Notes to Accounts of Shriram Finance Ltd.
Mar 31, 2023
Hedging activities and derivatives
The Company is exposed to certain risks relating to its ongoing business operations. The primary risks managed using derivative instruments are foreign currency risk and interest rate risk. The Companyâs risk management strategy and how it is applied to manage risk are explained in note 55.
Derivatives designated as hedging instruments
The Company designates its derivatives as hedging instruments to hedge the variability in cash flows associated with highly probable forecast transactions arising from changes in foreign exchange rates and interest rates. At inception of designated hedging relationships, the Company documents the risk management objective and strategy for undertaking the hedge. The Company also documents the economic relationship between the hedged item and the hedging instrument, including whether the changes in cash flows of the hedged item and hedging instrument are expected to offset each other. There is an economic relationship between the hedged item and the hedging instrument as the terms of the cross currency swap contract match that of the foreign currency borrowing (notional amount, interest payment dates, principal repayment date etc.). The Company has established a hedge ratio of 1:1 for the hedging relationships as the underlying risk of the hedging instruments is identical to the hedged risk components. To test the hedge effectiveness, the Company uses the hypothetical derivative method and compares the changes in the fair value of the hedging instruments against the changes in fair value of the hedged items attributable to the hedged risks.
Km DERIVATIVE FINANCIAL INSTRUMENTS (Contd.)Cash flow hedges
When a derivative is designated as a cash flow hedging instrument, the effective portion of changes in the fair value of the derivative is recognised in OCI and accumulated in other equity under âeffective portion of cash flow hedgesâ. The effective portion of changes in the fair value of the derivative that is recognised in OCI is limited to the cumulative change in fair value of the hedged item, determined on a present value basis, from inception of the hedge. Any ineffective portion of changes in the fair value of the derivative is recognised in the statement of profit and loss.
derivatives not designated as hedging instruments
There are no undesignated derivatives.
Notes:
1) The interest rate risk and exchange rate risk on the borrowings of the Company are managed using various derivative instruments which are entered into from time to time. The risk management strategy and the use of derivatives are explained in note 55 and note 97.
2) The Company has designated the interest rate derivatives which were entered to mitigate interest rate risks on its external commercial bond and external commercial borrowings, as hedging instruments.
The Company has no contractual obligations to purchase, construct or develop investment property. However, the responsibility for its repairs, maintenance or enhancements is with the Company.
(iii) Fair value
The fair value of the investment property as at March 31, 2023 is Rs. 6.47 crores (March 31, 2022 is Rs. 6.12 crores).
(iv) Pledged details
Carrying value of investment property pledged as collateral for liabilities as at March 31, 2023 is Rs. 0.91 crores (March 31, 2022 is Rs. 0.92 crores).
(v) Estimation of fair value
The fair values of investment property is determined by guidance value given by the local government of the area where the investment properties are located.
(vi) Leasing arrangements
Investment properties are leased out to tenants. Agreements provide for cancellation by either party or contain clause for escalation and renewal of agreements.
Secured by specific assets covered under hypothecation loan agreements and by way of exclusive charge and equitable mortgage of immovable property.
The Company had utilised the entire sum of Rs. 606.79 crores raised from public issue (net off expenses) for the purpose of onward disbursements as per the objects stated in the prospectus for the issue.
As per the terms of the issue Rs. 107.40 crores were redeemed on November 02, 2021.
Secured by specific assets covered under hypothecation loan agreements and by way of exclusive charge and equitable mortgage of immovable property.
The Company had utilised the entire sum of Rs. 537.32 crores raised from public issue (net off expenses) for the purpose of onward disbursements as per the objects stated in the prospectus for the issue.
As per the terms of the issue Rs. 247.04 crores were redeemed on February 06, 2022.
iv) Public issue of Non-Convertible Debentures (NCD) of Rs. 1,000/- each (IPO 2019 - 1)
Secured by specific assets covered under hypothecation loan agreements and by way of exclusive charge and equitable mortgage of immovable property.
The Company has utilised the entire sum of Rs. 339.94 crores raised from public issue (net off expenses) for the purpose of onward disbursements as per the objects stated in the prospectus for the issue.
As per the terms of the issue Rs. 126.25 crores were redeemed on February 22, 2023.
As per the terms of the issue Rs. 53.11 crores were redeemed on February 22, 2022.
v) Public issue of Non-Convertible Debentures (NCD) of Rs. 1,000/- each (IPO 2019 - 2)
I C'' AT A»T t
Secured by specific assets covered under hypothecation loan agreements and by way of exclusive charge and equitable mortgage of immovable property.
The Company has utilised the entire sum of Rs. 193.67 crores raised from public issue (net off expenses) for the purpose of onward disbursements as per the objects stated in the prospectus for the issue.
As per the terms of the issue Rs. 100.65 crores were redeemed on January 28, 2023.
vi) public issue of non-Convertible debentures (NCD) of Rs. 1,000/- each (ipo 2019 - April) (Effects of business combination - refer note 52)
On March 29, 2023, the Company issued and allotted USD 150,000,000 6.37% senior secured floating rate notes due 2026 (ânotesâ) for a sum of Rs. 1,232.60 crores under the Usd 3,500,000,000 Global Medium Term Note (GMTN) programme. The said notes are listed on Indian International Exchange (âINXâ). The proceeds of the issue of the notes have been utilised in accordance with the Companyâs Social Finance Framework and as may be permitted by the RBI ECB guidelines for onward lending and other activities.
On January 18, 2022, the Company issued and allotted USD 475,000,000 4.15% senior secured notes due 2025 in offshore market (Social Bonds) for sum of Rs. 3,512.86 crores under USD 3.5 billion GMTN Programme. The said Social Bonds were listed on Singapore Stock Exchange (SGX-ST) on January 19, 2022. The proceeds of the issue of the Social Bonds have been utilised as per the Companyâs Social Finance Framework, for onward lending and other activities as permitted by the RBI Master Direction â External Commercial Borrowings, Trade Credits and Structured Obligations.
On March 31, 2021, the Company issued and allotted USD 225,000,000 4.40% senior secured notes due 2024 in offshore market (Social Bonds) for sum of Rs.1,630.35 crores to be consolidated and form a single series with the U.S.$500,000,000 4.40% senior secured notes due 2024 issued on January 13, 2021 under USD 3 billion GMTN programme. The said Social Bonds were listed on Singapore Stock Exchange (SGX-ST) on April 01, 2021. The proceeds of the issue of the Social Bonds have been utilised as per the Companyâs Social Finance Framework, for onward lending and other activities as permitted by the RBI Master Direction â External Commercial Borrowings, Trade Credits and Structured Obligations.
On January 13, 2021, the Company issued and allotted USD 500,000,000 4.40% senior secured notes due 2024 in offshore market (Social Bonds) for sum of USD 499,950,000 equivalent to Rs. 3,672.50 crores under USD 3 Billion GMTN Programme. The said Social Bonds were listed on Singapore Stock Exchange (SGX-ST) on January 14, 2021. The proceeds of the issue of the Social Bonds have been utilised as per the Companyâs Social Finance Framework, for onward lending and other activities as permitted by the RBI Master Direction - External Commercial Borrowings, Trade Credits and Structured Obligations.
During the year ended March 31, 2020, the Company issued and allotted USD 250,000,000 5.3750% senior secured notes due
2022 in offshore market (notes) equivalent to Rs. 1,714.38 crores under USD 2,000,000,000 GMTN Programme. The said notes are listed on Singapore Stock Exchange (SGX-ST). The proceeds of the issue of the notes have been utilised for the purpose of onward lending and other activities as may be permitted by the ECB Directions.
During the year ended March 31, 2020, the Company issued and allotted USD 500,000,000 5.100% senior secured notes due
2023 in offshore market (Social Bonds) equivalent to Rs. 3,541.75 crores under USD 3,000,000,000 GMTN Programme. The said Social Bonds are listed on Singapore Stock Exchange (SGX-ST). The proceeds of the issue of the Social Bonds have been utilised for the purpose of onward lending and other activities as per the Companyâs Social Finance Framework and as may be permitted by the ECB Directions.
During the year ended March 31, 2019, the Company issued and allotted senior secured notes in offshore market (notes) aggregating to Rs. 2,849.90 crores consisting of 5.70% notes due 2022 under Rs. 5,000 crores Medium Term Note Programme.
The notes issued by the Company are listed on Singapore Stock Exchange (SGX-ST). The proceeds of the issue have been utilised for the purpose of onward disbursements.
As per the terms of the issue, Rs. 1,753.76 crores were bought back on November 03, 2022 and Rs. 30.47 crores were bought back on november 17, 2022 ( Dollar Bond - 3).
As per the terms of the issue, Rs. 3,991.97 crores were redeemed on October 24, 2022.
As per the terms of the issue, Rs. 1,210.16 crores were bought back on August 17, 2022.
As per the terms of the issue, Rs. 591.64 crores were bought back on August 17, 2022 (dollar Bond 7).
As per the terms of the issue, Rs. 2,849.90 crores were redeemed on February 28, 2022.
during the year ended March 31, 2018, the Company had issued senior secured notes in offshore market (notes) aggregating to Rs. 1,160.00 crores consisting of Rs. 840.00 crores 8.10% notes due 2023 and Rs. 320.00 crores 7.90% notes due 2021 payable in Usd under Rs. 5,000.00 crores Medium term note programme. The notes issued by the Company are listed on Singapore Stock exchange (SGX- St).
The Company had utilised the entire sum of Rs. 1,160.00 crores raised from senior secured notes towards asset financing activities as per the objects stated in the prospectus for the issue.
During the year ended March 31, 2017, the Company had issued Rs. 1,350.00 crores 8.25 % senior secured notes at the price of 100.18% that are due for repayment on February 18, 2020. The said notes (with ISm - XS 1549374475) are listed and traded on the Singapore Stock exchange (SGX-ST) with a minimum board lot size of USD 200,000.
The Company had utilised the entire sum of Rs. 1,350.00 crores raised from senior secured notes towards asset financing activities as per the objects stated in the prospectus for the issue.
As per the terms of the issue, Rs. 1,350.00 crores were redeemed on February 18, 2020.
As per the terms of the issue, Rs. 320.00 crores were redeemed on March 12, 2021.
Nature of security
Secured by way of an exclusive fixed charge over hypothecation loan receivables of the Company.
Loan Commitments Credit quality of exposure
The table below shows the credit quality and the maximum exposure to credit risk based on the Companyâs internal credit rating system and year-end stage classification. The amounts presented are gross of impairment allowances. Details of the Companyâs internal grading system are explained in note 55.02 and policies on whether ECL allowances are calculated on an individual or collective basis are set out in note 55.02.02.07.
# On June 12, 2021, the Company allotted 13,986,000 Equity Shares of face value Rs. 10/- each to eligible qualified institutional buyers at the issue price of Rs. 1,430/- per equity Share (including a premium of Rs. 1,420/- per equity Share) at a discount of Rs. 3.32 per equity Share i.e. 0.23% of the floor price of Rs. 1,433.32 per equity Share, aggregating to Rs. 19,999,980,000/- by way of qualified institutions placement (QIp Issue). The QIp Issue opened on June 07, 2021 and closed on June 11, 2021. The entire proceeds have been utilised for the objects of the QIp Issue. pursuant to the allotment of equity Shares in the QIp Issue, the paid - up equity share capital of the Company stood increased from Rs. 2,530,615,130/-to Rs. 2,670,475,130/- on June 12, 2021 comprising of 267,047,513 fully paid-up equity shares of face value of Rs.10/- each and securities premium reserve by Rs. 1,964.78 crores (net of share issue expenses of Rs. 21.23 crores).
