line method over the useful life of assets. The estimated useful lives of the assets for the different types of assets are :
a) Plant & equipments - 8 years
b) Computers - 5 years
c) Vehicle for personal use - 8 years
d) Vehicle for commercial use - 8 years other than Taxi - 6 years
ii) Own assets: All assets other than lease hold improvements, on Written Down Value method at the rates and in the manner prescribed in Schedule XIV to the Companies Act, 1956 and lease hold improvements are amortised over the primary period of the lease on straight-line basis.
iii) Intangible assets are amortised on straight-line basis over the useful life of the asset up to a maximum of five years commencing from the month in which such asset is frst installed.
The Company provides pro-rata depreciation from the day the asset is put to use and for any asset sold, till the date of sale.
h Impairment of assets
The Company assesses at each balance sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset is less than the carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognised in the Statement of profit and Loss. If at the balance sheet date there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is refected at the recoverable amount subject to a maximum of depreciable historical cost.
i Investments
Investments are classifed as long term or current based on intention of the management at the time of purchase.
Current investments are valued, scrip wise at cost or fair value, whichever is lower.
Long-term investments are carried at cost less diminution in value which is other than temporary, determined separately for each individual investment.
j Stock-in-trade
Securities held as stock-in-trade are valued scrip wise at weighted average cost or fair value, whichever is lower.
k Repossessed assets
Assets repossessed against the settlement of loans are carried in the balance sheet at outstanding loan amount or market value whichever is lower. The difference between the outstanding loan amount and the market value is charged to Statement of profit and Loss in the year of repossession of assets.
l Loan origination/acquisition cost
All direct cost incurred for the loan origination is amortised over the average tenure of the loan.
m Security of Loans Given
Housing loans / loans against property granted are secured by equitable registered mortgage of property and / or undertaking to create a security. Other Secured loans are secured against the hypothecation of respective assets.
n Market linked debentures (MLD)
The Company has issued certain non-convertible debentures, the rate of interest on which is linked to performance of specifed indices over the period of the debentures.
The Company hedges its interest rate risk on MLD by taking positions in future & options based on specifed indices. Any gain / loss on these hedge positions are netted against with interest expense on MLD & resultant 'net loss' is recognised in Statement of profit and Loss immediately, however 'net gain' if any is ignored.
o Discount on commercial papers
The difference between the issue price and the redemption value of commercial papers is apportioned on time basis and recognised as discounting expense.
p Employee benefits
i) Provident fund:
Company's contributions to the recognised provident fund, which is a defned contribution scheme, are charged to the Statement of profit and Loss.
ii) Gratuity:
The Company's gratuity beneft scheme is a defned beneft plan. The Company's net obligation in respect of the gratuity beneft scheme is calculated by estimating the amount of future beneft that employees have earned in return for their service in the current and prior periods; that beneft is discounted to determine its present value, and the fair value of any plan assets, if any, is deducted.
The present value of the obligation under such defned beneft plan is determined based on actuarial valuation using the Projected Accrued Beneft Method (same as Projected Unit Credit Method), which recognises each period of service as giving rise to additional unit of employee beneft entitlement and measures each unit separately to build up the fnal obligation.
The obligation is measured at the present value of the estimated future cash fows. The discount rates used for determining the present value of the obligation under defned beneft plan, are based on the market yields on Government securities as at the balance sheet date.
Actuarial gains and losses are recognised immediately in the Statement of profit and Loss.
iii) Leave encashment:
Leave encashment which is a defned beneft, is accrued for based on an actuarial valuation at the balance sheet date carried out by an independent actuary.
The employees of the Company are entitled to compensated absence. The employees can carry forward a portion of the unutilised accrued leave balance and utilise it in future periods. The Company records an obligation for compensated absences in the period in which the employee renders the service that increases the entitlement. The Company measures the expected cost of compensated absence as the amount that the Company expects to pay as a result of the unused entitlement that has accumulated at the balance sheet date.
q Employee Stock Option Scheme ("ESOS")
The Employees Stock Option Scheme ("the Scheme") provides for grant of equity shares of the Company to directors (including whole-time) and employees of the Company and its subsidiaries. The Scheme provides that employees are granted an option to acquire equity shares of the Company that vests in a graded manner. The options may be exercised within a specifed period. The Company follows the intrinsic value method to account for its stock-based employee compensation plans. Compensation cost is measured as the excess, if any, of the fair market price of the underlying stock over the exercise price on the grant date and is amortised over the vesting period of the option on a straight-line basis.
The fair market price is the latest closing price, immediately prior to the date of the Board / Committee meeting in which the options are granted, on the stock exchange on which the shares of the Company are listed. If the shares are listed on more than one stock exchange, then the stock exchange where there is highest trading volume on the said date is considered.
r Foreign currency transactions
Transactions denominated in foreign currencies are recorded at the exchange rate prevailing at the time of the transaction. Exchange differences, if any arising out of transactions settled during the year are recognised in the Statement of profit and Loss.
Monetary assets and liabilities denominated in foreign currencies at the year end are restated at year end rates.
s Borrowing costs
Borrowing costs, which are directly attributable to the acquisition / construction of fixed assets, till the time such assets are ready for intended use, are capitalised as part of the cost of the assets. Other borrowing costs are recognised as an expense in the year in which they are incurred. Brokerage costs directly attributable to a borrowing are expensed over the tenure of the borrowing.
t Operating leases
Lease payments for assets taken on an operating lease are recognised as an expense in the Statement of profit and Loss on a straight-line basis over the lease term.
u Earnings per share
The basic earnings per share is computed by dividing the net profit / loss attributable to the equity shareholders for the period by the weighted average number of equity shares outstanding during the reporting year. Diluted earnings per share refect the potential dilution that could occur if securities or other contracts to issue equity shares were exercised or converted during the year. Diluted earnings per share, is computed by dividing the net profit after tax by the weighted average number of equity shares and dilutive potential equity shares outstanding during the year.
In computing dilutive earnings per share, only potential equity shares that are dilutive and that reduce profit / increase loss per share are included.
v Provisions for Non Performing Assets (NPA) and Doubtful Debts
NPA including loans and advances, receivables are identifed as bad/ doubtful based on the duration of the delinquency. The duration is set at appropriate levels for each product. NPA provisions are made based on the management's assessment of the degree of impairment and the level of provisioning meets the NBFC prudential norms prescribed by Reserve Bank of India.
w Provisions for Standard Assets
Provisions on Standard Assets are made as per the Reserve Bank of India notifcation DNBS.PD.CC.No. 207/ 03.02.002 /2010- 11 dated January 17, 2011.
x Taxation
i) Current tax
Provision for current tax is made after taking into consideration benefits admissible under the provisions of the Income Tax Act, 1961. Minimum Alternative Tax (MAT) credit entitlement is recognised where there is convincing evidence that the same can be realised in future.
ii) Deferred tax:
The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognised using the tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax assets are recognised only to the extent there is reasonable certainty that the assets can be realised in future; however, where there is unabsorbed depreciation or carried forward loss under taxation laws, deferred tax assets are recognised only if there is virtual certainty of realisation of such assets. Deferred tax assets are reviewed as at each balance sheet date and written down or written up to refect the amount that is reasonably / virtually certain (as the case may be) to be realised.
y Provisions, contingent liabilities and contingent assets
The Company creates a provision when there is a present obligation as a result of past events and it is probable that there will be outfow of resources and a reliable estimate of the obligation can be made of the amount of the obligation. Contingent liabilities are not recognised but are disclosed in the notes to the financial statements. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outfow of resources. When there is a possible obligation or a present obligation in respect of which the likelihood of outfow of resources is remote, no provision or disclosure is made.
Provisions are reviewed at each balance sheet date and adjusted to refect the current best estimate. If it is no longer probable that the outfow of resources would be required to settle the obligation, the provision is reversed.
Contingent assets are not recognised in the financial statements. However, contingent assets are assessed continually and if it is virtually certain that an economic beneft will arise, the asset and related income are recognised in the period in which the change occurs.
Mar 31, 2011
A. Basis of preparation of Financial Statements
The accompanying financial statements are prepared and presented under the historical cost convention, on the accrual basis of accounting unless otherwise stated and comply with the Accounting Standards prescribed by the Companies (Accounting Standard) Rules, 2006 and the relevant provisions of the Companies Act, 1956 to the extent applicable. The financial statements are presented in Indian rupees rounded off to the nearest crore upto two decimal places.
The Company complies in all material respects, with the prudential norms relating to income recognition, asset classifcation and provisioning for bad and doubtful debts and other matters, specified in the directions issued by the Reserve Bank of India (RBI) in terms of Non-Banking Financial Companies Prudential Norms (Reserve Bank) Directions, 2007, as applicable to it.
C. Use of Estimates and Judgments
The preparation of financial statements is in conformity with generally accepted accounting principles (GAAP) and requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities on the date of the financial statements. The estimates and assumptions used in the accompanying financial statements are based upon management's evaluation of the relevant facts and circumstances as of the date of the financial statements. Actual result could differ from those estimates. Any revision to accounting estimates is recognised prospectively in current and future periods.
D. Revenue Recognition
i) Interest Income
Interest income is recognised in the profit and Loss Account as it accrues except in the case of Non Performing Assets ("NPAs") where it is recognised, upon realisation.
ii) Dividend Income
Dividend income is recognised when the right to receive payment is established.
iii) Income from Investments
profit earned from sale of securities is recognised on a trade date basis. The cost of securities is computed based on weighted average basis.
iv) Lease Rental Income
Income from operating lease is recognised as rental as per the lease agreement over the period of lease.
v) Discount on investments
The difference between the acquisition cost and face value of debt instruments is recognised as interest income over the tenor of the instrument.
vi) Redemption Premium on Investments in Preference Shares
Redemption premium on investments in Preference shares is recognised as income over the tenor of the investment.
vii) Share of profits or Losses in Partnership Firm
Share of profit/loss on share in partnership firm is accounted for once the amount of the share of profit/loss is ascertained and credited/debited to the Company's account in the books of the partnership frm.
viii) Loan Processing Fee Income
Loan processing fee income is accounted for upfront as and when it becomes due. ix) Management fee income
Management fee income is recognized based on the contractual terms with the parties.
x) Income from Assignment / Securitisation
a) In case of assignment of loans, the assets are derecognised when all the rights, title, future receivables and interest thereof along with all the risks and rewards of ownership are transferred to the purchasers of assigned loans. On derecognition, the difference between book value of the loans assigned and consideration received, as reduced by the estimated provision for loss/expenses and incidental expenses related to the transaction, is recognised as gain or loss arising on assignment.
b) In case of securitisation of loans, the transferred loans are de-recognised and gains/losses are accounted for only if the Company surrenders the rights to benefits specified in the underlying securitised loan contract. In accordance with the RBI guidelines for securitisation of standard assets, which is effective from February 1, 2006, the Company has recognised any loss arising from securitisation immediately at the time of sale and premium arising from securitisation is amortized over the life of securities issued or to be issued by the special purpose vehicle to which the assets are sold. Income on retained interest in securitised assets is booked on accrual basis.
E. Fixed Assets
Fixed assets are stated at cost of acquisition less accumulated depreciation. Cost includes all expenses incidental to the acquisition of the fixed assets.
F. Leased Assets
All assets given on operating lease are shown in fixed assets net of depreciation.
Initial direct costs in respect of leases are expensed in the year in which such costs are incurred.
G. Intangible Assets
Intangible assets comprising of software purchased / developed and licensing costs.