# On July 08, 2021, the Company allotted (i) 1,736,100 equity Shares of the Company, fully paid-up, at a price of Rs. 1,440/- per equity Share including a premium of Rs. 1,430/- per equity Share, aggregating up to Rs. 2,499,984,000/-and (ii) 1,736,100 Warrants convertible into 1,736,100 equity Shares at a price (including the warrant subscription price and the warrant exercise price) of Rs. 1,440/- each, aggregating up to Rs. 2,499,984,000/- on a preferential basis to Shriram Capital Limited, promoter of the Company (preferential Issue). The Company received the subscription money of Rs. 624,996,000/- for allotment of 1,736,100 Warrants convertible into equity Shares, being 25% of the Issue price of Rs. 1,440/- of the Warrants at Rs. 360/- per Warrant, towards the warrant subscription price. The entire proceeds have been utilised for the objects of the preferential Issue. pursuant to allotment of the equity Shares in the preferential Issue, the
paid-up share capital of the Company stood increased on July 08, 2021 from Rs. 2,670,475,130/- to Rs. 2,687,836,130/-comprising of 268,783,613 equity shares of face value of Rs. 10/- each and securities premium reserve by Rs. 248.06 crores.
# On November 25, 2021, the Company allotted 1,736,100 Equity Shares of face value of Rs. 10/- each fully paid up issued at a premium of Rs. 1,430/- per equity share to Shriram Capital Limited, promoter of the Company upon exercise of option of conversion of 1,736,100 Warrants by Shriram Capital Limited. The Issue price of the Warrant was Rs. 1,440/- per warrant of which 25% was paid by Shriram Capital Limited on subscription of 1,736,100 warrants on July 08, 2021 and the balance 75% i.e. Rs. 1,080/- per warrant being the Warrant exercise price was paid by Shriram Capital Limited. The entire proceeds have been utilised for the objects of the preferential Issue. pursuant to allotment of the Equity Shares in the preferential Issue, the paid-up share capital of the Company stood increased on November 25, 2021 from Rs. 2,687,836,130/- to Rs. 2,705,197,130/- comprising of 270,519,713 equity shares of face value of Rs. 10/- each and securities premium reserve by Rs. 248.26 crores.
b. Terms/ rights attached to equity shares
The Company has only one class of equity shares having a par value of Rs. 10/- per share. each holder of equity shares is entitled to one vote per share. The final dividend is subject to the approval of the shareholders in the ensuing annual general meeting.
The Board of Directors in their meeting held on April 27, 2023 has recommended a final dividend of Rs. 20/- per equity share of nominal face value of Rs.10/- each fully paid up i.e. 200 %, for the financial Year 2022-23 subject to approval by shareholders in the ensuing 44th Annual General Meeting (44th AGM) of the Company. This is in addition to the interim dividend of Rs. 15/- per equity share of Rs. 10/- each fully paid-up (150%) for the financial Year 2022-23 declared by the Company on December 24, 2022, amounting to Rs. 5,616,409,140/- (gross) subject to deduction of tax at source as per the applicable rate(s) to the eligible shareholders. The record date for payment of interim dividend was January 04, 2023. The interim dividend was paid to eligible shareholders on January 13, 2023. With this the total dividend for the financial year 2022-23 will be Rs. 35/- per equity share (i.e. 350 %). pursuant to Regulation 42 of the Securities and exchange Board of India (Listing Obligations and disclosure Requirements) Regulations, 2015 and subject to the confirmation by the Stock exchanges, the book closure period for the purpose of payment of the final dividend and 44th AGM will be from June 17, 2023 to June 23, 2023 (both days inclusive). The final dividend will be paid to eligible Shareholders on or before July 22, 2023 subject to deduction of tax at source as per the applicable rate(s).
The Board of directors in their meeting held on March 05, 2022 declared second interim equity dividend of 120% (Rs. 12/- per equity share of nominal face value of Rs. 10/- each fully paid up) for the Financial Year 2021-22, amounting to Rs. 3,246,236,556/- (gross) subject to deduction of tax at source as per the applicable rate(s) to the eligible shareholders. The record date for payment of second interim equity dividend was March 14, 2022. The second interim dividend was paid to eligible shareholders on March 24, 2022. The Board of directors in their meeting held on October 29, 2021 declared interim equity dividend of 80% (Rs. 8/- per equity share of nominal face value of Rs. 10/- each fully paid up) for the Financial Year 2021-22, amounting to Rs. 2,150,268,904/- (gross) subject to deduction of tax at source as per the applicable rate(s) to the eligible shareholders. The record date for payment of interim equity dividend was November 10, 2021. The interim dividend was paid to eligible shareholders on November 24, 2021. The Board of Directors in its meeting held on April 28, 2022 did not recommended final dividend. As such the interim dividend aggregating to Rs. 20/-per share (i.e. 200 %) was the final dividend for the Financial Year 2021-22 .
In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.
Nature and purpose of reserves
a) Share application money pending allotment: The amount received on the application for equity shares of the Company on which allotment is not yet made, to the extent not refundable.
b) securities premium: The amount received in excess of face value of the equity shares is recognised in securities premium. In case of equity-settled share based payment transactions, the difference between fair value on grant date and nominal value of share is accounted as securities premium. The reserve can be utilised only for limited purposes such as issuance of bonus shares in accordance with the provisions of the Companies Act, 2013.
c) Capital reserve: Capital reserve is the excess of net assets taken over cost of consideration paid during amalgamation. (Refer note 52: Business combination)
d) Capital redemption reserve: The Company has recognised capital redemption reserve on redemption of nonconvertible redeemable preference shares from its retained earnings. The amount in capital redemption reserve is equal to nominal amount of the non-convertible redeemable preference shares redeemed. The Company may issue fully paid up bonus shares to its members out of the capital redemption reserve.
e) Debenture redemption reserve:
(1) pursuant to Section 71 of the Companies Act, 2013 and circular 04/2013, read with notification issued date June 19, 2016 issued by Ministry of Corporate Affairs, the Company is required to transfer 25% of the value of the outstanding debentures issued through public issue as per the present SEBI (Issue and Listing of Debt Securities) Regulation, 2008 to debenture redemption reserve (DRR) and no DRR is required in case of privately placed debenture. Also the Company is required before 30th day of April of each year to deposit or invest, as the case may be, a sum which shall not be less than 15% of the amount of its debenture issued through public issue maturing within one year from the balance sheet date.
(2) As per the notification G.S.R. 574(E) dated August 16, 2019, the Ministry of Corporate Affairs has amended the Companies (Share Capital & debentures) Rules, DRR need not be created for debentures issued by a Non-Banking Finance Company subsequent to the notification date. The Company has not created DRR on public issue of nonconvertible debentures issued after the date of said notification.
(3) In respect of the debentures issued through public issue, the Company has created DRR of Rs. 93.23 crores (March 31, 2022: Rs. 170.31 crores). The Company subsequent to the year end has deposited a sum of Rs. 204.00 crores (March 31, 2022: Rs. 37.00 crores) in the form of fixed deposits with scheduled banks, representing 15% of the debenture issued through public issue, which are due for redemption within one year from the balance sheet date.
(4) On redemption of the debentures for which the DRR is created, the amounts no longer necessary to be retained in this account need to be transferred to the retained earnings.
f) General reserve: Under the erstwhile Companies Act, 1956, general reserve was created through an annual transfer of net income at a specified percentage in accordance with applicable regulations. Consequent to introduction of Companies Act, 2013, the requirement to mandatorily transfer a specified percentage of the net profit to general reserve has been withdrawn. However, the amount previously transferred to the general reserve can be utilised only in accordance with the specific requirements of Companies Act, 2013.
g) statutory reserve: every year the Company transfers a sum of not less than twenty per cent of net profit of that year as disclosed in the statement of profit and loss to its Statutory Reserve pursuant to Section 45-IC of the RBI Act, 1934.
The conditions and restrictions for distribution attached to statutory reserves as specified in Section 45-IC(1) in The
Reserve Bank of India Act, 1934:
(1) Every non-banking financial company (NBFC) shall create a reserve fund and transfer therein a sum not less than twenty per cent of its net profit every year as disclosed in the profit and loss account and before any dividend is declared.
(2) No appropriation of any sum from the reserve fund shall be made by the NBFC except for the purpose as may be specified by the RBI from time to time and every such appropriation shall be reported to the RBI within twenty-one days from the date of such withdrawal:
provided that the RBI may, in any particular case and for sufficient cause being shown, extend the period of twenty-one days by such further period as it thinks fit or condone any delay in making such report.
(3) notwithstanding anything contained in sub-section (1), the Central Government may, on the recommendation of the RBI and having regard to the adequacy of the paid-up capital and reserves of a NBFC in relation to its deposit liabilities, declare by order in writing that the provisions of sub-section (1) shall not be applicable to the NBFC for such period as may be specified in the order:
provided that no such order shall be made unless the amount in the reserve fund under sub-section (1) together with the amount in the share premium account is not less than the paid-up capital of the NBFC.
h) Amalgamation adjustment account: Upon amalgamation of the erstwhile Shriram City Union Finance (âSCUFâ) the transferor company, with Shriram Transport Finance Limited (âSTFCâ) the transferee company, renamed as Shriram Finance Limited (âSFLâ), the statutory reserves (i.e. Reserve under Section 45 IC of the Reserve Bank of India Act, 1934) of Rs. 1,706.81 crores of the transferor Companies as on April 01, 2022 (âthe Appointed Dateâ) were recorded in the books of Shriram Finance Limited with a corresponding debit to Amalgamation Adjustment Account. When the identity of the statutory reserves is no longer required to be maintained, both the statutory reserves and the aforesaid account will be reversed. (Refer note 52: Business combination)
i) Share option outstanding: The share-based payment reserve is used to recognise the value of equity-settled share-based payments provided to employees, including key management personnel, as part of their remuneration.
j) Remeasurement gain/(loss) on defined benefit plan: Remeasurement, comprising of actuarial gains and losses and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability), are recognised immediately in the balance sheet with a corresponding debit or credit to retained earnings through OCI in the period in which they occur. Remeasurements are not reclassified to the statement of profit and loss in subsequent periods.
k) other comprehensive income: Other comprehensive income includes effective portion of cash flow hedges and Gain/ (loss) on fair valuation of investments in quoted equity shares.
effective portion of cash flow hedges represents the cumulative effective portion of gains or losses arising on changes in fair value of hedging instruments entered into for cash flow hedges, which shall be reclassified to the statement of profit and loss only when the hedged transaction affects the statement of profit and loss, or included as a basis adjustment to the non-financial hedged item, consistent with the Company accounting policies.
Gain/(loss) on fair valuation of investments in quoted equity shares represents gains and losses from the change in the fair value of investments in quoted equity instruments in accordance with paragraph 5.7.5 of Ind AS 109, Financial Instruments.
l) retained earnings: Retained earnings are the profits that the Company has earned till date, less any transfers to statutory reserve, general reserve and dividend distributed to shareholders.
Basic earnings per share (EPS) is calculated by dividing the net profit for the year attributable to equity holders of Company by the weighted average number of equity shares outstanding during the year.
Diluted EPS is calculated by dividing the net profit for the year attributable to equity holders of Company (after adjusting for interest on the convertible preference shares and interest on the convertible bond, in each case, net of tax) by the weighted average number of equity shares outstanding during the year plus the weighted average number of equity shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares.