H. Depreciation / Amortisation
Depreciation on fixed assets, lease assets and intangible assets are provided as follows:
i) Own assets : All assets other than lease hold improvements, on Written Down Value method at the rates and in the manner prescribed in Schedule XIV to the Companies Act, 1956 and lease hold improvements are amortised over the primary period of the lease on Straight Line Basis.
ii) Leased assets: Depreciated on Straight Line Method over the useful life of assets. The estimated useful lives of the assets for the different types of assets are:
a) Vehicle for personal use - 8 years
b) Vehicle for commercial use (Taxi) - 6 years
c) Vehicle for commercial use (Lorries) - 8 years
d) Plant & Machinery - 8 years
iii) Intangible Assets : Intangible Assets are depreciated on straight line basis over the useful life of the software up to a maximum of five years commencing from the month in which such software is first installed.
The Company provides pro-rata depreciation from the day the asset is put to use and for any asset sold, till the date of sale.
I. Impairment of Assets
The Company assesses at each balance sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset is less than the carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognised in the profit and loss account. If at the balance sheet date there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of depreciable historical cost.
J. Investments
Investments are classified as long term or current based on intention of the management at the time of purchase.
Current investments are valued, scrip wise, at cost or fair value, whichever is lower.
Long-term investments are carried at carrying cost less diminution in value which is other than temporary, determined separately for each individual investment.
K. Stock-in-trade
Securities held as stock-in-trade are valued scrip wise at weighted average cost or fair value, whichever is lower.
L. Assets Held for Sale
Assets held for sale are valued at cost or market value, whichever is lower.
M. Repossession of Assets
Assets repossessed against the settlement of loan are carried in the balance sheet at outstanding loan amount or market value, whichever is lower. The difference between the outstanding loan amount and the market value is charged to profit and Loss Account in the year of repossession of assets.
N. Loan Origination/Acquisition Cost
The direct commission cost incurred for the loan origination is written off over the average tenure of the loan.
O. Security of Loans Given
Housing loans/loans against property granted are secured by equitable registered mortgage of property and / or undertaking to create a security. Secured loans in the nature of commercial vehicle, auto finance are secured against hypothecation of respective vehicle.
P. Discount on Commercial Paper
The difference between the issue price and the redemption value of commercial papers is apportioned on time basis and recognised as discounting expense.
Q. Employee Retirement benefits
i) Provident Fund
Contributions payable to the recognised provident fund, which is a defined contribution scheme, are charged to the profit and Loss Account.
ii) Gratuity
The Company's gratuity benefit scheme is a defined benefit plan. The Company's net obligation in respect of the gratuity benefit scheme is calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value, and the fair value of any plan assets, if any, is deducted.
The present value of the obligation under such defined benefit plan is determined based on actuarial valuation using the Projected Accrued benefit Method (same as Projected Unit Credit Method), which recognises each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation.
The obligation is measured at the present value of the estimated future cash flows. The discount rates used for determining the present value of the obligation under defined benefit plan, are based on the market yields on Government securities as at the Balance Sheet date.
Actuarial gains and losses are recognised immediately in the profit and Loss Account.
iii) Leave Encashment
Leave encashment which is a defined benefit, is accrued for based on an actuarial valuation at the Balance Sheet date carried out by an independent actuary.
iv) Compensated Absences
The employees of the Company are entitled to compensated absence. The employees can carry forward a portion of the unutilised accrued leave balance and utilise it in future periods. The Company records an obligation for compensated absences in the period in which the employee renders the service that increases the entitlement. The Company measures the expected cost of compensated absence as the amount that the Company expects to pay as a result of the unused entitlement that has accumulated at the balance sheet date.
R. Employee Stock Option Scheme ("ESOS")
The Employees Stock Option Scheme ("the Scheme") provides for grant of equity shares of the Company to Directors (including whole-time) and employees of the Company and its subsidiaries. The Scheme provides that employees are granted an option to acquire equity shares of the Company that vests in a graded manner. The options may be exercised within a specified period. The Company follows the intrinsic value method to account for its stock-based employee compensation plans. Compensation cost is measured as the excess, if any, of the fair market price of the underlying stock over the exercise price on the grant date and is amortized over the vesting period of the option on a Straight Line Basis.
The fair market price is the latest closing price, immediately prior to the date of the Board of Directors meeting in which the options are granted, on the stock exchange on which the shares of the Company are listed. If the shares are listed on more than one stock exchange, then the stock exchange where there is highest trading volume on the said date, is considered.
S. Foreign Currency Transactions
Transactions denominated in foreign currencies are normally recorded at the exchange rate prevailing at the time of the transaction. Exchange differences, if any arising out of transactions settled during the year are recognised in the profit and Loss Account.
Monetary assets and liabilities denominated in foreign currencies at the year end are restated at year end rates.
T. Borrowing Costs
Borrowing costs, which are directly attributable to the acquisition/construction of fixed assets, till the time such assets are ready for intended use, are capitalised as part of the cost of the assets. Other borrowing costs are recognised as an expense in the year in which they are incurred. Brokerage costs directly attributable to a borrowing are expended over the tenure of the borrowing.
U. Operating Leases
Lease payments for assets taken on an operating lease are recognised as an expense in the profit and Loss Account on a Straight Line Basis over the lease term.
V. Earnings Per Share
The basic earnings per share is computed by dividing the net profit / loss attributable to the equity shareholders for the period by the weighted average number of equity shares outstanding during the reporting period. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue equity shares were exercised or converted during the year. Diluted earnings per share is computed by dividing the net profit after tax by the weighted average number of equity shares and dilutive potential equity shares outstanding during the year.
In computing dilutive earnings per share, only potential equity shares that are dilutive and that reduce profit / loss per share are included.
W. Provisions for Non Performing Assets (NPA) and Doubtful Debts
Assets including loans and advances, receivables are identifed as bad/ doubtful based on the duration of the delinquency. The duration is set at appropriate levels for each product. NPA provisions are made based on the management's assessment of the degree of impairment and the level of provisioning meets the prudential norms prescribed by RBI.
X. Provisions for Standard Assets
Provisions on Standard Assets are made in line with the prudential norms prescribed by RBI.
Y. Taxation
Income tax expense comprises current tax (i.e. amount of tax for the period determined in accordance with the income tax law), deferred tax charge or credit (refecting the tax effects of timing differences between accounting income and taxable income for the period).
Deferred Tax
The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognised using the tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax assets are recognised only to the extent there is reasonable certainty that the assets can be realised in future; however, where there is unabsorbed depreciation or carried forward loss under taxation laws, deferred tax assets are recognised only if there is virtual certainty of realisation of such assets. Deferred tax assets are reviewed as at each balance sheet date and written down or written up to reflect the amount that is reasonably / virtually certain (as the case may be) to be realised.
Z. Provisions, Contingent Liabilities and Contingent Assets
The Company creates a provision when there is a present obligation as a result of past events and it is probable that there will be outflow of resources and a reliable estimate of the obligation can be made of the amount of the obligation. Contingent liabilities are not recognised but are disclosed in the notes to the financial statements. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources. When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made.
Provisions are reviewed at each balance sheet date and adjusted to refect 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.
Contingent assets are not recognised in the financial statements. However, contingent assets are assessed continually and if it is virtually certain that an economic benefit will arise, the asset and related income are recognised in the period in which the change the change occurs.
Mar 31, 2010
A. Basis of preparation of Financial Statements
The accompanying financial statements are prepared and presented under the historical cost convention, on the accrual basis of accounting and comply with the Accounting Standards prescribed by the Companies (Accounting Standard) Rules, 2006 and the relevant provisions of the Companies Act, 1956 to the extent applicable. The financial statements are presented in Indian rupees rounded off to the nearest crore upto two decimal places.
The Company complies in all material respects, with the prudential norms relating to income recognition, asset classification and provisioning for bad and doubtful debts and other matters, specified in the directions issued by the Reserve Bank of India (RBI) in terms of Non-Banking Financial Companies Prudential Norms (Reserve Bank) Directions, 2007, as applicable to it.
B. Use of Estimates and Judgments
The preparation of financial statements is in conformity with generally accepted accounting principles (GAAP) and requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities on the date of the financial statements. The estimates and assumptions used in the accompanying financial statements are based upon management's evaluation of the relevant facts and circumstances as of the date of the financial statements. Actual result could differ from those estimates. Any revision to accounting estimates is recognised prospectively in current and future periods.
D. Revenue Recognition
i) Interest Income
Interest income is recognised in the Profit and Loss Account as it accrues except in the case of Non Performing Assets ("NPAs") where it is recognised, upon realisation.
ii) Dividend Income
Dividend income is recognised when the right to receive payment is established.
iii) Income from Investments
Profit earned from sale of securities is recognised on a trade date basis. The cost of securities is computed based on a weighted average basis.
iv) Discount on investments
The difference between the acquisition cost and face value of debt instruments is recognised as interest income over the tenor of the instrument.
v) Redemption Premium on Investments in Preference Shares
Redemption premium on investments in Preference shares is recognised as income over the tenor of the investment.
vi) Share of Profits or Losses in Partnership Firm
Share of profit/loss on share in partnership firm is accounted for once the amount of the share of profit/loss is ascertained and credited/debited to the Company's account in the books of the partnership firm.
vii) Loan Processing Fee Income
Loan processing fee income is accounted for upfront as and when it becomes due.
viii) Income from Assignment / Securitization
a) In case of assignment of loans, the assets are derecognized when all the rights, title, future receivables and interest thereof along with all the risks and rewards of ownership are transferred to the purchasers of assigned loans. On de-recognition, the difference between book value of the loans assigned and consideration received, as reduced by the estimated provision for loss/expenses and incidental expenses related to the transaction, is recognised as gain or loss arising on assignment.
b) In case of securitization of loans, the transferred loans are de-recognised and gains/losses are accounted for only if the Company surrenders the rights to benefits specified in the underlying securitized loan contract. In accordance with the RBI guidelines for securitization of standard assets, which is effective from February 1, 2006, the Company has recognised any loss arising from securitization immediately at the time of sale and premium arising from securitization is amortized over the life of securities issued or to be issued by the special purpose vehicle to which the assets are sold.
ix) Income from Derivatives
Gains or losses on derivative contracts are recognised on a settlement date basis.
E. Fixed Assets
Fixed assets are stated at cost of acquisition less accumulated depreciation. Cost includes all expenses incidental to the acquisition of the fixed assets.
F. Leased Assets
All assets given on finance lease on or before March 31, 2001 are capitalised as fixed assets and all assets given on finance lease on or after April 1, 2001 are shown as receivables at an amount equal to net investment in the lease.
Initial direct costs in respect of leases are expensed in the year in which such costs are incurred.
G. Intangible Assets
Intangible assets comprising of software purchased / developed and licensing costs are depreciated on straight line basis over the useful life of the software up to a maximum of five years commencing from the month in which such software is first installed.
H. Depreciation / Amortisation
Depreciation on fixed assets other than software development and licensing costs is provided as follows:
i) Assets for Own use : On Written Down Value method at the rates and in the manner prescribed in Schedule XIV to the Companies Act, 1956.
ii) Leased Assets : On Straight Line Method at the rates and in the manner prescribed in Schedule XIV to the Companies Act, 1956.
iii) Leasehold Improvements : Amortised over the primary period of the lease on Straight Line Basis.
The Company provides pro-rata depreciation from the day the asset is put to use and for any asset sold, till the date of sale.
I. Impairment of Assets
The Company assesses at each balance sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset is less than the carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognised in the profit and loss account. If at the balance sheet date there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of depreciable historical cost.
J. Investments
Investments are classified as long term or current based on intention of the management at the time of purchase.
Current investments are valued, scrip wise, at cost or fair value, whichever is lower.
Long-term investments are carried at carrying cost less diminution in value which is other than temporary, determined separately for each individual investment.
K. Stock-in-trade
Securities held as stock-in-trade are valued scrip wise at weighted average cost or fair value, whichever is lower.
L. Assets Held for Sale
Assets held for sale are valued at cost or market value, whichever is lower.