E« RETIREMENT BENEFIT PLANa) Defined contribution plan
A defined contribution plan is a pension plan under which the Company pays fixed contributions; there is no legal or constructive obligation to pay further contributions. The assets of the plan are held separately from those of the Company in a fund under the control of trustees.
The Company makes provident fund and Employee State Insurance Scheme contributions which are defined contribution plans for qualifying employees. Under the schemes, the Company is required to contribute a specified percentage of the payroll costs to fund the benefits. The Company recognised Rs. 112.05 crores (March 31, 2022: Rs. 50.66 crores) for provident fund contributions and Rs. 20.35 crores (March 31, 2022: Rs. 8.80 crores) for employee State Insurance Scheme contributions in the Statement of profit and Loss. The contributions payable to these plans by the Company are at rates specified in the rules of the schemes.
b) Defined benefit plan Gratuity
The Company has a defined benefit gratuity plan (funded). The gratuity plan is governed by the payment of Gratuity Act, 1972. Under the act, employee who has completed five years of service is entitled to specific benefit. The level of benefits provided depends on the memberâs length of service and last drawn salary. The fund is managed by third party fund managers.
Each year, the Board of Trustees reviews the level of funding in the gratuity plan. Such a review includes the asset-liability matching strategy and investment risk management policy. This includes employing the use of annuities and longevity swaps to manage the risks. The Board of Trustees decides contribution to be made by the Company based on the results of this annual review. The trust is in process of investing entire funds in government securities through third party fund managers and as on March 31, 2023, 74.78% funds are invested in government securities and balance 25.22% funds are invested in money market and corporate debt instruments. The Board of Trustees aim to keep annual contributions of the Company relatively stable at a level such that no plan deficits (based on valuation performed) will arise.
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49 CONTINGENT LIABILITIES AND COMMITMENTS |
||
|
(A) Contingent liabilities particulars |
As at march 31, 2023 |
(Rs. in crores) As at march 31, 2022 |
|
a. In respect of Income tax demands where the Company has filed appeal before various authorities |
55.87 |
175.17 |
|
b. VAT demand where the Company has filed appeal before various appellates |
4.92 |
117.21 |
|
c. Service tax demands where the Company has filed appeal before various authorities |
2,056.61 |
1,976.41 |
|
d. Penalty levied for Contravention of provisions of Section 6(3) (b) of FEMA, 1999 read with Regulation 4 of Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000 |
5.00 |
5.00 |
|
Total |
2,122.40 |
2,273.79 |
Future cash outflows in respect of above are determinable only on receipt of judgements /decisions pending with various forums/authorities. It is not practicable for the Company to estimate the timings of the cashflows, if any, in respect of the above pending resolution of the respective proceedings. The Company does not expect any reimbursement in respect of the above contingent liabilities. The Company is of the opinion that above demands are not sustainable and expects to succeed in its appeals. The management believes that the ultimate outcome of these proceedings will not have a material adverse effect on the Companyâs financial position and results of operations.
(B) Commitments not provided for
|
(Rs. in crores) |
|||
|
particulars |
As at march 31, 2023 |
As at march 31, 2022 |
|
|
a. |
Estimated amount of contracts remaining to be executed on capital account, net of advances |
101.36 |
11.45 |
|
b. |
Commitments related to loans sanctioned but undrawn |
283.98 |
92.43 |
EMPLOYEE STOCK OPTION PLAN
The Company provides share-based payment schemes to its Employees.
Employee Stock Option Plan (2013)
51.01: About the plan
pursuant to clause 3.35.11 of the approved the Composite Scheme of Arrangement and Amalgamation (âSchemeâ), all the employees in service of Shriram City Union Finance Limited (âTransferor Companyâ) have become employee of the Company with effect from appointed date of the scheme i.e April 01, 2022. The transferor Company prior to the Scheme had framed and implemented the Shriram City Union Finance Limited employee Stock Options Scheme 2013 (âSCUF ESOS 2013â) under which employee Stock Options were granted to certain of its eligible employees. Shriram Finance Limited employee Stock Options Scheme 2023 (âSFL ESOS 2023â) has been created in lieu of the SCUF ESOS 2013 to issue stock options to the eligible employee of the transferor Company taking into account the share exchange ratio as provided in terms of clause 3.36.1 of the Scheme. The objective of SFL ESOS 2023 plan is that the eligible employees of the transferor Company continue to enjoy the benefit of stock options upon becoming the employees of the Company and to restore the value of options post amalgamation in the manner provided in terms of Clause 3.35.17 of the Scheme. This SFL ESOS 2023 plan has been adopted on March 15, 2023 by the Board and Nomination and Remuneration Committee of the Company.
total no. of grant of options under SCUF ESOS 2013 plan are 2,627,000.
The period during which the options granted by the Transferor Company under SCUF ESOS 2013 plan were held by the eligible employee shall be adjusted against the minimum vesting period. That is, the date of vesting under the SCUF ESOS 2013 plan shall be considered as the vesting date under SFL ESOS 2023 plan.
The exercise price shall be Rs. 193.55 per Fresh Options under the SFL ESOS 2023.
The options vested shall be exercised within period of ten years from the vesting date. When exercisable, each option is convertible into one equity share. Any option granted shall be exercisable according to the terms and conditions as determined by the Scheme.
51.02: Fair value of the options granted
The Company has recorded employee stock-based compensation expense relating to the SFL ESOS 2023 options on the basis of fair value of SCUF ESOS 2013 options.
The fair value of the options granted is mentioned below as per vesting period. The fair value of the options is determined using Black-Scholes model which takes into account the exercise price, the term of the option (time to maturity), the share price as at the grant date and expected price volatility (standard deviation) of the underlying share, the expected dividend yield and risk-free interest rate for the term of the option.
Since the SFL ESOS scheme 2023 is already recorded by applying fair value method, the disclosure required under para 48 of guidance note on âAccounting for Employees Share Based paymentsâ issued by ICAI for reconciling the impact on net profit and earnings per share is not required.
51.03: Rationale for the variables used
The variables used for calculating the fair values and their rationale are as follows: a. stock price
The latest available closing market price on the National Stock Exchange (NSE) date on which options are granted under SCUF ESOS 2023 plan has been considered for the purpose of valuation.
Volatility is a measure of the amount by which a price has fluctuated or is expected to fluctuate during a period. The measure of volatility used in the Black-Scholes option pricing model is the annualised standard deviation of the continuously compounded rates of return on the stock over a period of time.
The period to be considered for volatility must be adequate to represent a consistent trend in the price movements. Accordingly, the annualised volatility has been computed based on the share price data of past one year, from the date of the valuation.
The fair value is very sensitive to this variable. Higher the volatility, higher is the fair value. The rationale being, the more volatile a stock is, the more is its potential to go up (or come down), and the more is the probability to gain from the movement in the price. Accordingly, an option to buy a highly volatile stock is more valuable than the one to buy a less volatile stock, since the probability of gaining is lesser in the latter case.
The risk-free interest rate being considered for the calculation is the interest rate applicable on Government securities -having 10 year maturity period.
d. Exercise price
Exercise price of the options granted is as per SCUF ESOS 2013 plan.
e. Time to maturity / Expected life of options
Time to maturity / expected life of options is the period from the grant date to the date on which option is expected to be exercised. The minimum life of stock option is the minimum period before which the options cannot be exercised and maximum life is the period after which the options cannot be exercised.
Considering the deep discount on the market price i.e. 55% to 70%, it is expected that the options will be exercised in 1 year from the vesting date. As such the average expected life of options is considered at 2 years.
51.04: effect of the employee share-based payment plans on the statement of profit and loss and on its financial position
The Company has recorded employee stock-based compensation cost of Rs. 164.56 crores in the Statement of profit and loss for the year ended March 31, 2023 (March 31, 2022: Rs. Nil)
The share option outstanding in the Balance Sheet as at March 31, 2023 is Rs. 194.84 crores (March 31, 2022: Rs. Nil)
¦5n business combination
The Board of Directors of the Company in its meeting held on December 13, 2021 had approved a Composite Scheme of Arrangement and Amalgamation (âSchemeâ), inter alia, involving amalgamation of Shriram Capital Limited (SCL) (after demerger of a few undertakings from the said Shriram Capital Limited) and Shriram City Union Finance Limited (SCUF) with the Company under Sections 230 to 232 and other applicable provisions of the Companies Act, 2013. The Reserve Bank of India vide its letter dated June 15, 2022 conveyed its No-Objection to the Scheme. As per the directions of the Honâble national Company Law tribunal, Chennai Bench, (âNCLTâ) in the common order dated May 11, 2022, the meeting of the equity Shareholders, Secured Creditors and Unsecured Creditors was held on July 04, 2022 and the Scheme was approved by the requisite majority of the equity shareholders, Secured Creditors and Unsecured Creditors in their respective meetings. The Company had obtained approvals/no objection to the Scheme from various statutory authorities, as applicable. The Honâble NCLT had sanctioned the Scheme, vide order dated November 09, 2022 to be read with Corrigendum order dated November 17, 2022 effective from appointed date of the Scheme being April 01, 2022. Pursuant to the scheme, Shrilekha Business Consultancy Private Limited (âSBCPLâ) was amalgamated with SCL. The undertaking carrying on the business of financial services from SCL was demerged and transferred to Shriram Investment Holdings Limited (âSIHLâ). The undertakings which were carrying on the businesses of Life Insurance and General Insurance were demerged from SCL and transferred to Shriram LI Holdings Private Limited (âSLIHâ), and Shriram GI Holdings Private Limited (âSGIHâ) respectively. The remaining undertaking of SCL and its investments in STFC and SCUF were amalgamated with STFC.
Pursuant to the Scheme, the name of the Company is changed to Shriram Finance Limited upon receipt of necessary approval from the Registrar of Companies, Tamil Nadu, Chennai, Ministry of Corporate Affairs, with effect from November 30, 2022. pursuant to the Scheme, new equity shares of face value of Rs. 10/- each fully paid-up have been issued and allotted to the eligible shareholders of SCL and SCUF on December 12, 2022 as per the share exchange ratio contained in the Scheme. As per Ind AS 103, the amalgamation has been accounted under âacquisition methodâ. The difference between the purchase consideration and fair value has been accounted as goodwill/capital reserve on amalgamation, as applicable.
The Company has determined the useful life of the intangible asset in the nature of branch network acquired through the scheme of amalgamation as five years and started amortising the same over its useful life by making a suitable change in the accounting estimate. Impact for future periods will be Rs. 302.58 crores per annum over next four years. The figures for the current reporting period include the effect of merger of transferor Companies SCUF and SCL as discussed above and are therefore not comparable with figures of the respective previous year.
Summary of acquisitions done during the financial year ended March 31, 2023 (i) shriram City union Finance Limited (âsCuFâ)
The Honâble national Company Law tribunal, Chennai Bench, (âNCLTâ) had approved the Composite Scheme of Arrangement and Amalgamation (âSchemeâ), inter alia, involving amalgamation of Shriram City Union Finance Limited (SCUF) with its entire undertaking with the Company, vide order dated november 09, 2022 to be read with Corrigendum order dated november 17, 2022 effective from Appointed date of the Scheme being April 01, 2022, for a share exchange ratio of 1.55:1. The percentage of voting equity interests acquired was 100%. This acquisition is highly beneficial to all the stakeholders, by bringing together the capabilities and the presence of the Company in the categories of transport finance, and retail finance, and in the process create a larger financial lending entity with both these businesses combined, and the resulting benefits of scale and synergies of operation. This acquisition further consolidates the leadership position of the Company in the Commercial Vehicle market. Following the acquisition, the amalgamated entity is able to launch retail finance products in new locations.