M. Repossession of Assets
Assets repossessed against the settlement of loan are carried in the balance sheet at outstanding loan amount or market value, whichever is lower. The difference between the outstanding loan amount and the market value is charged to Profit and Loss Account in the year of repossession of assets.
N. Loan Origination/Acquisition Cost
The direct commission cost incurred for the loan origination is written off over the average tenure of the loan.
O. Security of Loans Given
Housing loans / loans against property granted are secured by equitable registered mortgage of property and / or undertaking to create a security. Secured loans in the nature of commercial vehicle, auto finance are secured against hypothecation of respective vehicle.
P. Discount on Commercial Paper
The difference between the issue price and the redemption value of commercial papers is apportioned on time basis and recognised as discounting expense.
Q. Employee Retirement Benefits
i) Provident Fund
Contributions payable to the recognised provident fund, which is a defined contribution scheme, are charged to the Profit and Loss Account.
ii) Gratuity
The Company's gratuity benefit scheme is a defined benefit plan. The Company's net obligation in respect of the gratuity benefit scheme is calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value, and the fair value of any plan assets, if any, is deducted.
The present value of the obligation under such defined benefit plan is determined based on actuarial valuation using the Projected Accrued Benefit Method (same as Projected Unit Credit Method), which recognises each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation.
The obligation is measured at the present value of the estimated future cash flows. The discount rates used for determining the present value of the obligation under defined benefit plan, are based on the market yields on Government securities as at the Balance Sheet date.
Actuarial gains and losses are recognised immediately in the Profit and Loss Account.
iii) Leave Encashment
Leave encashment which is a defined benefit, is accrued for based on an actuarial valuation at the Balance Sheet date carried out by an independent actuary.
iv) Compensated Absences
The employees of the Company are entitled to compensated absence. The employees can carry forward a portion of the unutilised accrued leave balance and utilise it in future periods. The Company records an obligation for compensated absences in the period in which the employee renders the service that increases the entitlement. The Company measures the expected cost of compensated absence as the amount that the Company expects to pay as a result of the unused entitlement that has accumulated at the balance sheet date.
R. Employee Stock Option Scheme ("ESOS")
The Employees Stock Option Scheme ("the Scheme") provides for grant of equity shares of the Company to Directors (including whole-time) and employees of the Company and its subsidiaries. The Scheme provides that employees are granted an option to acquire equity shares of the Company that vests in a graded manner. The options may be exercised within a specified period. The Company follows the intrinsic value method to account for its stock-based employee compensation plans. Compensation cost is measured as the excess, if any, of the fair market price of the underlying stock over the exercise price on the grant date and is amortized over the vesting period of the option on a Straight Line Basis.
The fair market price is the latest closing price, immediately prior to the date of the Board of Directors meeting in which the options are granted, on the stock exchange on which the shares of the Company are listed. If the shares are listed on more than one stock exchange, then the stock exchange where there is highest trading volume on the said date, is considered.
S. Foreign Currency Transactions
Transactions denominated in foreign currencies are normally recorded at the exchange rate prevailing at the time of the transaction. Exchange differences, if any arising out of transactions settled during the year are recognised in the Profit and Loss Account.
Monetary assets and liabilities denominated in foreign currencies at the year end are restated at year end rates.
T. Borrowing Costs
Borrowing costs, which are directly attributable to the acquisition/construction of fixed assets, till the time such assets are ready for intended use, are capitalised as part of the cost of the assets. Other borrowing costs are recognised as an expense in the year in which they are incurred. Brokerage costs directly attributable to a borrowing are expended over the tenure of the borrowing.
U. Operating Leases
Lease payments for assets taken on an operating lease are recognised as an expense in the Profit and Loss Account on a Straight Line Basis over the lease term.
V. Earnings Per Share
The basic earnings per share is computed by dividing the net profit / loss attributable to the equity shareholders for the period by the weighted average number of equity shares outstanding during the reporting period. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue equity shares were exercised or converted during the year. Diluted earnings per share is computed by dividing the net profit after tax by the weighted average number of equity shares and dilutive potential equity shares outstanding during the year.
In computing dilutive earnings per share, only potential equity shares that are dilutive and that reduce profit / loss per share are included.
W. Provisions for Non Performing Assets (NPA) and Doubtful Debts
Assets including loans and advances, receivables are identified as bad/ doubtful based on the duration of the delinquency. The duration is set at appropriate levels for each product. NPA provisions are made based on the management's assessment of the degree of impairment and the level of provisioning meets the prudential norms prescribed by RBI.
X. Taxation
Income tax expense comprises current tax (i.e. amount of tax for the period determined in accordance with the income tax law), deferred tax charge or credit (reflecting the tax effects of timing differences between accounting income and taxable income for the period) and fringe benefit tax.
Deferred Taxation
The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognised using the tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax assets are recognised only to the extent there is reasonable certainty that the assets can be realised in future; however, where there is unabsorbed depreciation or carried forward loss under taxation laws, deferred tax assets are recognised only if there is virtual certainty of realisation of such assets. Deferred tax assets are reviewed as at each balance sheet date and written down or written up to reflect the amount that is reasonably / virtually certain (as the case may be) to be realised.
Fringe Benefit Tax
Provision for Fringe Benefit Tax has been recognised on the basis of applicable Fringe Benefit Tax on the taxable value of chargeable expenses of the Company as prescribed under the Income Tax Act, 1961.
Y. Provisions, Contingent Liabilities and Contingent Assets
The Company creates a provision when there is a present obligation as a result of past events and it is probable that there will be outflow of resources and a reliable estimate of the obligation can be made of the amount of the obligation. Contingent liabilities are not recognised but are disclosed in the notes to the financial statements. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources. When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made.
Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. If it is no longer probable that the outflow of resources would be required to settle the obligation, the provision is reversed.
Contingent assets are not recognised in the financial statements. However, contingent assets are assessed continually and if it is virtually certain that an economic benefit will arise, the asset and related income are recognised in the period in which the change the change occurs.
Mar 31, 2009
A. Background
Reliance Capital Limited (the Company) is registered as a Non-Banking Financial Company (NBFC) as defined under section 45-IA of the Reserve Bank of India (RBI) Act, 1934. The Company is principally engaged in lending and investing activities.
B. Basis of preparation of Financial Statements
The accompanying financial statements are prepared and presented under the historical cost convention, on the accrual basis of accounting and comply with the Accounting Standards prescribed by the Companies (Accounting Standard) Rules, 2006 and the relevant provisions of the Companies Act, 1956 to the extent applicable. The financial statements are presented in Indian rupees rounded off to the nearest crore upto two decimal places.
The Company complies in all material respects, with the prudential norms relating to income recognition, asset classification and provisioning for bad and doubtful debts and other matters, specified in the directions issued by the Reserve Bank of India in terms of Non-Banking Financial Companies Prudential Norms (Reserve Bank) Directions, 2007, as applicable to it.
C. Use of Estimates and Judgments
The preparation of financial statements is in conformity with generally accepted accounting principles (GAAP) and requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities on the date of the financial statements. The estimates and assumptions used in the accompanying financial statements are based upon managements evaluation of the relevant facts and circumstances as of the date of the financial statements. Actual result could differ from those estimates. Any revision to accounting estimates is recognised prospectively in current and future periods.
D. Revenue recognition
The Companys policy satisfies the prudential norms for income recognition as prescribed by the RBI for NBFCs.
i) Interest income
Interest income is recognised in the Profit and Loss Account as it accrues except in the case of Non Performing Assets
("NPAs") where it is recognised, upon realisation.
ii) Dividend income
Dividend income is recognised when the right to receive payment is established.
iii) Income from investments
Profit earned from sale of securities is recognised on a trade date basis. The cost of securities is computed based on a weighted average basis.
iv) Discount on Investments
The difference between the acquisition cost and face value of debt instruments is recognised as interest income over the tenor of the instrument.
v) Redemption Premium on Investments in Preference Shares
Redemption premium on investments in preference shares is recognised as income over the tenor of the investment.
vi) Share of Profits or Losses in Partnership Firm
Share of profit/loss on share in partnership firm is accounted for once the amount of the share of profit/loss is ascertained and credited/debited to the Companys account in the books of the partnership firm.
vii) Loan Processing Fee Income
Loan processing fee income is accounted for upfront as and when it becomes due.
viii) Income from Assignment
In case of assignment of receivables, the assets are derecognised when all the rights, title, future receivables and interest thereof are assigned to the purchaser. On de-recognition, the difference between book value of the receivables assigned and consideration received is recognised as gain or loss arising on assignment.
ix) Income from Derivatives
Realised gains or losses on derivative contracts are recognised on a settlement date basis.
E. Fixed Assets
Fixed assets are stated at cost of acquisition less accumulated depreciation. Cost includes all expenses incidental to the acquisition of the fixed assets.
F. Leased Assets
All assets given on finance lease on or before March 31, 2001 are capitalised as Fixed Assets and all assets given on finance lease on or after April 1, 2001 are shown as receivables at an amount equal to net investment in the lease. Initial direct costs in respect of leases are expensed in the year in which such costs are incurred.
G. Intangible Assets
Intangible assets comprising of software purchased / developed and licensing costs are depreciated on straight line basis over the useful life of the software up to a maximum of five years commencing from the month in which such software is first installed.
H. Depreciation / Amortisation
Depreciation on fixed assets other than software development and licensing costs is provided as follows
i) Assets for Own Use : On Written Down Value method at the rates and in the manner prescribed in Schedule XIV to the Companies Act, 1956.
ii) Leased Assets : On Straight Line Method at the rates and in the manner prescribed in Schedule XIV to the Companies Act, 1956.
iii) Leasehold Improvements : Amortised over the primary period of the lease on Straight-Line Basis.
The Company provides pro-rata depreciation from the day the asset is put to use and for any asset sold, till the date of sale.
I. Impairment of Assets
The Company assesses at each balance sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset is less than the carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognised in the profit and loss account. If at the balance sheet date there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of depreciable historical cost.
J. Investments
Investments are classified as long term or current based on intention of the management at the time of purchase. Current investments are valued, scrip wise, at cost or fair value, whichever is lower.
Long-term investments are carried at carrying cost less diminution in value which is other than temporary, determined separately for each individual investment.
K. Stock-in-trade
Securities held as stock-in-trade are valued scrip wise at weighted average cost or fair value, whichever is lower.
L. Assets Held for Sale
Assets held for sale are valued at cost or market value, whichever is lower.
M. Repossession of Assets
Assets repossessed against the settlement of loan are carried in the Balance Sheet at outstanding loan amount or market value whichever is lower. The difference between the outstanding loan amount and the market value is charged to Profit and Loss Account in the year of repossession of assets.
N. Loan Origination/Acquisition Cost
The direct commission cost incurred for the loan origination is written off over the average tenure of the loan.
O. Zero Coupon Instrument
The difference between the acquisition cost and the redemption value of commercial papers is apportioned on time basis and recognised as discounting charge expense.
P. Employee Retirement Benefits
i) Provident fund
Contributions payable to the recognised provident fund, which is a defined contribution scheme, are charged to the Profit and Loss Account.
ii) Gratuity
The Companys gratuity benefit scheme is a defined benefit plan. The Companys net obligation in respect of the gratuity benefit scheme is calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value, and the fair value of any plan assets, if any, is deducted.
The present value of the obligation under such defined benefit plan is determined based on actuarial valuation using the Projected Accrued Benefit Method (same as Projected Unit Credit Method), which recognises each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation.
The obligation is measured at the present value of the estimated future cash flows. The discount rates used for determining the present value of the obligation under defined benefit plan, are based on the market yields on Government securities as at the balance sheet date.
Actuarial gains and losses are recognised immediately in the Profit and Loss Account.
iii) Leave Encashment
Leave encashment which is a defined benefit, is accrued for based on an actuarial valuation at the balance sheet date carried out by an independent actuary.
iv) Compensated Absences
The employees of the Company are entitled to compensated absence. The employees can carry forward a portion of the unutilised accrued leave balance and utilise it in future periods. The Company records an obligation for compensated absences in the period in which the employee renders the service that increases the entitlement. The Company measures the expected cost of compensated absence as the amount that the Company expects to pay as a result of the unused entitlement that has accumulated at the balance sheet date.
Q. Foreign Currency Transactions
Transactions denominated in foreign currencies are normally recorded at the exchange rate prevailing at the time of the transaction. Exchange differences, if any arising out of transactions settled during the year are recognised in the Profit and Loss Account. Monetary assets and liabilities denominated in foreign currencies at the year end are restated at year end rates.
R. Borrowing Costs
Borrowing costs, which are directly attributable to the acquisition/construction of fixed assets, till the time such assets are ready for intended use, are capitalised as part of the cost of the assets. Other borrowing costs are recognised as an expense in the year in which they are incurred. Brokerage costs directly attributable to a borrowing are expensed over the tenure of the borrowing.
S. Operating Leases
Lease payments for assets taken on an operating lease are recognised as an expense in the Profit and Loss Account on a Straight Line Basis over the lease term.
T. Earnings Per Share
The basic earnings per share is computed by dividing the net profit / loss attributable to the equity shareholders for the period by the weighted average number of equity shares outstanding during the reporting period. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue equity shares were exercised or converted during the year. Diluted earnings per share is computed by dividing the net profit after tax by the weighted average number of equity shares and dilutive potential equity shares outstanding during the year.
In computing dilutive earnings per share, only potential equity shares that are dilutive and that reduce profit / loss per share are included.
U. Provisions for Non Performing Assets and Doubtful Debts
Assets including loans and advances, receivables are identified as bad/ doubtful based on the duration of the delinquency. The duration is set at appropriate levels for each product. NPA provisions are made based on the managements assessment of the degree of impairment and the level of provisioning meets the prudential norms prescribed by RBI.
V. Taxation
Income tax expense comprises current tax (i.e. amount of tax for the period determined in accordance with the income tax law), deferred tax charge or credit (reflecting the tax effects of timing differences between accounting income and taxable income for the period) and fringe benefit tax.
Deferred Taxation
The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognised using the tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax assets are recognised only to the extent there is reasonable certainty that the assets can be realised in future; however, where there is unabsorbed depreciation or carried forward loss under taxation laws, deferred tax assets are recognised only if there is virtual certainty of realisation of such assets. Deferred tax assets are reviewed as at each balance sheet date and written down or written up to reflect the amount that is reasonably / virtually certain (as the case may be) to be realised.
Fringe Benefit Tax
Provision for Fringe Benefit Tax has been recognised on the basis of applicable Fringe Benefit Tax on the taxable value of chargeable expenses of the Company as prescribed under the Income Tax Act, 1961.
W. Provisions, Contingent Liabilities and Contingent Assets
The Company creates a provision when there is a present obligation as a result of past events and it is probable that there will be outflow of resources and a reliable estimate of the obligation can be made of the amount of the obligation. Contingent liabilities are not recognised but are disclosed in the notes to the financial statements. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources. When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made.
Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. If it is no longer probable that the outflow of resources would be required to settle the obligation, the provision is reversed.
Contingent assets are not recognised in the financial statements. However, contingent assets are assessed continually and if it is virtually certain that an economic benefit will arise, the asset and related income are recognised in the period in which the change occurs.
Mar 31, 2008
A. Basis of Preparation of Financial Statements
The financial statements have been prepared and presented under the historical cost convention on the accrual basis of accounting and comply with the Accounting Standards as per Companies (Accounting Standard) Rules, 2006 and the relevant provisions of the Companies Act, 1956. The financial statements are presented in Indian Rupees rounded off to the nearest crore.
B. Use of Estimates
The preparation of financial statements is in conformity with Generally Accepted Accounting Principles (GAAP) and requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities on the date of the financial statements. The estimates and assumptions used in the accompanying financial statements are based upon management's evaluation of the relevant facts and circumstances as of the date of the financial statements. Actual results could differ from those estimates. Any revision to accounting estimates is recognised prospectively in current and future periods.
C. Revenue Recognition
i) Interest Income
Interest Income is recognised in the profit and loss account as it accrues except in the case of non performing assets ("NPAs") where it is recognised, upon realisation, as per the Non Banking Financial Companies (NBFC) prudential norms of RBI.
ii) Dividend Income
Dividend income is recognised when the right to receive payment is established.
iii) Lease Finance
Income from Lease Assets is accounted for in the year in which lease rentals fall due, by applying the interest rate implicit in the lease to the net investment in the lease during the period.
iv) Discount on Investments
The difference between the acquisition cost and face value of debt instruments is recognised as interest income over the tenor of the instrument.
v) Redemption premium on Investments in Preference Shares
Redemption premium on investments in Preference shares is recognised as income over the tenor of the investment.
D. Fixed Assets and Depreciation
All fixed assets are stated at cost less accumulated depreciation after considering lease adjustment account. All costs of acquisition including incidental and financing cost attributable to fixed assets are capitalised till assets are ready for intended use.
i) All assets given on finance lease on or before March 31, 2001 are capitalised as Fixed Assets and all assets given on finance lease on or after April 1, 2001 are shown as receivables at an amount equal to net investment in the lease.
ii) Initial direct costs in respect of leases are expensed in the year in which such costs are incurred.
iii) Intangible assets comprising of software purchased / developed and licensing costs are stated at cost of acquisition less accumulated amortisation.
Depreciation is provided as under:
i) Assets for own use
On Written Down Value method at the rates and in the manner prescribed in Schedule XIV to the Companies Act, 1956.
ii) Leased Assets
On Straight Line Method at the rates and in the manner prescribed in Schedule XIV to the Companies Act, 1956.
iii) Leasehold Improvements
Leasehold improvements are amortised over the primary period of the lease on Straight Line Method.
iv) Intangible Assets
Intangible assets are depreciated on Straight Line Method over the estimated useful life of the asset, up to a maximum of three years commencing from the month in which such assets are first utilised.
E. Impairment of Assets
The Company assesses at each balance sheet date whether there is any indication that an asset may be impaired, if such condition exists an asset is treated as impaired, when carrying cost of assets exceeds its recoverable amount. An impairment loss is charged to the Profit and Loss Account in the year in which an asset is identified as impaired. The impairment loss recognised in prior accounting periods is reversed if there has been a change in the estimate of the recoverable amount is treated as impaired, when carrying cost of assets exceeds its recoverable amount.
F. Investments
Investments are classified into Current Investments and Long-term Investments.
Current investments are valued, scrip wise, at cost or net realisable value, whichever is lower.
Long-term investments are valued at cost. Provision for diminution is made scrip wise to recognise a decline, other than temporary, determined separately for each individual investment.
G. Stock-in-trade / Assets held for sale
Securities held as stock-in-trade are valued scrip wise at book value or fair value, whichever is lower. Assets held for sale are valued at cost or market value, whichever is lower.
H. Repossession of Assets
Assets repossessed against the settlement of loan are carried in the balance sheet at outstanding loan amount or market value, whichever is lower. The difference between the outstanding loan amount and the market value is charged to profit and loss account in the year of repossession of assets.
I. Loan Originating Cost
The direct commission cost incurred for the loan origination is written off over the average tenure of the loan.
J. Employee Retirement Benefits
i) Provident fund
Contributions payable to the recognised provident fund, which is a defined contribution scheme, are charged to the Profit and Loss Account.
ii) Gratuity
The Company's gratuity benefit scheme is a defined benefit plan. The Company's net obligation in respect of the gratuity benefit scheme is calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value and the fair value of any plan assets, if any, is deducted.
The present value of the obligation under such defined benefit plan is determined based on actuarial valuation using the Projected Accrued Benefit Method (same as Projected Unit Credit Method), which recognises each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation.
The obligation is measured at the present value of the estimated future cash flows. The discount rates used for determining the present value of the obligation under defined benefit plan, are based on the market yields on Government securities as at the balance sheet date.
Actuarial gains and losses are recognised immediately in the Profit and Loss Account.
iii) Leave encashment
Leave encashment which is a defined benefit, is accrued for based on an actuarial valuation at the balance sheet date carried out by an independent actuary.
K. Foreign Currency Transactions
(a) Transactions denominated in foreign currencies are normally recorded at the exchange rate prevailing at the time of the transaction. Exchange differences, if any arising out of transactions settled during the year are recognised in the Profit and Loss Account.
(b) Monetary items (Assets & Liabilities) denominated in foreign currencies at the year end are restated at year end rates. In case of monetary items which are covered by forward exchange contracts, the difference between the year end rate and rate on the date of the contract is recognised as exchange difference and the premium paid on forward contracts has been recognised over the life of the contract.
(c) Non monetary foreign currency items are carried at cost.
(d) Any income or expense on account of exchange difference either on settlement or on translation is recognised in the Profit and Loss Account except in cases where they relate to acquisition of fixed assets in which case they are adjusted to the carrying cost of such assets.
L. Financial Derivatives and Commodity Hedging Transactions
Financial derivatives and commodity hedging transactions are accounted for on a mark to market basis. Payments of margin requirements on these contracts are recognised on the Balance Sheet.
M. Earning per share
The basic earnings per share is computed by dividing the net profit / loss attributable to the equity shareholders for the period by the weighted average number of equity shares outstanding during the reporting period. The number of shares used in computing diluted earnings per share comprises the weighted average number of shares considered for deriving earnings per share, and also the weighted average number of equity shares, which could have been issued on the conversion of all dilutive potential shares. In computing dilutive earnings per share, only potential equity shares that are dilutive and that reduce profit / loss per share are included.
N. Provisions for non performing assets
Non performing assets ("NPAs") provisions are made based on management's assessment of the degree of impairment, subject to the minimum provisioning level in accordance with Non Banking Financial Companies (NBFC) prudential norms of RBI.
O. Provision for Current Tax, Deferred Ta x and Fringe Benefit Tax
In case of non performing assets ("NPAs") the recognition of income and provision of non performing assets is done in accordance with the Non Banking Financial Companies (NBFC) prudential norms of RBI.
Income tax expense comprises current tax (i.e. amount of tax for the period determined in accordance with the income tax law) and deferred tax charge or credit (reflecting the tax effects of timing differences between accounting income and taxable income for the period).
The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognised using the tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax assets are recognised only to the extent there is reasonable certainty that the assets can be realised in future; however, where there is unabsorbed depreciation or carried forward loss under taxation laws, deferred tax assets are recognised only if there is virtual certainty of realisation of such assets. Deferred tax assets are reviewed as at each balance sheet date and written down or written up to reflect the amount that is reasonably / virtually certain (as the case may be) to be realised.
Provision for Fringe Benefit Tax has been recognised on the basis of applicable Fringe Benefit Tax on the taxable value of chargeable expenses of the Company as prescribed under the Income Tax Act, 1961.
P. Provisions, Contingent Liabilities and Contingent Assets
Provisions involving substantial degree of estimation in measurement are recognised when there is a present obligation as a result of past events and it is probable that there will be outflow of resources. Contingent liabilities are not recognised but are disclosed in the notes. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources. When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made. Contingent assets are neither recognised nor disclosed in the financial statements.
Q. Security of Loans Given
Housing loans / loans against property granted are secured by equitable registered mortgage of property and/or undertaking to create a security. Secured loans in the nature of commercial vehicle and auto finance are secured against hypothecation of respective vehicle.