The difference between the purchase consideration and amount attributable to identified intangible assets / assets and liabilities represents residual goodwill in the business. As a result of the merger, the Company receives customer information such as names, contact information, historical credit provided and repayment information, etc. of existing customers of SCUF and vice versa. This information can further be divided into different customer profiles based on demography, zones, age groups, etc., which helps businesses target products/services according to their target audience that will be used by the merged entity to gain synergies from cross selling its products. Consequently, the Goodwill in the transaction subsumes the above synergy benefit, along with assembled workforce, future potential of the new branches that are planned to open, new customers, new geographies etc.
(f) Acquisition related costs:
Acquisition related costs of Rs. 26.53 crores (March 31, 2022: Rs. Nil) have been recognised under Miscellaneous expenses in the Statement of profit and Loss.
(ii) shriram Capital Limited (âsCLâ)
The Honâble national Company Law Tribunal, Chennai Bench, (âNCLTâ) had approved the Composite Scheme of Arrangement and Amalgamation (âSchemeâ), inter alia, involving amalgamation of Shriram Capital Limited (SCL) with its remaining undertaking with the Company, vide order dated november 09, 2022 to be read with Corrigendum order dated november 17, 2022, effective from Appointed date of the Scheme being April 01, 2022 for a share exchange ratio 1:0.97. The amalgamation will achieve the combination of the remaining line of business activities of SCL with the Company which is a listed entity engaged in the business of financial lending. This will ensure that the companies forming part of the Shriram Group, which are focused on the business of lending are concentrated in a single large entity, which has the necessary means, presence and resources to achieve still larger scales in the business of lending, while reducing the presence of multiple entities across the Group, with an interest and presence in the same line of business.
CAPITAL MANAGEMENT
The Company maintains an actively managed capital base to cover risks inherent in the business which includes issued equity capital, share premium and all other equity reserves attributable to equity holders of the Company.
As an NBFC, the RBI requires us to maintain a minimum capital to risk weighted assets ratio (âCRARâ) consisting of Tier I and tier II capital of 15% of our aggregate risk weighted assets. Further, the total of our tier II capital cannot exceed 100% of our tier I capital at any point of time. The capital management process of the Company ensures to maintain a healthy CRAR at all the times. Refer note 85 and 95 for the Companyâs Capital ratios.
The primary objectives of the Companyâs capital management policy are to ensure that the Company complies with externally imposed capital requirements and maintains strong credit ratings and healthy capital ratios in order to support its business and to maximise shareholder value.
The Company manages its capital structure and makes adjustments to it according to changes in economic conditions and
the risk characteristics of its activities. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividend payment to shareholders, return capital to shareholders or issue capital securities. No changes have been made to the objectives, policies and processes from the previous years except those incorporated on account of regulatory amendments. However, they are under constant review by the Board. The Company has complied with the notification RBI/2019-20/170 DOR (NBFC).CC.pD.No.109/22.10.106/2019-20 âImplementation of Indian Accounting Standards"
ES FAIR VALUE MEASUREMENT 54.01: Valuation principle
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction in the principal (or most advantageous) market at the measurement date under current market conditions (i.e., an exit price), regardless of whether that price is directly observable or estimated using a valuation technique. In order to show how fair values have been derived, financial instruments are classified based on a hierarchy of valuation techniques, as explained in significant accounting policies of the year ended March 31, 2023.
FAIR VALUE MEASUREMENT (Contd.)54.03: Valuation techniquesFair values of financial assets, other than those which are subsequently measured at amortised cost, have been arrived at as under:investments in mutual funds/ equity instruments
Investment in units of mutual funds are measured based on their published net asset value (NAV), taking into account redemption and/or other restrictions. Such instruments are generally Level 1. Equity instruments in non-listed entities are initially recognised at transaction price and re-measured (to the extent information is available) and valued on a case-bycase and classified as Level 3. Quoted equity instruments on recognised stock exchanges are valued at Level 1 hierarchy being the unadjusted quoted price as the reporting date.
Derivative Financial instruments
Foreign exchange contracts include foreign exchange forward and swap contracts, interest rate swaps and over-the-counter foreign exchange options. These instruments are valued by either observable foreign exchange rates, observable or calculated forward points and option valuation models. With the exception of contracts where a directly observable rate is available which are disclosed as Level 1, the Company classifies derivative financial instruments as Level 2 financial instruments when no unobservable inputs are used for their valuation or the unobservable inputs used are not significant to the measurement (as a whole).
Certificate of deposits are short-term financial instruments issued by Banks. Financial Benchmark India private Limited (FBIL) has developed the FBIL-CD, a new benchmark for the money market based on traded CDs reported on the FIMMDA Trade Reporting and Confirmation System (FTRAC) platform of The Clearing Corporation of India Limited (CCIL). FBIL-CD is announced for seven tenors of 14 days, 1 month, 2 months, 3 months, 6 months, 9 months and 12 months. For valuation, the Company uses FBIL-CD benchmark and based on that benchmark the Company interpolates and calculates CD prices corresponding to their residual maturities and such instruments are classified as Level 2.
54.04: Transfer between fair value hierarchy levels
During the year there were no transfers between level 1 and level 2. Similarly, there were no transfers from or transfer to level 3.
54.05: Movements in Level 3 financial instruments measured at fair value
The following tables show a reconciliation of the opening and closing amounts of Level 3 financial assets and liabilities which are recorded at fair value. transfers from Level 3 to Level 2 occur when the market for some securities became more liquid, which eliminates the need for the previously required significant unobservable valuation inputs. Since the transfer, these instruments have been valued using valuation models incorporating observable market inputs. Transfers into Level 3 reflect changes in market conditions as a result of which instruments become less liquid. Therefore, the Company requires significant unobservable inputs to calculate their fair value.
54.07: Sensitivity of fair value measurements to changes in unobservable market data
The table below describes the effect of changing the significant unobservable inputs to reasonable possible alternatives. All changes would be reflected in the Statement of profit and loss. Sensitivity data are calculated using a number of techniques, including analysing price dispersion of different price sources, adjusting model inputs to reasonable changes within the fair value methodology.
The ranges are not comparable or symmetrical as the model inputs are usually not in the middle of the favourable/ unfavourable range.
The table below shows data in relation to level 3 inputs that are already aggregated on the underlying product levels without assuming any potential diversification effect, but including potential off-sets from economic or accounting hedge relationships in place. The Company is of the opinion that, whilst there may be some diversification benefits, incorporating these would not be significant to the analysis.
54.08: Fair value of financial instruments not measured at fair value
Set out below is a comparison, by class, of the carrying amounts and fair values of the Companyâs financial instruments that are not carried at fair value in the financial statements. This table does not include the fair values of non-financial assets and non-financial liabilities.
The management assessed that cash and cash equivalents, trade receivables, trade payables, other receivables, other payables and other financial liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments.
54.09: Valuation methodologies of financial instruments not measured at fair value
Below are the methodologies and assumptions used to determine fair values for the above financial instruments which are not recorded and measured at fair value in the Companyâs financial statements. These fair values were calculated for disclosure purposes only. The below methodologies and assumptions relate only to the instruments in the above tables. short-term financial assets and liabilities
For financial assets and financial liabilities that have a short-term maturity (less than twelve months), the carrying amounts, which are net of impairment, are a reasonable approximation of their fair value. Such instruments include: trade receivables, other receivables, balances other than cash and cash equivalents and trade payables without a specific maturity. Loans and advances to customers
The fair values of loans and receivables are estimated by discounted cash flow models based on contractual cash flows using actual yields.
pass through certificates
These instruments include asset backed securities. The market for these securities is not active. Therefore, the Company uses a variety of valuation techniques to measure their fair values. Expected cash flow levels are estimated by using quantitative and qualitative measures regarding the characteristics of the underlying assets including prepayment rates, default rates and other economic drivers such as loan-to-value ratios, emergence period estimation, indebtedness and rental income levels. Instruments with no comparable instruments or valuation inputs are classified as Level 3.
Investment in associate at cost
Investment in associate: As per Ind AS 28 Interest in associate are recognised at cost and not adjusted to fair value at the end of each reporting period. Cost represents amount paid for acquisition of the said investments. The Company assesses at the end of each reporting period, if there are any indications that the said investments may be impaired. If so, the Company estimates the recoverable value/amount of the investment and provides for impairment, if any i.e. the deficit in the recoverable value over cost.
Investment in subsidiary
The Company has accounted for its investment in subsidiary at fair value at the time of acquisition due to business combination. The investment is subsequently measured at cost.
Investment in government securities at amortised cost
The fair values financial assets held-to-maturity investments are estimated using a discounted cash flow model based on contractual cash flows using actual or estimated yields and discounting by yields incorporating the counterparties credit risk.
Issued debt and borrowings
The fair value of issued debt is estimated by a discounted cash flow model incorporating interest rate from market-observable data such as secondary prices for its traded debt.
The fair value of public deposits and deposit from corporates is estimated by discounting the future cash flows considering the interest rate applicable on the reporting date for deposits of similar tenure and scheme (cumulative/non-cumulative). Inter-corporate deposits are estimated at their carrying amounts due to the short-term maturities of these deposits.
Estimated fair values of off-balance sheet positions are based on the carrying amounts due to the short-term maturities of these positions.
Whilst risk is inherent in the Companyâs activities, it is managed through an integrated risk management framework including ongoing identification, measurement and monitoring, subject to risk limits and other controls. This process of risk management is critical to the Companyâs continuing profitability and each individual within the Company is accountable for the risk exposures relating to his or her responsibilities. The Company is exposed to credit risk, liquidity risk and market risk. It is also subject to various operating and business risks.
55.01: Introduction and risk profile 55.01.01: risk management structure
The Board of Directors are responsible for the overall risk management approach and for approving the risk management strategies and principles.
The Board has constituted the Risk Management Committee which is responsible for monitoring the overall risk process within the Company.
The Risk Management Committee has the overall responsibility for the development of the risk strategy and imp
Mar 31, 2022
Hedging activities and derivatives
The Company is exposed to certain risks relating to its ongoing business operations. The primary risks managed using derivative instruments are foreign currency risk and interest rate risk. The companyâs risk management strategy and how it is applied to manage risk are explained in Note 53.
Derivatives designated as hedging instruments
The Company designates its derivatives as hedging instruments to hedge the variability in cash flows associated with highly probable forecast transactions arising from changes in foreign exchange rates and interest rates. At inception of designated hedging relationships, the Company documents the risk management objective and strategy for undertaking the hedge. The Company also documents the economic relationship between the hedged item and the hedging instrument, including whether the changes in cash flows of the hedged item and hedging instrument are expected to offset each other. There is an economic relationship between the hedged item and the hedging instrument as the terms of the cross currency swap contract matches that of the foreign currency borrowing (notional amount, interest payment dates, principal repayment date etc.). The Company has established a hedge ratio of 1:1 for the hedging relationships as the underlying risk of the hedging instruments are identical to the hedged risk components. To test the hedge effectiveness, the Company uses the hypothetical derivative method and compares the changes in the fair value of the hedging instruments against the changes in fair value of the hedged items attributable to the hedged risks.
Cash flow hedges
When a derivative is designated as a cash flow hedging instrument, the effective portion of changes in the fair value of the derivative is recognised in oci and accumulated in other equity under âeffective portion of cash flow hedgesâ. The effective portion of changes in the fair value of the derivative that is recognised in OCI is limited to the cumulative change in fair value of the hedged item, determined on a present value basis, from inception of the hedge. Any ineffective portion of changes in the fair value of the derivative is recognised in the statement of profit and loss.