Mar 31, 2007
A. Basis of Preparation of Financial Statements
The financial statements have been prepared under the historical cost convention method, in accordance with the generally accepted accounting principles and the provisions of the Companies Act, 1956, as adopted consistently by the Company.
B. Use of Estimates
The preparation of financial statement is in conformity with Generally Accepted Accounting Principles (GAAP) and requires management to make estimates and assumptions that effect the reported amounts of assets and liabilities, and the disclosure of contingent liabilities on the date of the financial statements. Actual result could differ from those estimates. Any revision to accounting estimates is recognised prospectively in current and future periods.
C. Revenue Recognition
i) Interest Income:
Interest Income is recognised in the profit and loss account as it accrues except in the case of non performing assets ("NPAs") where it is recognised, upon realization, as per the prudential norms of RBI.
ii) Dividend Income:
Dividend income is recognised when the right to receive payment is established.
iii) Lease Finance:
Income from leased assets is accounted for in the year in which lease rentals fall due, by .applying the interest rate implicit in the lease to the net investment in the lease during the period.
iv) Discount on Investments:
The difference between the acquisition cost and face value of debt instruments is recognized as interest income over the tenor of the instrument.
v) Redemption premium on Investments in Preference Shares:
Redemption premium on investments in Preference shares is recognised as income over the tenor of the investment.
D. Own Fixed Assets
All fixed assets are stated at cost less accumulated depreciation after considering Lease Adjustment account. All costs including financing cost attributable to fixed assets till assets are ready for intended use are capitalised.
E. Assets given on Finance Lease
i) All assets given on finance lease on or before March 31, 2001 are capitalised as Fixed Assets.
All assets given on finance lease on or after April 1, 2001 are shown as receivables at an amount equal to net investment in the lease.
ii) Initial direct costs in respect of leases are expensed in the year in which such costs are incurred.
F. Lease hold Improvements
Lease hold improvements are written off over the lease period of the asset (Lease hold Premises).
G. Intangible Assets
Intangible assets are stated at cost of acquisition less accumulated amortization. Intangible assets are amortised over their estimated useful lives on a straight line basis, commencing from the date the asset is available to the Company for its use.
H. Depreciation
Depreciation is provided as under:
i) Assets for own use:
On Written Down Value method at the rates and in the manner prescribed in Schedule XIV to the Companies Act, 1956.
ii) Leased Assets:
On Straight Line Method at the rates and in the manner prescribed in Schedule XIV to the Companies Act, 1956,
I. Impairment of Assets
An asset is treated as impaired, when carrying cost of assets exceeds its recoverable amount. An impairment loss is charged to the Profit and Loss Account in the year in which an asset is identified as impaired. The impairment loss recognised in prior accounting periods is reversed if there has been a change in the estimate of the recoverable amount.
J. Investments
Investments are classified into current investments and long-term investments, Current investments are valued, scrip wise, at cost or fair value, whichever is lower.
Long-term investments are valued at cost. Provision for diminution is made scrip wise to recognise a decline, other than temporary.
K. Stock in trade/Assets held for sale
Securities held as stock-in-trade are valued scrip wise at book value or fair value whichever is lower. Assets held for sale are valued at cost or market value whichever is lower.
L. Share Issue Expenses
Issue expenses are adjusted against the securities premium account.
M. Employee Retirement Benefits
Company's contribution to Provident Fund and Superannuation Fund are charged to Profit and Loss Account. Gratuity and Leave Encashment benefits are charged to Profit and Loss Account on the basis of actuarial valuation.
N. Foreign Currency Transactions
(a) Transactions denominated in foreign currencies are normally recorded at the exchange rate prevailing at the time of the transaction.
(b) Monetary items denominated in foreign currencies at the year end are restated at year end rates. In case of monetary items which are covered by forward exchange contracts, the difference between the year end rate and rate on the date of the contract is recognised as exchange difference and the premium paid on forward contracts has been recognised over the life of the contract.
(c) Non monetary foreign currency items are carried at cost.
(d) Any income or expense on account of exchange difference either on settlement or on translation is recognised in the profit and loss account except in cases where they relate to acquisition of fixed assets in which case they are adjusted to the carrying cost of such assets.
O. Borrowing Costs
Borrowing costs, which are directly attributable to the acquisition/construction of fixed assets, till the time such assets are ready for intended use, are capitalised as part of the cost of the assets. Other borrowing costs are recognised as an expense in the year in which they are incurred.
P. Financial Derivatives and Commodity Hedging Transactions
Financial derivatives and commodity hedging transaction are accounted for on a mark to market basis. Payments of margin requirements on these contracts are recognised on the balance sheet.
Q. Provision for Current Tax, Deferred Tax and Fringe Benefit Tax
Income tax expense comprises current tax (i.e. amount of tax for the period determined in accordance with the income tax law) and deferred tax charge or credit (reflecting the tax effects of timing differences between accounting income and taxable income for the period). The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognised using the tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax assets are recognised only to the extent there is reasonable certainty that the assets can be realised in future; however, where there is unabsorbed depreciation or carried forward loss under taxation laws, deferred tax assets are recognised only if there is virtual certainty of realisation of such assets, Deferred tax assets are reviewed as at each balance sheet date and written down or written up to reflect the amount that is reasonably/virtually certain (as the case may be) to be realised.
Provision for Fringe Benefit Tax has been recognized on the basis of a harmonious, contractual interpretation of the Income Tax Act, 1961.
R. Earning per share
The basic earnings per share is computed by dividing the net profit/loss attributable to the equity shareholders for the period by the weighted average number of equity shares outstanding during the reporting period, The number of shares used in computing diluted earning per share comprises the weighted average number of shares considered for deriving earnings per share, and also the weighted average number of equity shares, which could have been issued on the conversion of all dilutive potential shares. In computing dilutive earnings per share, only potential equity shares that are dilutive and that reduce profit/loss per share are included.
S. Provisions, Contingent Liabilities and Contingent Assets
Provisions involving substantial degree of estimation in measurement are recognised when there is a present obligation as a result of past events and it is probable that there will be outflow of resources. Contingent liabilities are not recognised but are disclosed in the notes. Contingent assets are neither recognised nor disclosed in the financial statements.
Mar 31, 2006
A. Basis of Preparation of Financial Statements
The financial statements have been prepared under the historical cost convention method in accordance with the generally accepted accounting principles and the provisions of the Companies Act, 1956, as adopted consistently by the Company.
B. Use of Estimates
The presentation of financial statements requires estimates and assumptions to be made that effect the reported amount of assets and liabilities on the date of financial statements and the reported amount of revenue and expenses during the reporting period. Difference between the actual results and estimates are recognised in the period in which the results are known/materialised.
C. Revenue Recognition
i) Lease Finance:
Income from leased assets is accounted for in the year in which lease rentals fall due, by applying the interest rate implicit in the lease to the net investment in the lease during the period.
Front-ended lease management/syndication fees are treated as income of the period in which they accrue.
ii) Income from Bill Discounting:
Income from bill discounting is net of rediscounting charges paid.
D. Fixed Assets
All Fixed Assets are stated at cost less accumulated depreciation after considering Lease Adjustment account. All costs including financing cost attributable to fixed assets till assets are ready for intended use are capitalised.
E. Assets given on Finance Lease
i) All assets given on finance lease on or before 31st March, 2001 are capitalised as Fixed Assets. All assets given on finance lease on or after 1st April, 2001 are shown as receivables at an amount equal to net investment in the lease.
ii) Initial direct costs in respect of leases are expensed in the year in which such costs are incurred.
F. Depreciation
Depreciation is provided as under:
i) Assets for own use :
On Written Down Value method at the rates and in the manner prescribed in Schedule XIV to the Companies Act, 1956.
ii) Leased Assets:
On Straight Line Method at the rates and in the manner prescribed in Schedule XIV to the Companies Act, 1956.
G. Impairment of Assets
An asset is treated as impaired, when carrying cost of assets exceeds its recoverable amount. An impairment loss is charged to the Profit and Loss Account in the year in which an asset is identified as impaired. The impairment loss recognised in prior accounting periods is reversed if there has been a change in the estimate of the recoverable amount.
H. Share Issue Expenses
Issue expenses are adjusted against the securities premium account.
I. Investments
Investments are classified into current investments and long-term investments.
Current investments are valued, scrip wise, at cost or fair value, whichever is lower.
Long-term investments are valued at cost. Provision for diminution is made scrip wise to recognise a decline, other than temporary.
J. Stock in trade
Stock-in-Trade is valued scrip wise at book value or fair value whichever is lower.
K. Employee Retirement Benefits
Company's contribution to Provident Fund and Superannuation Fund are charged to Profit and Loss Account. Gratuity and Leave Encashment benefits are charged to Profit and Loss Account on the basis of actuarial valuation.
L. Foreign Currency Transactions
(a) Transactions denominated in foreign currencies are normally recorded at the exchange rate prevailing at the time of the transaction.
(b) Monetary items denominated in foreign currencies at the year end are restated at year end rates. In case of monetary items which are covered by forward exchange contracts, the difference between the year end rate and rate on the date of the contract is recognised as exchange difference and the premium paid on forward contracts has been recognised over the life of the contract.
(c) Non monetary foreign currency items are carried at cost.
(d) In respect of branches, which have integral foreign operations, all transactions are translated at rates prevailing at the time of transaction or that approximates the actual rate as at the date of transaction. Branch monetary assets and liabilities are restated at the year-end rates.
(e) Any income or expense on account of exchange difference either on settlement or on translation is recognised in the profit and loss account except in cases where they relate to acquisition of fixed assets in which case they are adjusted to the carrying cost of such assets.
M. Borrowing Costs
Borrowing costs, which are directly attributable to the acquisition/construction of fixed assets, till the time such assets are ready for intended use, are capitalised as part of the cost of the assets. Other borrowing costs are recognised as an expense in the year in which they are incurred.
N. Securities Lending
Income and expenses on securities lending activities are accounted for on accrual basis and are netted off.
O. Provisions, Contingent Liabilities and Contingent Assets
Provisions involving substantial degree of estimation in measurement are recognised when there is a present obligation as a result of past events and it is probable that there will be outflow of resources. Contingent Liabilities are not recognised but are disclosed in the notes. Contingent Assets are neither recognised nor disclosed in the financial statements.
Mar 31, 2005
ACCOUNTING POLICIES
A. Basis of Preparation of Financial Statements
The financial statements have been prepared under the historical cost convention method in accordance with the generally accepted accounting principles and the provisions of the Companies Act, 1956, as adopted consistently by the Company.
B. Use of Estimates
The presentation of financial statements requires estimates and assumptions to be made that effect the reported amount of assets and liabilities on the date of financial statements and the reported amount of revenue and expenses during the reporting period. Difference between the actual results and estimates are recognised in the period in which the results are known/materialised.
C. Revenue Recognition
i) Lease Finance:
Income from leased assets is accounted for in the year in which lease rentals fall due, by applying the interest rate implicit in the lease to the net investment in the lease during the period.
Front-ended lease management/syndication fees are treated as income of the period in which they accrue,
ii) Income from Bill Discounting:
Income from bill discounting is net of rediscounting charges paid.
D. Fixed Assets
All Fixed Assets are stated at cost less accumulated depreciation after considering Lease Adjustment account. All costs including financing cost attributable to fixed assets till assets are ready for intended use are capitalised.
E. Assets given on Finance Lease
i) All assets given on finance lease on or before 31st March, 2001 are capitalised as Fixed Assets.
All assets given on finance lease on or after 1st April, 2001 are shown as receivables at an amount equal to net investment in the lease.
ii) Initial direct costs in respect of leases are expensed in the year in which such costs are incurred.
F. Depreciation
Depreciation is provided as under:
i) Assets for own use:
On Written Down Value method at the rates and in the manner prescribed in Schedule XIV to the Companies' Act, 1956.
ii) Leased Assets:
On Straight Line Method at the rates and in the manner prescribed in Schedule XIV to the Companies Act, 1956.
G. Impairment of Assets
An asset is treated as impaired, when carrying cost of assets exceeds its recoverable amount. An impairment loss is charged to the Profit and Loss Account in the year in which an asset is identified as impaired. The impairment loss recognised in prior accounting periods is reversed if there has been a change in the estimate of the recoverable amount.
H. Preliminary and Share Issue Expenses
Preliminary and issue expenses are adjusted against the securities premium account.
I. Investments
Investments are classified into current investments and long-term investments.
Current investments are valued, scrip wise, at cost or market price, whichever is lower.
Long-term investments are valued at cost. Provision for diminution is made scrip wise to recognise a decline, other than temporary.
J. Stock in trade
Stock-in-Trade is valued scrip wise at book value or market price whichever is lower.
K. Employee Retirement Benefits
Company's contribution to Provident Fund and Superannuation Fund are charged to Profit and Loss Account. Gratuity and Leave Encashment benefits are charged to Profit and Loss Account on the basis of actuarial valuation.
L. Expenditure/Discount on Bond Issue
Expenses relating to issue of bonds and discount on the issue are amortised proportionately over the tenor of the bonds based on the implicit rate of return.
M. Assigned Liabilities and Discount on Assigned Liabilities
The assigned liabilities are accounted at discounted value. The difference between the assigned liability and the discounted value is charged to the Profit & Loss account proportionately on time period basis as discount on assigned liability.
N. Foreign Currency Transactions
(i) Transactions denominated in foreign currencies are normally recorded at the exchange rate prevailing at the time of the transaction.
(ii) Monetary items denominated in foreign currencies at the year end are restated at year end rates. In case of monetary items which are covered by forward exchange contracts, the difference between the year end rate and rate on the date of the contract is recognised as exchange difference and the premium paid on forward contracts has been recognised over the life of the contract.
(iii) Non monetary foreign currency items are carried at cost.
(iv) In respect of branches, which are integral foreign operations, all transactions are translated at rates prevailing at the time of transaction or that approximates the actual rate as at the date of transaction. Branch monetary assets and liabilities are restated at the year-end rates.
(v) Any income or expense on account of exchange difference either, on settlement or on translation is recognised in the profit and loss account except in cases where they relate to acquisition of fixed assets in which case they are adjusted to the carrying cost of such assets.
O. Borrowing Costs
Borrowing costs, which are directly attributable to the acquisition/construction of fixed assets, till the time such assets are ready for intended use, are capitalised as part of the cost of the assets. Other borrowing costs are recognised as an expense in the year in which they are incurred.
P. Securities Lending
Income and expenses on securities lending activities are accounted for on accrual basis and are netted off.
Q. Provision, Contingent Liabilities and Contingent Assets
Provisions involving substantial degree of estimation in measurement are recognised when there is a present obligation as a result of past events and it is probable that there will be outflow of resources. Contingent Liabilities are not recognised but are disclosed in the notes. Contingent Assets are neither recognised nor disclosed in the financial statements.
Mar 31, 2004
A. Basis of Preparation of Financial Statements
The financial statements have been prepared under the historical cost convention method in accordance with the generally accepted accounting principles and the provisions of the Companies Act, 1956, as adopted consistently by the Company.
B. Revenue Recognition
i) Lease Finance:
Income from leased assets is accounted for in the year in which lease rentals fall due, by applying the interest rate implicit in the lease to the net investment in the lease during the period.
Front-ended lease management/syndication fees are treated as income of the period in which they accrue.
ii) Income from Bill Discounting:
Income from bill discounting is net of rediscounting charges paid.
C. Fixed Assets
All Fixed Assets are stated at cost less accumulated depreciation after considering Lease Adjustment account. All costs including financing cost attributable to fixed assets till assets are ready for intended use are capitalised.
D. Assets given on Finance Lease
i) All assets given on finance lease on or before 31st March, 2001 are capitalised as Fixed Assets.
All assets given on finance lease on or after 1st April, 2001 are shown as receivables at an amount equal to net investment in the lease.
ii) Initial direct costs in respect of leases are expensed in the year in which such costs are incurred.
E. Depreciation
Depreciation is provided as under:
i) Assets for own use:
On Written Down Value method at the rates and in the manner prescribed in Schedule XIV to the Companies Act, 1956 and Additional depreciation is provided to the extent of difference between the market value and the written down value of the asset.
ii) Leased Assets:
On Straight Line Method at the rates and in the manner prescribed in Schedule XIV to the Companies Act, 1956.
F. Preliminary and Share Issue Expenses
Preliminary and issue expenses are adjusted against the securities premium account.
G. Investments
Investments are classified into current investments and long-term investments.
Current investments are valued, scrip wise, at cost or market price, whichever is lower.
Long-term investments are valued at cost. Provision for diminution is made scrip wise to recognise a decline, other than temporary.
H. Stock-in-trade
Stock-in-Trade is valued scrip wise at book value or market price whichever is lower.
I. Employee Retirement Benefits
Company's contribution to Provident Fund and Superannuation Fund are charged to Profit and Loss Account. Gratuity and Leave Encashment benefits are charged to Profit and Loss Account on the basis of actuarial valuation.
J. Expenditure/Discount on Bond Issue
Expenses relating to issue of bonds and discount on the issue are amortised proportionately over the ten6r of the bonds based on the implicit rate of return.
K. Assigned Liabilities and Discount on Assigned Liabilities
The assigned liabilities are accounted at discounted value. The difference between the assigned liability and the discounted value is charged to the Profit & Loss account proportionately on time period basis as discount on assigned liability.
L. Foreign Currency Transactions
i) Transactions denominated in foreign currencies are normally recorded at the exchange rate prevailing at the time of the transaction.
ii) Monetary items denominated in foreign currency remaining unsettled at the end of the year are translated at year end rates.
iii) Non monetary foreign currency items are carried at cost.
iv) Any income or expense on account of exchange difference either on settlement or on translation is recognised in the Profit and Loss account except in cases where they relate to acquisition of fixed assets in which case they are adjusted to the carrying cost of such assets.
M. Borrowing Costs
Borrowing costs, which are directly attributable to the acquisition/construction of fixed assets, till the time such assets are ready for intended use, are capitalised as part of the cost of the assets. Other borrowing costs are recognised as an expense in the year in which they are incurred.
N. Securities Lending
Income and expenses on securities lending activities are accounted for on accrual basis and are netted off.
Mar 31, 2003
A. Basis of Preparation of Financial Statements
The financial statements have been prepared under the historical cost convention method in accordance with the generally accepted accounting principles and the provisions of the Companies Act, 1956. as adopted consistently by the Company.
B. Revenue Recognition :
i) Lease Finance:
Income from leased assets is accounted for in the year in which lease rentals fall due, by applying the interest rate implicit in the lease to the net investment in the lease during the period. Front-ended lease management / syndication fees are treated as income of the period in which they accrue.
ii) Income from Bill Discounting:
Income from bill discounting is net of rediscounting charges paid.
iii) Merchant Banking Division:
Management fees, credit syndication and other financial services.
a) Income is recognised on completion of assignment.
b) Underwriting Commission: Underwriting Commission is recognised as income upon closure of the issue.
C. Fixed Assets
All Fixed Assets are stated at cost less accumulated depreciation after considering Lease Adjustment account. All costs including financing cost attributable to fixed assets till assets are ready for intended use are capitalised.
D. Assets' given on Finance Lease
i) All assets given on finance lease on or before 31" March, 2001 are capitalised as Fixed Assets
All assets given on finance lease on or after 1st April, 2001 are shown as receivables at an amount equal to net investment in the lease.
ii) Initial direct costs in respect of leases are expensed in the year in which such costs are incurred.
E. Depreciation
Depreciation is provided as under:
i) Assets for own use:
On Written Down Value method at the rates and in the manner prescribed in Schedule XIV to the Companies Act, 1956 and Additional depreciation is provided to the extent of difference between the market value and the written down value of the asset. ii) Leased Assets:
On Straight Line Method at the rates and in the manner prescribed in Schedule XIV to the Companies Act, 1956, F. Preliminary and Share Issue Expenses Preliminary and issue expenses are adjusted against the securities premium account.
G. Investments , '
Investments are classified into current investments and long term investments.
Current investments are valued, scripwise, at cost or market price, whichever is lower.
Long term investments are valued at cost. Provision for diminution is made scripwise to recognise a decline, other than temporary.
H. Stock in trade Stock-in-Trade is valued scripwise at book value or market price whichever is lower.
I. Gratuity & Superannuation
Company's contribution to gratuity and superannuation scheme is expensed based on actuarial valuation. J. Expenditure / Discount on Bond Issue Expenses relating to issue of bonds and discount on the issue are amortised proportionately over the tenor of the bonds based on the implicit rate of return.
K. Assigned Liabilities and Discount on Assigned Liabilities
The assigned liabilities are accounted at discounted value. The difference between the assigned liability and the discounted value is charged to the Profit & Loss account proportionately on time period basis as discount on assigned liability.
L. Foreign Currency Transactions
i) Transactions denominated in foreign currencies are normally recorded at the exchange rate prevailing at the time of the transac- tion.
ii) Monetary items denominated in foreign currency remaining unsettled at the end of the year are translated at year end rates. iii) Non monetary foreign currency items are carried at cost.
iv) Any income or expense on account of exchange difference either on settlement or on translation is recognised in the Profit and Loss account except in cases where they relate to acquisition of fixed assets in which case they are adjusted to the carrying cost of such assets.
M. Borrowing Costs
Borrowing costs which are directly attributable to the acquisition/construction of fixed assets, till the time such assets are ready for intended use, are capitalised as part of the cost of the assets. Other borrowing costs are recognised as an expense in the year in Which they are incurred.
N. Securities Lending
Income and expenses on securities lending activities are accounted for on accrual basis and are netted off.
Mar 31, 2002
A. Basis of Preparation of Financial Statements
The financial statements have been prepared under the historical cost convention method in accordance with the generally accepted accounting principles and the provisions of the Companies Act, 1956, as adopted consistently by the Company.
B. Revenue Recognition :
i) Lease Finance:
Income from leased assets is accounted for in the year in which lease rentals fall due, by applying the interest rate implicit in the lease to the net investment in the lease during the period. Front-ended lease management / syndication fees are treated as income of the period in which they accrue.
ii) Income from Bill Discounting:
Income from bill discounting is net of rediscounting charges paid.
iii) Merchant Banking Division:
a) Management fees, credit syndication and other financial services; Income is recognised on completion of assignment.
b) Underwriting Commission:
Underwriting commission is recognised as Income upon closure of the issue.
C. Fixed Assets
All fixed assets are stated at cost less accumulated depreciation after considering Lease Adjustment account, All costs Including financing cost attributable to fixed assets till assets are ready for Intended use are capitalised,
D. Asset given on Finance Lease
i) All assets given on finance lease on or before 31st March, 2001 are capitalised as Fixed Assets
All assets given on finance lease on or after 1st April, 2001 are shown as receivables at an amount equal to net investment In the lease.
ii) Initial dimet sorts in respect of leases are expensed in the year in which such costs are incurred,
E. Depreciation
Depreciation is provided as under:
i) Aggete for own use:
On Written Dewn Value method at the rats and in the manner prescribed in Schedule XIV to the Companies Act, 1956.
ii) Legged Assets:
On Straight Line Method at the rates and in the manner prescribed in Schedule XIV to the Companies Act, 1956.
F. Preliminary and Share Issue Expenses.
Investments are classified Inter current investments and long term Investments,
Current Investments are valued, scripwise, at east or market price, whichever is lower.
Long term investments are valued at cost. Provision for diminution is made scripwise to recognise a decline, other than temporary.