Derivatives not designated as hedging instruments
There are no undesignated derivatives.
Notes:
1) The interest rate risk and exchange rate risk on the borrowings of the Company are managed using various derivative instruments which are entered from time to time. The risk management strategy and the use of derivatives are explained in Note 53 - Risk management and Note 94 - Derivatives.
2) The Company has designated the interest rate derivatives which were entered to mitigate interest rate risks on its external commercial bond and external commercial borrowings, as hedging instruments.
The managements expects no default in receipt of trade receivables; also there is no history of default observed by the management. Hence, no Ed has been recognised on trade receivables.
There are no dues from directors or other officers of the company or any firm or private company in which any director is a partner, a director or a member.
Trade receivables are non-interest bearing and are generally on terms of 30 days.
Credit quality of assets
The table below shows the credit quality and the maximum exposure to credit risk based on the Companyâs internal credit rating system and year-end stage classification. The amounts presented are gross of impairment allowances. Details of the Companyâs internal grading system are explained in note 53.02 and policies on whether ECL allowances are calculated on an individual or collective basis are set out in note 53.02.02.07.
(ii) Contractual obligations
The Company has no contractual obligations to purchase, construct or develop investment property. However, the responsibility for its repairs, maintenance or enhancements is with the company.
(iii) Fair value
The fair value of the investment property as at March 31, 2022 is Rs. 6.12 crores (March 31, 2021 is Rs. 6.12 crores).
(iv) Pledged details
investment property is not pledged.
(v) Estimation of fair value
The fair values of investment property is determined by guidance value given by the local government of the area where the investment properties are located.
(vi) Leasing arrangements
investment properties are leased out to tenants. Agreements provide for cancellation by either party or contain clause for escalation and renewal of agreements. The non-cancellable operating lease agreement is for a period of 108 months.
The Company does not face a significant liquidity risk with regard to its lease liabilities as the assets are sufficient to meet the obligations related to lease liabilities as and when they fall due.
B] This note provides information for leases where the Company is a lessor.
The company had given office premises under lease. The income from lease recognised in the Statement of Profit and Loss are Rs. 0.17 crores (March 31, 2021: Rs. 0.21 crores). Agreements provide for cancellation by either party or contain clause for escalation and renewal of agreements. The non-cancellable operating lease agreement is for a period of 108 months.
amounts less than Rs. 1.00 lac are presented as Rs. 0.00 crores in the above statement.
*Refer note 6.9 of Significant accounting policies for exemption applied during first-time adoption of Indian accounting Standards.
The company has not revalued any of its intangible assets during the years ended March 31, 2022 and March 31, 2021. Hence, the amount of change in gross and net carrying amount due to revaluation and impairment losses/reversals is nil.
There are no borrowings measured at FVTPL or designated at FVTPL.
The borrowings have not been guaranteed by directors or others. The Company has not defaulted in repayment of principal and interest to its lenders.
The company has utilised the funds raised from banks and financial institutions for the specific purpose for which they were borrowed.
The company has borrowed funds from banks and financial institutions on the basis of security of current assets. It has filed quarterly returns or statements of current assets with banks and financial institutions and the said returns/statements are in agreement with books of accounts.
Nature of security
Secured by specific assets covered under hypothecation loan agreements and by way of exclusive charge and equitable mortgage of immovable property.
The company had utilised the entire sum of Rs. 1,974.85 crores raised from public issue (net off expenses) towards asset financing activities as per the objects stated in the prospectus for the issue.
The Company had utilised the entire sum of Rs. 606.79 crores raised from public issue (net off expenses) for the purpose of onward disbursements as per the objects stated in the prospectus for the issue.
As per the terms of the issue Rs. 107.40 crores were redeemed on November 2, 2021.
On January 18, 2022, the Company issued and allotted USD 475,000,000 4.15% senior secured notes due 2025 in offshore market (Social Bonds) for sum of Rs.3,512.86 crores under uSD 3.5 Billion Global Medium Term Note Programme. The said Social Bonds were listed on Singapore Stock Exchange (SGX- St) on January 19, 2022. The proceeds of the issue of the Social Bonds are being utilised as per the companyâs Social Finance Framework, for onward lending and other activities as permitted by the RBI Master Direction â External Commercial Borrowings, Trade Credits and Structured Obligations.
On March 31, 2021, the Company issued and allotted USD 225,000,000 4.40% senior secured notes due 2024 in offshore market (Social Bonds) for sum of Rs.1,630.35 crores to be consolidated and form a single series with the U.S.$500,000,000 4.40 per cent Senior Secured Notes due 2024 issued on January 13, 2021 under uSD 3 Billion Global Medium Term Note Programme. The said Social Bonds were listed on Singapore Stock Exchange (SGX- ST) on April 01, 2021. The proceeds of the issue of the Social Bonds are being utilised as per the Companyâs Social Finance Framework, for onward lending and other activities as permitted by the RBI Master Direction â External Commercial Borrowings, Trade Credits and Structured Obligations.
On January 13, 2021, the Company issued and allotted USD 500,000,000 4.40% Senior Secured Notes due 2024 in offshore market (Social Bonds) for sum of uSD 499,950,000 equivalent to Rs. 3,672.50 crores under uSD 3 Billion GMTO Programme. The said Social Bonds were listed on Singapore Stock Exchange (SGX-ST) on January 14, 2021. The proceeds of the issue of the Social Bonds are being utilised as per the companyâs Social Finance Framework, for onward lending and other activities as permitted by the RBI Master Direction - External Commercial Borrowings, Trade Credits, and Structured obligations.
During the year ended March 31, 2020, the Company issued and allotted USD 250,000,000 5.3750% senior secured notes due 2022 in offshore market (notes) equivalent to Rs. 1,714.38 crores under USD 2,000,000,000 Global Medium Term Note Programme. The said notes are listed on Singapore Stock Exchange (SGX- ST). The proceeds of the issue of the notes have been utilised for the purpose of onward lending and other activities as may be permitted by the ECB Directions.
During the year ended March 31, 2020, the Company issued and allotted USD 500,000,000 5.100% senior secured notes due 2023 in offshore market (Social Bonds) equivalent to Rs. 3,541.75 crores under USD 3,000,000,000 Global Medium Term Note Programme. The said Social Bonds are listed on Singapore Stock Exchange (SGX- ST). The proceeds of the issue of the Social Bonds have been utilised for the purpose of onward lending and other activities as per the Companyâs Social Finance Framework and as may be permitted by the ECB Directions.
During the year ended March 31, 2019, the Company issued and allotted senior secured notes in offshore market (notes) aggregating to INR 2,849.90 crores consisting of 5.70% notes due 2022 under INR 5,000 crores Medium Term Note Programme. The notes issued by the Company are listed on Singapore Stock Exchange (SGX- ST). The proceeds of the issue have been utilised for the purpose of onward disbursements.
As per the terms of the issue, Rs. 2,849.90 crores were redeemed on February 28, 2022.
Nature of security
Secured by way of an exclusive fixed charge over hypothecation loan receivables of the Company.
During the year ended March 31, 2018, the Company had issued senior secured notes in offshore market (notes) aggregating to INR 1,160 crores consisting of INR 840 crores 8.10% notes due 2023 and INR 320 crores 7.90% notes due 2021 payable in US dollars under INR 5,000 crores Medium Term Note Programme. The notes issued by the Company are listed on Singapore Stock Exchange (SGX- ST).
The Company had utilised the entire sum of Rs. 1,160.00 crores raised from Senior secured notes towards asset financing activities as per the objects stated in the prospectus for the issue.
During the year ended March 31, 2017, the Company had issued Rs. 1,350.00 crores 8.25 % senior secured notes at the price of 100.18% that are due for repayment on February 18, 2020. The said notes (with ISIN - XS 1549374475) are listed and traded on the Singapore Exchange (SGX-ST) with a minimum board lot size of S $200,000.
The Company had utilised the entire sum of Rs. 1,350.00 crores raised from Senior secured notes towards asset financing activities as per the objects stated in the prospectus for the issue.
As per the terms of the issue, Rs. 1,350.00 crores were redeemed on February 18, 2020.
As per the terms of the issue, Rs. 320.00 crores were redeemed on March 12, 2021.
# On August 06, 2020, the Company allotted fully paid-up 26,178,777 Equity Shares of face value of Rs. 10/- each to the eligible equity shareholders at an issue price of Rs. 570/- per equity Share (including premium of Rs. 560/- per equity Share) in the Rights Issue, which opened on July 16, 2020 and closed on July 30, 2020. The entire proceeds of the Rights Issue have been utilised as per the objects stated in the offer document for the Rights issue. The fresh allotment of equity shares through Rights Issue as stated above has resulted in an increase of equity share capital by Rs. 26.18 crores and securities premium reserve by Rs. 1,446.46 crores (net of share issue expenses of Rs. 19.55 crores).
## on June 12, 2021, the company allotted 13,986,000 equity Shares of face value Rs. 10/- each to eligible qualified institutional buyers at the issue price of Rs. 1,430/- per equity Share (including a premium of Rs. 1,420/- per equity Share) at a discount of Rs. 3.32 per equity Share i.e. 0.23% of the floor price of Rs. 1,433.32 per equity Share, aggregating to Rs. 19,999,980,000/- by way of qualified institutions placement (QiP issue). The QiP issue opened on June 7, 2021 and closed on June 11, 2021. The entire proceeds have been utilised for the objects of the QiP issue. Pursuant to the allotment of equity Shares in the QiP issue, the paid - up equity share capital of the company stood increased from Rs. 2,530,615,130/-to Rs. 2,670,475,130/- on June 12, 2021 comprising of 267,047,513 fully paid-up equity shares of face value of Rs.10/- each and securities premium reserve by Rs. 1,964.78 crores (net of share issue expenses of Rs. 21.23 crores).
## on July 8, 2021, the company allotted (i) 1,736,100 equity Shares of the company, fully paid-up, at a price of Rs. 1,440/- per equity Share including a premium of Rs. 1,430/- per equity Share, aggregating up to Rs. 2,499,984,000/- and (ii) 1,736,100 Warrants convertible into 1,736,100 equity Shares at a price (including the warrant subscription price and the warrant exercise price) of Rs. 1,440/- each, aggregating up to Rs. 2,499,984,000/- on a preferential basis to Shriram capital Limited, Promoter of the company (Preferential issue). The company received the subscription money of Rs. 624,996,000/- for allotment of 1,736,100 Warrants convertible into equity Shares, being 25% of the issue price of Rs. 1,440/- of the Warrants at Rs. 360/- per Warrant, towards the warrant subscription price. The entire proceeds have been utilised for the objects of the Preferential issue. Pursuant to allotment of the equity Shares in the Preferential issue, the paid-up share capital of the company stood increased on July 8, 2021 from Rs. 2,670,475,130/- to Rs. 2,687,836,130/-comprising of 268,783,613 equity shares of face value of Rs.10/- each and securities premium reserve by Rs. 248.06 crores.
## on November 25, 2021, the company allotted 1,736,100 equity Shares of face value of Rs. 10/- each fully paid up issued at a premium of Rs. 1,430/- per equity share to Shriram capital limited, Promoter of the company upon exercise of option of conversion of 1,736,100 Warrants by Shriram capital limited. The issue Price of the Warrant was Rs. 1,440/- per warrant of which 25% was paid by Shriram capital limited on subscription of 1,736,100 warrants on July 08, 2021 and the balance 75% i.e. Rs. 1,080/- per warrant being the Warrant exercise Price was paid by Shriram capital limited. The entire proceeds have been utilised for the objects of the Preferential issue. Pursuant to allotment of the equity Shares in the Preferential issue, the paid-up share capital of the company stood increased on november 25, 2021 from Rs. 2,687,836,130/- to Rs. 2,705,197,130/- comprising of 270,519,713 equity shares of face value of Rs. 10/- each and securities premium reserve by Rs. 248.26 crores.
b. Terms/ rights attached to equity shares
The company has only one class of equity shares having a par value of Rs. 10/- per share. each holder of equity shares is entitled to one vote per share. The dividend is subject to the approval of the shareholders in the ensuing annual general meeting.
The Board of Directors in their meeting held on March 05, 2022 declared second interim equity dividend of 120% (Rs. 12/- per equity share of nominal face value of Rs. 10/- each fully paid up) for the financial year 2021-22, amounting to Rs. 3,246,236,556/- (gross) subject to deduction of tax at source as per the applicable rate(s) to the eligible shareholders. The record date for payment of second interim equity dividend was March 14, 2022. The second interim dividend was paid to eligible shareholders on March 24, 2022. The Board of Directors in its meeting held on April 28, 2022 have not recommended final dividend. As such the interim dividend aggregating to Rs.20/-per share (i.e. 200 %) shall be the final dividend for the financial year 2021-22.
The Board of Directors in their meeting held on October 29, 2021 declared interim equity dividend of 80% (Rs. 8/-per equity share of nominal face value of Rs. 10/- each fully paid up) for the financial year 2021-22, amounting to Rs. 2,150,268,904 (gross) subject to deduction of tax at source as per the applicable rate(s) to the eligible shareholders. The record date for payment of interim equity dividend was November 10, 2021. The interim dividend was paid to eligible shareholders on november 24, 2021.
Pursuant to the final equity dividend for the financial year 2020-21 approved by the shareholders at the 42nd Annual General Meeting held on June 24, 2021, the company paid the final equity dividend of 60% ( Rs. 6/- per equity share of nominal face value of Rs. 10/- each fully paid up) aggregating to Rs. 1,602,285,078/- (gross) subject to deduction of tax at source as per the applicable rate(s) to the eligible shareholders. The record date for payment of final equity dividend was June 17, 2021 and the payment was made on July 07, 2021. With this the total dividend for the financial year 2020-21 was Rs. 18 /- per share (i.e. 180 %).
The Board of directors in their meeting held on March 25, 2021 declared second interim equity dividend of 60% (Rs. 6/- per equity share of nominal face value of Rs. 10/- each fully paid up) for the financial year 2020-21, amounting to Rs. 1,518,369,078/- (gross) subject to deduction of tax at source as per the applicable rate(s) to the eligible shareholders. The record date for payment of second interim dividend was april 06, 2021 and the payment was done on april 16, 2021.
In the event of liquidation of the company, the holders of equity shares will be entitled to receive remaining assets of the company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.
c. Aggregate number of equity shares issued for consideration other than cash during the period of five years immediately preceding the reporting date:
Nature and purpose of reserves
Securities premium: The amount received in excess of face value of the equity shares is recognised in Securities premium. In case of equity-settled share based payment transactions, the difference between fair value on grant date and nominal value of share is accounted as securities premium. The reserve can be utilised only for limited purposes such as issuance of bonus shares in accordance with the provisions of the companies Act, 2013.
Capital reserve: capital reserve is the excess of net assets taken over cost of consideration paid during amalgamation. Capital redemption reserve: The company has recognised capital redemption reserve on redemption of non-convertible redeemable preference shares from its retained earnings. The amount in capital redemption reserve is equal to nominal amount of the non-convertible redeemable preference shares redeemed. The company may issue fully paid up bonus shares to its members out of the capital redemption reserve.
Debenture redemption reserve:
(1) Pursuant to Section 71 of the companies act, 2013 and circular 04/2013, read with notification issued date June 19, 2016 issued by Ministry of corporate affairs, the company is required to transfer 25% of the value of the outstanding debentures issued through public issue as per the present SEBi (issue and Listing of Debt Securities) Regulation, 2008 to debenture redemption reserve (DRR) and no DRR is required in case of privately placed debenture. AIso the company is required before 30th day of April of each year to deposit or invest, as the case may be, a sum which shall not be less than 15% of the amount of its debenture issued through public issue maturing within one year from the Balance sheet date.
(2) As per the notification G.S.R. 574(E) dated august 16, 2019, the Ministry of corporate affairs has amended the companies (Share capital & debentures) Rules, DRR need not be created for debentures issued by a Non-Banking Finance company subsequent to the notification date. The company has not created DRR on public issue of nonconvertible debentures issued after the date of said notification.
(3) in respect of the debentures issued through public issue, the company has created DRR of Rs. 170.31 crores (March 31, 2021: Rs. 337.87 crores). The company subsequent to the year end has deposited a sum of Rs. 37.00 crores (March 31, 2021: Rs. 498.41 crores) in the form of fixed deposits with scheduled banks, representing 15% of the debenture issued through public issue, which are due for redemption within one year from the balance sheet date.
(4) on redemption of the debentures for which the DRR is created, the amounts no longer necessary to be retained in this account need to be transferred to the Retained earnings.
General reserve: under the erstwhile companies Act, 1956, general reserve was created through an annual transfer of net income at a specified percentage in accordance with applicable regulations. consequent to introduction of companies Act, 2013, the requirement to mandatorily transfer a specified percentage of the net profit to general reserve has been withdrawn. However, the amount previously transferred to the general reserve can be utilised only in accordance with the specific requirements of companies Act, 2013.
Statutory reserve: Every year the company transfers a sum of not less than twenty per cent of net profit of that year as disclosed in the statement of profit and loss to its Statutory Reserve pursuant to Section 45-IC of the RBI Act, 1934.
The conditions and restrictions for distribution attached to statutory reserves as specified in Section 45-IC(1) in The Reserve Bank of india Act, 1934:
(1) Every non-banking financial company (NBFG) shall create a reserve fund and transfer therein a sum not less than twenty per cent of its net profit every year as disclosed in the profit and loss account and before any dividend is declared.
(2) No appropriation of any sum from the reserve fund shall be made by the NBFc except for the purpose as may be specified by the RBI from time to time and every such appropriation shall be reported to the RBI within twenty-one days from the date of such withdrawal:
Provided that the RBi may, in any particular case and for sufficient cause being shown, extend the period of twenty-one days by such further period as it thinks fit or condone any delay in making such report.
(3) notwithstanding anything contained in sub-section (1), the central Government may, on the recommendation of the RBi and having regard to the adequacy of the paid-up capital and reserves of a NBFc in relation to its deposit liabilities, declare by order in writing that the provisions of sub-section (1) shall not be applicable to the NBFc for such period as may be specified in the order:
Provided that no such order shall be made unless the amount in the reserve fund under sub-section (1) together with the amount in the share premium account is not less than the paid-up capital of the NBFc.
Retained earnings: Retained earnings are the profits that the company has earned till date, less any transfers to statutory reserve, debenture redemption reserve, general reserve, dividends distributions paid to shareholders and transfer from debenture redemption reserve.
Remeasurement gain/(loss) on defined benefit plan: Re-measurement, comprising of actuarial gains and losses and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability), are recognised immediately in the balance sheet with a corresponding debit or credit to retained earnings through oci in the period in which they occur. Remeasurements are not reclassified to the statement of profit and loss in subsequent periods.
other comprehensive income: other comprehensive income includes effective portion of cash flow hedges. effective portion of cash flow hedges represents the cumulative effective portion of gains or losses arising on changes in fair value of hedging instruments entered into for cash flow hedges, which shall be reclassified to the statement of profit and loss only when the hedged transaction affects the statement of profit and loss, or included as a basis adjustment to the non-financial hedged item, consistent with the company accounting policies.
EARNINGS PER SHARE
Basic earnings per share (EPS) is calculated by dividing the net profit for the year attributable to equity holders of Company by the weighted average number of equity shares outstanding during the year.
Diluted EPS is calculated by dividing the net profit attributable to equity holders of company (after adjusting for interest on the convertible preference shares and interest on the convertible bond, in each case, net of tax) by the weighted average number of equity shares outstanding during the year plus the weighted average number of equity shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares.
RETIREMENT BENEFIT PLAN a) Defined contribution plan
A defined contribution plan is a pension plan under which the company pays fixed contributions; there is no legal or constructive obligation to pay further contributions. The assets of the plan are held separately from those of the company in a fund under the control of trustees.
The company makes Provident fund and employee State Insurance Scheme contributions which are defined contribution plans for qualifying employees. under the schemes, the company is required to contribute a specified percentage of the payroll costs to fund the benefits. The company recognised Rs. 50.66 crores (March 31, 2021: Rs. 42.95 crores) for Provident fund contributions and Rs. 8.80 crores (March 31, 2021: Rs. 10.30 crores) for employee State insurance Scheme contributions in the Statement of Profit and Loss. The contributions payable to these plans by the company are at rates specified in the rules of the schemes.
b) Defined benefit plan Gratuity
The Company has a defined benefit gratuity plan (funded). The gratuity plan is governed by the Payment of Gratuity Act, 1972. under the act, employee who has completed five years of service is entitled to specific benefit. The level of benefits provided depends on the memberâs length of service and last drawn salary. The fund is managed by third party fund managers.
Each year, the Board of Trustees reviews the level of funding in the gratuity plan. Such a review includes the asset-liability matching strategy and investment risk management policy. This includes employing the use of annuities and longevity swaps to manage the risks. The Board of Trustees decides contribution to be made by the Company based on the results of this annual review. The trust is in process of investing entire funds in government securities through third party fund managers and as on March 31, 2022, 94 % funds are invested in government securities and balance 6 % funds are invested in money market and corporate debt instruments. The Board of Trustees aim to keep annual contributions of the Company relatively stable at a level such that no plan deficits (based on valuation performed) will arise.
The Company has not funded its compensated absences liability and the same continues to remain as unfunded as at March 31, 2022.
The estimate of future salary increase takes into account inflation, seniority, promotion and other relevant factors. Discount rate is based on the prevailing market yields of Indian Government Bonds as at the Balance Sheet date for the estimated term of the obligation.
|
49 CONTINGENT LIABILITIES AND COMMITMENTS |
|||
|
(A) Contingent liabilities |
(Rs. in crores) |
||
|
Particulars |
As at march 31, 2022 |
As at march 31, 2021 |
|
|
a. |
In respect of Income tax demands where the Company has filed appeal before various authorities |
175.17 |
133.64 |
|
b. |
VAT demand where the company has filed appeal before various appellates |
117.21 |
117.21 |
|
c. |
Service tax demands where the company has filed appeal before various authorities |
1,976.41 |
1,976.41 |
|
d. |
Penalty levied for contravention of provisions of Section 6(3) (b) of FEMA, 1999 read with Regulation 4 of Foreign Exchange Management (transfer or issue of Security by a Person Resident outside india) Regulations, 2000 |
5.00 |
5.00 |
|
Total |
2,273.79 |
2,232.26 |
|
Future cash outflows in respect of above are determinable only on receipt of judgements/decisions pending with various forums/authorities. It is not practicable for the company to estimate the timings of the cashflows, if any, in respect of the above pending resolution of the respective proceedings. The company does not expect any reimbursement in respect of the above contingent liabilities. The company is of the opinion that above demands are not sustainable and expects to succeed in its appeals. The management believes that the ultimate outcome of these proceedings will not have a material adverse effect on the companyâs financial position and results of operations.