H. Stock-In-Trade
Stock-In-Trade is valued scripwise at book value or market price whichever is lower.
I. Gratuity & Superannuation
Company's contribution to gratuity and superannuation scheme is expensed based on actuarial valuation,
J. Expenditure / Discount on Bond Issue
Expenses relating to issue of bonds and discount on the issue are amortised proportionately over the tenor of the bonds based on the implicit rate of return,
K. Assigned Liabilities and Discount on Assigned Liabilities
The assigned liabilities are accounted at discounted value. The difference between the assigned liability and the discounted value is charged to the Profit & Loss account proportionately on time period basis as discount on assigned liability.
L. Foreign Currency Transactions
i) Transactions denominated in foreign currencies are normally recorded at the exchange rate prevailing at the time of the transaction.
ii) Monetary items denominated in foreign currency remaining unsettled at the end of the year are translated at year end rates.
iii) Non monetary foreign currency items are carried at cost.
iv) Any income or expense on account of exchange difference either on settlement or on translation is recognised in the Profit and Loss account except in cases where they relate to acquisition of fixed assets in which case they are adjusted to the carrying cost of such assets.
M. Borrowing Costs :
Borrowing costs which are directly attributable to the acquisition/construction of fixed assets, till the time such assets are ready for intended use, are capitalised as part of the cost of the assets. Other borrowing costs are recognised as an expense in the year in which they are incurred.
N. Securities Lending :
Income and expenses on securities lending activities are accounted for on accrual basis and are netted off.
Mar 31, 2001
A. System of Accounting:
The Company follows the accrual system of accounting except in the case of interest on Allotment / Call Money in arrears on Shares which are accounted for as and when received.
B. Revenue Recognition :
i) Lease Finance :
Income from leased assets is accounted for in the year in which lease rentals fall due, by applying the interest rate implicit in the lease to the net investment in the lease during the period, as recommended by the Institute of Chartered Accountants of India in the Guidance Note on Accounting for leases.
Front-ended lease management / syndication fees are treated as income of the period in which they accrue.
ii) Income from Bill Discounting :
Income from Bill Discounting is net of rediscounting charges paid.
iii) Merchant Banking Division :
[a] Management Fees, Credit Syndication and Other Financial Services. Income is recognised on completion of assignment.
[b] Underwriting Commission :
Underwriting Commission is recognised as income upon closure of the issue.
C. Fixed Assets :
All the Fixed Assets are stated at cost less depreciation after taking into consideration the Lease Adjustment account.
D. Depreciation :
Depreciation is provided as under :
(a) Assets for own use :
On building on Straight Line Method and on other assets on Written Down Value method at the rates and in the manner prescribed in Schedule XIV to the Companies Act, 1956.
(b) Leased Assets :
On straight line method at the rates and in the manner prescribed in Schedule XIV to the Companies Act, 1956.
E. Preliminary and Share Issue Expenses :
Preliminary and issue expenses are adjusted against the share premium account.
F. investments :
Investments are classified into current investments and long term investments.
Current investments are valued, scripwise, at cost or market price, whichever is lower.
Long term investments are valued at cost. Provision for diminution is made scripwise to recognise a decline, other than temporary. G. Stock-in-trade:
Stock-in-Trade is valued scripwise at Book value or Market Price whichever is lower.
H. Gratuity & Superannuation:
Gratuity and Superannuation payments are made to the fund / trust maintained with LIC.
I. Expenditure / Discount on Bond Issue :
Expenses relating to issue of Bonds and discount on the issue are amortised proportionately over the tenor of the Bonds based on the implicit rate of return.
J. Assigned Liabilities and Discount on Assigned Liabilities :
The Assigned liabilities are accounted at discounted value. The difference between the Assigned Liability and the discounted value is charged to the Profit & Loss account proportionately on time period basis as Discount on Assigned Liability.
K. Foreign Currency Transactions :
(a) Transactions denominated in foreign currencies are recorded at the exchange rate prevailing at the time of the transaction.
(b) Monetary items denominated in foreign currency remaining unsettled at the end of the year are translated at year end rates.
(c) Non monetary foreign currency items are carried at cost.
L. Borrowing Costs :
Borrowing Costs which are directly attributable to the acquisition/construction of fixed assets, till the time such assets are ready for intended use, are capitalised as part of the cost of the assets. Other borrowing costs are recognised as an expense in the year in which they are incurred.
M. Securities Lending :
Income and Expenses on Securities Lending activities are accounted for on accrual basis and are netted off.
Mar 31, 2000
A. System of Accounting :
The Company follows the accrual system of accounting except in the case of interest on Allotment / Call Money in arrears on Shares, which are accounted for as and when received.
B. Revenue Recognition :
i) Lease Finance :
Income from leased assets is accounted for in the year in which lease rentals fall due, by applying the interest rate implicit in the lease to the net investment in the lease during the period, as recommended by the Institute of Chartered Accountants of India in the Guidance Note on Accounting for leases.
Front-ended lease management / syndication fees are treated as income of the period in which they accrue.
ii) Income from Bill Discounting :
Income from Bill Discounting is net of rediscounting charges paid.
iii) Merchant Banking Division :
[a] Management Fees, Credit Syndication and Other Financial Services :
Income is recognised on completion of assignment.
[b] Underwriting Commission :
Underwriting Commission is recognised as income upon closure of the issue.
C. Fixed Assets :
All the Fixed Assets are stated at cost less depreciation after taking into consideration the Lease Adjustment account.
D. Depreciation :
Depreciation is provided as under :
(a) Assets for own use :
On building on Straight Line Method and on other assets on Written Down Value method at the rates and in the manner prescribed in Schedule XIV to the Companies Act, 1956.
(b) Leased Assets :
On straight line method at the rates and in the manner prescribed in Schedule XIV to the Companies Act, 1956.
E. Preliminary and Share Issue Expenses :
Preliminary and issue expenses are adjusted against the share premium account.
F. Investments :
Investments are classified into current investments and long term investments. Current investments are valued, acripwise, at cost or market price, whichever is lower. Long term investments are valued at cost. Provision for diminution is made scripwise to recognise a decline, other than temporary.
G. Stock-in-trade :
Stock-in-trade is valued scripwise at Book value or Market Price whichever is lower.
H. Gratuity & Superannuation :
Gratuity and Superannuation payments are made to the fund / trust maintained with LIC.
I. Expenditure / Discount on Bond Issue :
Expenses relating to issue of Bonds and discount on the issue are amortised proportionately over the tenor of the Bonds based on the implicit rate of return.
J. Assigned Liabilities and Discount on Assigned Liabilities :
The assigned liabilities are accounted at discounted value. The difference between the assigned liability and the discounted value is charged to the Profit & Loss account proportionately on time period basis as Discount on Assigned Liability.
K. Foreign Currency Transactions :
(a) Transactions denominated in foreign currencies are recorded at the exchange rate prevailing at the time of the transaction.
(b) Monetary items denominated in foreign currency remaining unsettled at the end of the year are translated at year end rates.
(c) Non monetary foreign currency items are carried at cost.
L. Securities Lending :
Income and Expenses on Securities Lending activities are accounted for on accrual basis and are netted off.
Mar 31, 1999
A. System of Accounting :
The Company follows the accrual system of accounting except in the case of interest on Allotment / Call Money in arrears on Shares which are accounted for as and when received.
B. Revenue Recognition :
i) Lease Finance :
Income from leased assets is accounted for in the year in which lease rentals fall due, by applying the interest rate implicit in the lease to the net investment in the lease during the period, as recommended by the Institute of Chartered Accountants of India in the Guidance Note on Accounting for leases.
Front-ended lease management / syndication fees are treated as income of the period in which they accrue.
ii) Income from Bill Discounting :
Income from Bill Discounting is net of rediscounting charges paid.
iii) Merchant Banking Division :
[a] Management Fees, Credit Syndication and Other Financial Services. Income is recognised on completion of assignment.
[b] Underwriting Commission : Underwriting Commission is recognised as income upon closure of the issue.
C. Fixed Assets :
All the Fixed Assets are stated at cost less depreciation after taking into consideration the Lease Adjustment account.
D. Depreciation :
Depreciation is provided as under :
[a] Assets for own use :
On building on straight line method and on other assets on written down value method at the rates and in the manner prescribed in Schedule XIV to the Companies Act, 1956.
[b] Leased Assets :
On straight line method at the rates and in the manner prescribed in Schedule XIV to the Companies Act, 1956.
E. Preliminary and Share Issue Expenses :
Preliminary and issue expenses are adjusted against the share premium account.
F. Investments :
Investments are classified into current investments and long term investments. Current investments are valued, scripwise, at cost or market price, whichever is lower. Long term investments are valued at cost. Provision for diminution is made scripwise to recognise a decline, other than temporary.
G. Stock-in-trade :
Stock-in-trade is valued scripwise at coat or market price whichever is lower.
H. Gratuity & Superannuation :
Gratuity and Superannuation payments are made to the fund / trust maintained with LIC.
I. Expenditure / Discount on Bond Issue :
Expenses relating to issue of Bonds and discount on the issue are amortised proportionately over the tenor of the Bonds based on the implicit rate of return.
J. Assigned Liabilities and discount on assigned liabilities :
The assigned liabilities are accounted at discounted value. The difference between the assigned liability and the discounted value is charged to the Profit & Loss account proportionately on time period basis as discount on assigned liability.
K. Foreign Currency Transactions :
[a] Transactions denominated in foreign currencies are recorded at the exchange rate prevailing at the time of the transaction.
[b] Monetary items denominated in foreign currency remaining unsettled at the end of the year are translated at year end rates.
[c] Non monetary foreign currency items are carried at cost.
L. Securities Lending :
Income and expenses on Securities Lending activities are accounted for on accrual basis and are netted off.
Mar 31, 1998
1. System of Accounting :
The Company follows the accrual system of accounting except in the case of interest on Allotment/Call Money in arrears On Shares which are accounted for as and when received.
2. Revenue Recognition :
i. Lease Finance :
Income from leased assets is accounted for in the year in which lease rentals fall due, by applying the interest rate implicit in the lease to the net investment in the lease during the period, as recommended by the Institute of Chartered Accountants of India in the Guidance Note on Accounting for leases.
Front-ended lease management/syndication fees are treated as income of the period in which they accrue.
ii. Income from Bill Discounting :
Income from Bill Discounting is net of rediscounting charges paid.
iii. Merchant Banking Division :
a. Management Fees, Credit Syndication and Other Financial Services.
Income is recognised on completion of assignment.
b. Underwriting Commission :
Underwriting Commission is recognised as income upon closure of the issue.
3. Fixed Assets :
All the Fixed Assets are stated at cost less depreciation after taking into consideration the Lease Adjustment account.
4. Depreciation :
Depreciation is provided as under :
i. Assets for own use :
On building on straight line method and on other assets on written down value method at the rates and in the manner prescribed in Schedule XIV to the Companies Act, 1956.
ii. Leased Assets :
On straight line method at the rates and in the manner prescribed in Schedule XIV to the Companies Act, 1956.
5. Preliminary and Share Issue Expenses :
Preliminary and issue expenses are adjusted against the share premium account.
6. Investments :
Investments are classified into current investments and long term investments.
Current investments are valued, scripwise, at cost or market price, whichever is lower.
Long term investments are valued at cost. Provision for diminution is made scripwise to recognise a decline, other than temporary.
7. Stock-in-Trade :
Stock-in-Trade is valued scripwise at cost or market price whichever is lower.
8. Gratuity & Superannuation :
Gratuity and Superannuation payments are made to the fund/trust maintained with LIC.
9. Expenditure/Discount on Bond Issue :
Expenses relating to issue of Bonds and discount on the Issue are amortised proportionately over the tenor of the Bonds based on the implicit rate of return.