II. Shriram Transport Finance Company Limited (STFC) holds 44.56 % of equity shares of the company. Disclosure relating to transactions with STFc is given above.
CAPITAL MANAGEMENT
The company maintains an actively managed capital base to cover risks inherent in the business which includes issued equity capital, share premium and all other equity reserves attributable to equity holders of the company.
As an NBFc, the RBi requires us to maintain a minimum capital to risk weighted assets ratio (âcRARâ) consisting of tier i and tier ii capital of 15% of our aggregate risk weighted assets. Further, the total of our tier ii capital cannot exceed 100% of our tier i capital at any point of time. The capital management process of the company ensures to maintain a healthy cRAR at all the times. Refer note 82 and 92 for the companyâs capital ratios.
The primary objectives of the companyâs capital management policy are to ensure that the company complies with externally imposed capital requirements and maintains strong credit ratings and healthy capital ratios in order to support its business and to maximise shareholder value.
The company manages its capital structure and makes adjustments to it according to changes in economic conditions and the risk characteristics of its activities. in order to maintain or adjust the capital structure, the company may adjust the amount of dividend payment to shareholders, return capital to shareholders or issue capital securities. No changes have been made to the objectives, policies and processes from the previous years except those incorporated on account of regulatory amendments. However, they are under constant review by the Board. The company has complied with the notification RBi/2019-20/170 DOR (NBFc).cc.PD.No.109/22.10.106/2019-20 âimplementation of indian Accounting Standardsâ
FAIR VALUE MEASUREMENT 52.01: Valuation principle
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction in the principal (or most advantageous) market at the measurement date under current market conditions (i.e., an exit price), regardless of whether that price is directly observable or estimated using a valuation technique. in order to show how fair values have been derived, financial instruments are classified based on a hierarchy of valuation techniques, as explained in Note 6.1 (xiii).
52.03: Valuation techniques
Fair values of financial assets, other than those which are subsequently measured at amortised cost, have been arrived at as under:
Investments in Mutual Funds / Equity instruments
Investment in units of mutual funds are measured based on their published net asset value (NAV), taking into account redemption and/or other restrictions. Such instruments are generally Level 1. Equity instruments in non-listed entities are initially recognised at transaction price and re-measured (to the extent information is available) and valued on a case-bycase and classified as level 3.
Derivative Financial instruments
Foreign exchange contracts include foreign exchange forward and swap contracts, interest rate swaps and over-the-counter foreign exchange options. These instruments are valued by either observable foreign exchange rates, observable or calculated forward points and option valuation models. With the exception of contracts where a directly observable rate is available which are disclosed as level 1, the company classifies derivative financial instruments as level 2 financial instruments when no unobservable inputs are used for their valuation or the unobservable inputs used are not significant to the measurement (as a whole).
Certificate of deposits (CDs)
certificate of deposits are short-term financial instruments issued by Banks. Financial Benchmark india Private ltd (FBH) has developed the FBIL-cD, a new benchmark for the money market based on traded cDs reported on the FIMMDA Trade Reporting and confirmation System (FTRAc) platform of The clearing corporation of india ltd (ccIL). FBIL-cD is announced for seven tenors of 14 days, 1 month, 2 months, 3 months, 6 months, 9 months and 12 months. For valuation, the company uses FBIL-cD benchmark and based on that benchmark the company interpolates and calculates cD prices corresponding to their residual maturities and such instruments are classified as Level 2.
52.04: Transfer between fair value hierarchy levels
During the year there were no transfers between level 1 and level 2. Similarly, there were no transfers from or transfer to level 3.
52.05: movements in Level 3 financial instruments measured at fair value
The following tables show a reconciliation of the opening and closing amounts of Level 3 financial assets and liabilities which are recorded at fair value. transfers from Level 3 to Level 2 occur when the market for some securities became more liquid, which eliminates the need for the previously required significant unobservable valuation inputs. Since the transfer, these instruments have been valued using valuation models incorporating observable market inputs. Transfers into Level 3 reflect changes in market conditions as a result of which instruments become less liquid. Therefore, the company requires significant unobservable inputs to calculate their fair value.
52.06: Impact of changes to key assumptions on fair value of level 3 financial instruments measured at fair value
The table summarises the valuation techniques together with the significant unobservable inputs used to calculate the fair value of the companyâs level 3 assets and liabilities. The range of values indicates the highest and lowest level input used in the valuation technique and, as such, only reflects the characteristics of the instruments as opposed to the level of uncertainty to their valuation. Relationships between unobservable inputs have not been incorporated in this summary.
52.07: Sensitivity of fair value measurements to changes in unobservable market data
The table below describes the effect of changing the significant unobservable inputs to reasonable possible alternatives. All changes would be reflected in the Statement of profit and loss. Sensitivity data are calculated using a number of techniques, including analysing price dispersion of different price sources, adjusting model inputs to reasonable changes within the fair value methodology.
The ranges are not comparable or symmetrical as the model inputs are usually not in the middle of the favourable/ unfavourable range.
The table below shows data in relation to level 3 inputs that are already aggregated on the underlying product levels without assuming any potential diversification effect, but including potential off-sets from economic or accounting hedge relationships in place. The Company is of the opinion that, whilst there may be some diversification benefits, incorporating these would not be significant to the analysis.
The management assessed that cash and cash equivalents, trade receivables, trade payables, other receivables, other payables, bank overdrafts and other financial liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments.
52.09: Valuation methodologies of financial instruments not measured at fair value
Below are the methodologies and assumptions used to determine fair values for the above financial instruments which are not recorded and measured at fair value in the companyâs financial statements. These fair values were calculated for disclosure purposes only. The below methodologies and assumptions relate only to the instruments in the above tables.
Short-term financial assets and liabilities
For financial assets and financial liabilities that have a short-term maturity (less than twelve months), the carrying amounts, which are net of impairment, are a reasonable approximation of their fair value. Such instruments include: trade receivables, other receivables, balances other than cash and cash equivalents and trade payables without a specific maturity.
Loans and advances to customers
The fair values of loans and receivables are estimated by discounted cash flow models based on contractual cash flows using actual yields.
pass through certificates
These instruments include asset backed securities. The market for these securities is not active. Therefore, the Company uses a variety of valuation techniques to measure their fair values. Expected cash flow levels are estimated by using quantitative and qualitative measures regarding the characteristics of the underlying assets including prepayment rates, default rates and other economic drivers such as loan-to-value ratios, emergence period estimation, indebtedness and rental income levels. Instruments with no comparable instruments or valuation inputs are classified as Level 3.
Investment in associate at cost
Investment in associate: As per Ind AS 28 Interest in associate are recognised at cost and not adjusted to fair value at the end of each reporting period. Cost represents amount paid for acquisition of the said investments. Loan and other similar arrangements with subsidiaries which are probable to be settled for a fixed number of equity share of the borrower for a fixed price are classified as equity investment. The Company assesses at the end of each reporting period, if there are any indications that the said investments may be impaired. If so, the Company estimates the recoverable value/amount of the investment and provides for impairment, if any i.e. the deficit in the recoverable value over cost.
investment in government securities at amortised cost
The fair values financial assets held-to-maturity investments are estimated using a discounted cash flow model based on contractual cash flows using actual or estimated yields and discounting by yields incorporating the counterpartiesâ credit risk.
¦5» FAIR VALUE MEASUREMENT (Contd.)
Issued debt and borrowings
The fair value of issued debt is estimated by a discounted cash flow model incorporating interest rate from market-observable data such as secondary prices for its traded debt.
Deposits
The fair value of public deposits and deposit from corporates is estimated by discounting the future cash flows considering the interest rate applicable on the reporting date for deposits of similar tenure and scheme (cumulative/non-cumulative). Inter-corporate deposits are estimated at their carrying amounts due to the short-term maturities of these deposits.
off-balance sheet positions
Estimated fair values of off-balance sheet positions are based on the carrying amounts due to the short-term maturities of these positions.
risk management
Whilst risk is inherent in the companyâs activities, it is managed through an integrated risk management framework including ongoing identification, measurement and monitoring, subject to risk limits and other controls. This process of risk management is critical to the companyâs continuing profitability and each individual within the company is accountable for the risk exposures relating to his or her responsibilities. The Company is exposed to credit risk, liquidity risk and market risk. It is also subject to various operating and business risks.
53.01: Introduction and risk profile
53.01.01: Risk management structure
The Board of Directors are responsible for the overall risk management approach and for approving the risk management strategies and principles.
The Board has constituted the Risk Management Committee which is responsible for monitoring the overall risk process within the Company.
The Risk Management Committee has the overall responsibility for the development of the risk strategy and implementing principles, frameworks, policies and limits. The Risk Management Committee is responsible for managing risk decisions and monitoring risk levels.
The Chief Risk officer is responsible for implementing and maintaining risk related procedures to ensure an independent control process is maintained. The Risk owners within each department will report to the Risk Committee.
The Risk owners are responsible for monitoring compliance with risk principles, policies and limits across the Company. Each department has its Risk owner who is responsible for the control of risks, including monitoring the actual risk of exposures against authorised limits and the assessment of risks.
The Companyâs Treasury is responsible for managing its assets and liabilities and the overall financial structure. It is also primarily responsible for the funding and liquidity risks of the Company.
The Companyâs policy is that risk management processes throughout the Company are audited annually by the Internal Audit function, which examines both the adequacy of the procedures and the Companyâs compliance with the procedures. Internal Audit discusses the results of all assessments with management, and reports its findings and recommendations to Risk Management Committee.
53.01.02: Risk mitigation and risk culture
As part of its overall risk management, the Company can use derivatives and other instruments to manage exposures resulting from changes in interest rates and foreign currencies associated with foreign currency transactions.
53.01.03: Risk measurement and reporting systems
The Companyâs risks are measured using a method that reflects both the expected loss likely to arise in normal circumstances and unexpected losses, which are an estimate of the ultimate actual loss. The models make use of probabilities derived from historical experience, adjusted to reflect the economic environment, as necessary.
The Companyâs policy is to measure and monitor the overall risk-bearing capacity in relation to the aggregate risk exposure across all risk types and activities.
Information compiled from all the departments is examined and processed in order to analyse, control and identify risks on a timely basis. This information is presented and explained to the Risk Management Committee and the head of each department.
The Risk Management Committee receives a comprehensive risk report once a quarter which is designed to provide all the necessary information to assess and conclude on the risks of the company.
It is the companyâs policy to ensure that a robust risk awareness is embedded in its organisational risk culture. Employees are expected to take ownership and be accountable for the risks the company is exposed to that they decide to take on. The Companyâs continuous training and development emphasises that employees are made aware of the Companyâs risk appetite and they are supported in their roles and responsibilities to monitor and keep their exposure to risk within the Companyâs risk appetite limits. Compliance breaches and internal audit findings are important elements of employeesâ annual ratings and remuneration reviews.
53.01.04: Excessive risk concentration
Concentrations arise when a number of counterparties are engaged in similar business activities, or activities in the same geographical region, or have similar economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic, political or other conditions.
In order to avoid excessive concentrations of risk, the Companyâs policies and procedures include specific guidelines to focus on spreading its lending portfolio across all the states with a cap on maximum limit of exposure for a state and also for an individual/Group.
53.02: Credit risk
Credit risk is the risk that the Company will incur a loss because its customers or counterparties fail to discharge their contractual obligations. The Company manages and controls credit risk by setting limits on the amount of risk it is willing to accept for individual counterparties and for geographical concentrations, and by monitoring exposures in relation to such limits.