10. Assigned Liabilities and Discount On Assigned Liabilities :
The assigned liabilities are accounted at discounted value. The difference between the assigned liability and the discounted value is charged to the Profit & Loss account proportionately on time period basis as discount on assigned liability.
11. Foreign Currency Transactions :
i. Transactions denominated in foreign currencies are recorded at the exchange rate prevailing at the time of the transaction.
ii. Monetary items denominated in foreign currency remaining unsettled at the end of the year are translated at year end rates.
iii. Non monetary foreign currency items are carried at cost.
12. Securities Lending :
Income and Expense on Securities Lending activities are accounted for on accrual basis and are netted off.
Mar 31, 1997
A. System of Accounting
The company follows the accrual system of accounting except in the case of interest on Allotment/Call Money in arrears on Shares which are accounted for as and when received.
B Revenue Recognition:
i) Lease Finance:
Income from leased assets is accounted for in the year in which lease rentals fall due, by applying the interest rate implicit in the lease to the net investment in the lease during the period, as recommended by the Institute of Chartered Accountants of India in the Guidance Note on Accounting for leases.
Front-ended lease management/syndication fees are treated as income of the period in which they accrue.
ii) Income from Bill Discounting:
Income from Bill Discounting is net of rediscounting charges paid.
iii) Merchant Banking Division
a. Management Fees, Credit Syndication and Other Financial Services.
b. Under Commission:
Under Commission is recognised as income upon closure of the issue.
C Fixed Assets
All the Fixed Assets are stated at cost less depreciation after taking into consideration the Lease Adjustment account.
D. Depreciation
Depreciation is provided as under:
(a) Assets for own use:
On building on straight line method and on other assets on written down value method at the rates and in the manner prescribed in Schedule XIV to the Companies Act, 1956.
(b) Leased Assets:
On straight line method at the rates and in the manner prescribed in Schedule XIV to the Companies Act, 1956.
E. Preliminary and share issue expenses:
F. Investments:
Investments are classified into current investments and long term investments.
Current investments are valued scripwise, at cost or market price, whichever is lower.
Long-term investments are valued at cost. Provision for diminution is made scripwise to recognise a decline, other than temporary.
G. Stock-in-Trade
Stock-in-Trade is valued scripwise at cost or market price whichever is lower.
H. Gratuity & Superannuation:
Gratuity & Superannuation payments are made to the fund/trust maintained with LIC
I. Expenditure/Discount on Bond Issue:
Expenses relating to issue of Bonds and discount on the issue are amortised proportionately over the tenor of the Bonds.
J. Assigned Liabilities and Discounted on Assigned Liabilities:
The Assigned Liabilities are accounted at discounted value. The difference between the Assigned Liability and the discounted value is charged to the Profit & Loss account proportionately on time period basis as discount on Assigned Liability.
K. Foreign Currency Transactions:
(a) Transactions denominated in foreign currencies are recorded at the exchange rate prevailing at the time of the transaction.
(b) Monetary items denominated in foreign currency remaining unsettled at the end of the year are translated at year end rates.
(c) Non monetary foreign currency items are carried at cost.
Mar 31, 1996
A. System of Accounting :
The Company follows the accrual system of accounting except in case of interest on Allotment/Call Money in arrears on Shares which are accounting as and when received.
B. Revenue Recognition :
i) Lease Finance :
Income from leased assets is accounted for in the year in which lease rentals fall due, by applying the interest rate implicit in the lease to the net investment in the lease during the period, as recommended by the Institute of Chartered Accountants of India in the Guidance Note on Accounting for leases.
Front-ended lease management/syndication fees are treated as income of the period in which they accrue.
ii) Income from Bill Discounting :
Income from Bill Discounting is net of rediscounting charges paid.
iii) Merchant Banking Division :
(a) Management Fees, Credit Syndication and Other Financial Services.
Income is recognised on completion of assignment.
(b) Underwriting Commission :
Underwriting Commission is recognised as income upon closure of the issue.
C. Fixed Assets :
All the Fixed Assets are stated at cost less depreciation after taking into consideration the Lease Adjustment account.
D. Depreciation :
Depreciation is provided as under :
(a) Assets for own use :
On building on Straight Line Method and on other assets on Written Down Value method at the rates and in the manner prescribed in Schedule XIV to the Companies Act, 1956.
(b) Leased Assets :
On straight line method at the rates and in the manner prescribed in Schedule XIV to the Companies Act, 1956.
E. Preliminary and Share Issue Expenses :
Preliminary and issue expenses are adjusted against the share premium account.
F. Investments :
Investments are classified into current investments and long term investments.
Current investments are valued, scripwise, at cost or market price whichever is lower.
Long term investments are valued at cost. Provision for diminution is made scripwise to recognise a decline, other than temporary.
G. Stock-in-Trade :
Stock-in-Trade is valued scripwise at Cost or Market Price whichever is lower.
H. Gratuity & Superannuation:
Gratuity and Superannuation payments are made to the fund/trust maintained with LIC.
I. Expenditure/Discount on Bonus Issue :
The expenses relating to issue of Bonds and discount on the issue are recognised as expenses in the year of issue of the Bonds.
J. Foreign Currency Transactions :
(a) Transactions denominated in foreign currencies are recorded at the exchange rate prevailing at the time of the transaction.
(b) Foreign currency transactions remaining unsettled at the end of the year are translated at year end rates.
Mar 31, 1995
A. System of Accounting:
The Company follows the accrual System of accounting except in case of interest on Allotment / Call Money in arrears on Shares which are accounted as and when received.
B. Revenue Recognition:
i) Lease Finance:
Lease rentals are accounted in the year in which they fall due. Front-ended lease management / syndication fees are treated as income of the period in which lease is sanctioned.
ii) Income from Bill Discounting:
Income from Bill Discounting is net of rediscounting charges paid.
iii) Merchant Banking Division:
(a) Management Fees, Credit Syndication and Other Financial Services income is recognised on completion of assignment.
(b) Underwriting Commission:
Underwriting Commission is recognised as income upon closure of the issue.
C. Fixed Assets:
All the Fixed Assets are stated at cost less depreciation.
D. Depreciation
Depreciation is provided as under:
a. Assets for own use:
On building on Straight Line Method and on other assets on Written Down Value method at the rates and in the manner prescribed in Schedule XIV to the Companies Act, 1956.
b. Leased Assets:
Over primary lease period in proportion of lease rentals earned during the year to total rentals for the entire primary lease period.
E. Preliminary and Share Issue Expenses:
Preliminary and issue expenses are adjusted against the share premium account.
F. Investments:
Investments are bifurcated as current investments and long term investments.
Current investments are valued, scripwise, at cost or market price whichever is lower.
Long term investments are valued at cost. Provision for diminution is made scripwise to recognise a decline, other than temporary decline.
G. Stock-in-Trade:
Stock-in-trade is valued script wise at cost or market price whichever is lower.
H. Gratuity & Superannuation
Gratuity and Superannuation payments are made to the fund/trust maintained with LIC.
Mar 31, 1994
A. SYSTEM OF ACCOUNTING:
The Company follows the accrual system of accounting except in case of interest on Allotment/Call Money in arrears on Shares which are accounted as and when received.
B. REVENUE RECOGNITION:
a) Lease Finance:
The Company accounts for lease rentals in the year in which it falls due. Front-ended lease management/syndication fees are treated as income of the period in which lease is sanctioned.
b) Income from Bill Discounting:
Income from Bill Discounting is net of rediscounting charges paid.
c) Fund Management:
Income on the Fund Management has been recognised as income upon closure/termination of contract.
d) Merchant Banking Division:
I. MANAGEMENT FEES:
Income from the issues managed by the Company is considered after close of subscription list.
II. UNDERWRITING COMMISSION:
Underwriting Commission is considered as income upon receipt of subscription particulars.
III. CREDIT SYNDICATION AND OTHER FINANCIAL SERVICES: Income is considered upon completion of assignment.
C. FIXED ASSETS:
All the Fixed Assets including assets given on lease have been valued at cost less depreciation.
D. DEPRECIATION:
The Company has provided depreciation as under:
a) Assets for own use:
On building on Straight Line Method and on other assets on Written Down Value Method at the rates prescribed in Schedule XIV of the Companies Act, 1956, on pro rata basis.
b) Leased Assets:
Over primary lease period in proportion of lease rentals earned during the year to total rentals for the entire primary lease period.
E. PRELIMINARY AND SHARE ISSUE EXPENSES:
The Company amortises miscellaneous expenditure representing Preliminary and Share Issue Expenses over a period of 10 years.
F. INVESTMENTS:
Investments are shown at cost which includes brokerage and stamp charges.
G. STOCK-IN-TRADE:
Stock-in-Trade is valued at Cost or Market Price whichever is lower.
H. GRATUITY & SUPERANNUATION:
The Company has opted for the schemes managed by Life Insurance Corporation of India (LIC). The payment for Gratuity and Superannuation is made by the Company to the fund/trust maintained with LIC.
Mar 31, 1993
System of accounting:
The company follows the accrual system of accounting except in case of interest on allotment/call money in arrears on shares which are accounted as and when received.
REVENUE RECOGNITION: a) Lease Finance: The Company accounts for lease rentals in the year in which it falls due. Front-ended lease management/syndication fees are treated as income of the period in which lease is sanctioned.
b) Income from Bill Discounting: Income from Bill Discounting is net of rediscounting charges paid.
c) Fund Management: Income on the Fund Management has been recognised as income upon closure/termination of contract.
d) Merchant Banking Division: I. MANAGEMENT FEES: Income from the issues managed by the Company is considered after close of subscription list.
II. UNDERWRITING COMMISSION: Underwriting Commission is considered as income upon receipt of subscription particulars.
III. CREDIT SYNDICATION AND OTHER FINANCIAL SERVICES: Income is considered upon completion of assignment.
Fixed assets: All fixed assets including assets given on lease have been valued at cost less depreciation.
DEPRECIATION: The Company has provided depreciation as under :
a) Assets for own use: On building on Straight Line Method and on other assets on written down value method at the rates prescribed in Schedule XIV of the Companies Act, 1956, on pro-rata basis.
b) Leased Assets: Over primary lease period in proportion of lease rentals earned during the year to total rentals for the entire primary lease period.
Investments: Investments are shown at cost which includes brokerage and stamp charges.
Gratuity and superannuation: The company has opted for the schemes managed by the LIC. The payment for gratuity and superannuation is made by the company to the fund/trust maintained with LIC.
Mar 31, 1992
System of accounting:
The company follows the accrual system of accounting except for iterest on allotment/call money in arrears on shares accounted for as and when received.
Revenue recognition: Lease finance: The company accounts for lease renatals in a year in which it falls due. Front end management fees are treated as income of the period in which lease are sanctioned.
Income from bill discounting: Income from bill discounting is net of rediscounting charges paid.
Fund management: Income from fund management has been recognised as income upon closure /termination of contract.
Merchant banking division: Management fees: Income from public issue/rights issue considered on close of subsription list.
Underwriting commission: The underwriting commission s considered as income on receipt of subscribtion particulars.
Credit syndication and other financial services: Income is considered on completion of assignment.
Fixed assets: All fixed assets including those given on lease have been valued at cost less depreciation.
Depreciation: The Company has provided depreciation as under:- a) Assets for own use:- On premises on Straight Line Method and on other assets on written down value method at rates prescribed in schedule XIV of the Companies Act, 1956, on prorata basis.
b) Leased Assets:- Over primary lease period in proportion of lease rentals earned during the year to total rentals for the entire primary lease period.
Investments: Investments are shown at cost which includes brokerage and stamp charges.
Stock of shares and securities: Valued at cost.
Gratuity and superannuation: The company has opted for the schemes of LIC and according to their working the payment is made by the company.
Mar 31, 1991
Information not available.
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