Credit risk is monitored by the credit department of the Company. It is their responsibility to review and manage credit risk, including environmental and social risk for all types of counterparties. Credit risk consists of line credit managers who are responsible for their business lines and manage specific portfolios and experts who support both the line credit manager, as well as the business with tools like credit risk systems, policies, models and reporting.
The Company has established a credit quality review process to provide early identification of possible changes in the creditworthiness of counterparties.
The credit quality review process aims to allow the Company to assess the potential loss as a result of the risks to which it is exposed and take corrective actions.
The Companyâs internal credit rating grades on days past due(dpd) basis:
|
internal rating grade |
internal rating description |
|
performing |
|
|
High grade |
0 dpd |
|
Standard grade |
1 to 30 dpd |
|
Sub-standard grade |
31 to 60 dpd |
|
Past due but not impaired |
61 to 90 dpd |
|
Non-performing |
90 dpd |
53.02.01: Derivative financial instruments
Credit risk arising from derivative financial instruments is, at any time, limited to those with positive fair values, as recorded on the balance sheet.
With gross-settled derivatives, the Company is also exposed to a settlement risk, being the risk that the Company honours its obligation, but the counterparty fails to deliver the counter value.
53.02.02: Impairment assessment
The references below show where the Companyâs impairment assessment and measurement approach is set out in this report. It should be read in conjunction with the Summary of significant accounting policies.
The Companyâs definition and assessment of default (Note 53.02.02.01).
- How the Company defines, calculates and monitors the probability of default, exposure at default and loss given default (Notes 53.02.02.02 to 53.02.02.04)
- When the Company considers there has been a significant increase in credit risk of an exposure (Note 53.02.02.05)
- The Companyâs policy of segmenting financial assets where ECL is assessed on a collective basis (Note 53.02.02.07)
- The details of the ECL calculations for stage 1, stage 2 and stage 3 assets (Note 6.1(xi))
53.02.02.01: Definition of default
The Company considers a financial instrument defaulted and therefore stage 3 (credit-impaired) for ECL calculations in all cases when the borrower becomes 90 days past due on its contractual payments.
As a part of a qualitative assessment of whether a customer is in default, the company also considers a variety of instances that may indicate unlikeliness to pay. When such events occur, the company carefully considers whether the event should result in treating the customer as defaulted and therefore assessed as stage 3 for EcL calculations or whether stage 2 is appropriate. Such events include:
- The borrower requesting emergency funding from the company.
- a material decrease in the underlying collateral value where the recovery of the loan is expected from the sale of the collateral.
- A covenant breach not waived by the company.
- The debtor (or any legal entity within the debtorâs company) filing for bankruptcy application/protection.
- All the facilities of a borrower are treated as stage 3 when one of his facility becomes 90 days past due i.e. credit impaired.
- The restructuring of a loan or advance by the company on terms that the company would not consider otherwise. 53.02.02.02: PD estimation process
It is an estimate of the likelihood of default over a given time horizon. PD estimation process is done based on historical internal data available with the company. While arriving at the PD, the company also ensures that the factors that affects the macro economic trends are considered to a reasonable extent, wherever necessary. company calculates the 12 month PD by taking into account the past historical trends of the portfolio and its credit performance. In case of assets where there is a significant increase in credit risk, lifetime PD has been applied which is computed based on survival analysis. For credit impaired assets, a PD of 100% has been applied.
53.02.02.03: Exposure at default (Bad)
The exposure at default (EAD) represents the gross carrying amount of the financial instruments subject to the impairment calculation, addressing both the ability to increase its exposure while approaching default and potential early repayments too.
To calculate the EAD for a Stage 1 loan, the company assesses the possible default events within 12 months for the calculation of the 12 months EcL.
For stage 2 and stage 3 financial assets, the exposure at default is considered for events over the lifetime of the instruments.
In case of undrawn loan commitments, a credit conversion factor of 100% is applied for expected drawdown.
53.02.02.04: Loss Given Default (LGD)
LGD is an estimate of the loss arising in case where a default occurs. It is based on the difference between the contractual cash flows due and those that the company would expect to receive, including from the realisation of any security.
53.02.02.05: Significant increase in credit risk(SICR)
The company continuously monitors all assets subject to EcLs in order to determine whether an instrument or a portfolio of instruments is subject to 12 month EcL or lifetime EcL. The company assesses whether there has been an event which could cause a significant increase in the credit risk of the underlying asset or the customersâ ability to pay and accordingly change the 12 month EcL to a lifetime EcL.
In certain cases, the company may also consider that events explained in Note 53.02.02.01 are a significant increase in credit risk as opposed to a default. Regardless of the above, if contractual payments are more than 30 days past due, the credit risk is deemed to have increased significantly since initial recognition.
When estimating EcLs on a collective basis for a company of similar assets (as set out in Note 53.02.02.07), the company applies the same principles for assessing whether there has been a significant increase in credit risk since initial recognition.
53.02.02.06: Forward looking information
The Company has incorporated forward looking information and macro-economic factors while calculating PD and LGD rate. Refer note 63 for impact of coVID-19 on estimate of Pd, LGD and SicR.
53.02.02.07: Grouping financial assets measured on a collective basis
As explained in Note 6.1.(xi) dependent on the factors below, the company calculates Eds only on a collective basis.
The company segments the exposure into smaller homogeneous portfolios, based on a combination of internal and external characteristics of the loans as described below.
1. new vehicle finance
2. Pre owned vehicle finance
3. Business Loans
53.02.03: Analysis of risk concentration
The maximum credit exposure to any individual client or counterparty as of March 31, 2022 was Rs. 61.13 crores (March 31, 2021: Rs. 52.22 crores).
53.03: Liquidity risk and funding management
in assessing the companyâs liquidity position, consideration shall be given to: (1) present and anticipated asset quality (2) present and future earnings capacity (3) historical funding requirements (4) current liquidity position (5) anticipated future funding needs, and (6) sources of funds. The Company maintains a portfolio of marketable assets that are assumed to be easily liquidated and undrawn cash credit limits which can be used in the event of an unforeseen interruption in cash flow. The Company also enters into securitisation deals (direct assignment as well as pass through certificates) of their loan portfolio, the funding from which can be accessed to meet liquidity needs. in accordance with the Companyâs policy, the liquidity position is assessed under a variety of scenarios, giving due consideration to stress factors relating to both the market in general and specifically to the Company. Net liquid assets consist of cash, short-term bank deposits and investments in mutual fund available for immediate sale, less issued securities and borrowings due to mature within the next month. Borrowings from banks and financial institutions, issue of debentures and bonds and acceptance of public deposits are considered as important sources of funds to finance lending to customers. They are monitored using the advances to borrowings ratio, which compares loans and advances to customers as a percentage of secured and unsecured borrowings.
The Board of Directors also approves constitution of Asset Liability Committee (ALCO), Asset Liability Management Committee(ALCO) reviews or monitors Asset Liability Management (ALM) mismatch. ALCO conducts periodic rev
Mar 31, 2021
Hedging activities and derivatives
The Company is exposed to certain risks relating to its ongoing business operations. The primary risks managed using derivative instruments are foreign currency risk and interest rate risk. The companyâs risk management strategy and how it is applied to manage risk are explained in Note 53.
Derivatives designated as hedging instruments
The Company had not designated any derivatives as hedging instruments till March 31, 2020. Since April 01, 2020, the Company designates its derivatives as hedging instruments to hedge the variability in cash flows associated with highly probable forecast transactions arising from changes in foreign exchange rates and interest rates. At inception of designated hedging relationships, the Company documents the risk management objective and strategy for undertaking the hedge. The Company also documents the economic relationship between the hedged item and the hedging instrument, including whether the changes in cash flows of the hedged item and hedging instrument are expected to offset each other. There is an economic relationship between the hedged item and the hedging instrument as the terms of the cross currency swap contract match that of the foreign currency borrowing (notional amount, interest payment dates, principal repayment date etc.). The Company has established a hedge ratio of 1:1 for the hedging relationships as the underlying risk of the hedging instruments are identical to the hedged risk components. To test the hedge effectiveness, the Company uses the hypothetical derivative method and compares the changes in the fair value of the hedging instruments against the changes in fair value of the hedged items attributable to the hedged risks.
Cash flow hedges
When a derivative is designated as a cash flow hedging instrument, the effective portion of changes in the fair value of the derivative is recognised in OCI and accumulated in other equity under âeffective portion of cash flow hedgesâ. The effective portion of changes in the fair value of the derivative that is recognised in OCI is limited to the cumulative change in fair value of the hedged item, determined on a present value basis, from inception of the hedge. Any ineffective portion of changes in the fair value of the derivative is recognised in the statement of profit and loss.
Derivatives not designated as hedging instruments
Till March 31, 2020, the Company used cross currency interest rate swaps, interest rate swaps, principal only swaps, forward contracts, interest rate caps to manage its interest rate risk and foreign currency risk arising from USD and EURO denominated External commercial borrowings and bonds. The derivative instruments were entered into for periods consistent with exposure of the underlying transactions. From April 01, 2020, there no undesignated derivatives.
Notes:
1) The interest rate risk and exchange rate risk on the borrowings of the Company are managed using various derivative instruments which are entered from time to time. The risk management strategy and the use of derivatives are explained in Note 53 - Risk Management and Note 80 - Derivatives.
2) The Company has designated the interest rate derivatives which were entered to mitigate interest rate risks on its external commercial bond and external commercial borrowings, as hedging instruments.
The impact of the hedging instrument on the Balance sheet as at March 31, 2021 is as follows:
(ii) Contractual obligations
The Company has no contractual obligations to purchase, construct or develop investment property. However, the responsibility for its repairs, maintenance or enhancements is with the company.
(iii) Fair value
The fair value of the investment property as at March 31, 2021 is Rs. 6.12 crores (March 31, 2020: Rs. 6.43 crores).
(iv) Pledged details
investment property is not pledged.
(v) Estimation of fair value
The fair values of investment property is determined by guidance value given by the local government of the area where the investment properties are located.
(vi) Leasing arrangements
investment properties are leased out to tenants. Agreements provide for cancellation by either party or contain clause for escalation and renewal of agreements. The non-cancellable operating lease agreement is for a period of 108 months.
The weighted average incremental borrowing rate of 9.09% has been applied to lease liabilities recognised in the balance sheet as at April 01, 2019 .
The difference between the operating lease commitments disclosed applying Ind As 17 as of March 31, 2019 and the value of the lease liability arrived using the incremental borrowing rate as of april 01, 2019 is primarily on account of exclusion of short term leases in measuring the lease liability in accordance with ind As 116.
The company does not face a significant liquidity risk with regard to its lease liabilities as the assets are sufficient to meet the obligations related to lease liabilities as and when they fall due.
This note provides information for leases where the Company is a lessor.
The company had given office premises under lease. The income from lease recognised in the Statement of Profit and Loss are Rs. 0.21 crore (March 31, 2020: Rs. 0.22 crore). agreements provide for cancellation by either party or contain clause for escalation and renewal of agreements. The non-cancellable operating lease agreement is for a period of 108 months. Future minimum lease receivables under non-cancellable leases as at March 31, 2021 are as follows:
Secured by specific assets covered under hypothecation loan agreements and by way of exclusive charge and equitable mortgage of immovable property.
The company had utilised the entire sum of Rs. 500.00 crores raised from public issue (net off expenses) towards asset financing activities as per the objects stated in the prospectus for the issue.
Debentures may be bought back subject to applicable statutory and/or regulatory requirements, upon the terms and conditions as may be decided by the company.
As per the terms of the issue NcD 2013 ( 2 ) Rs. 91.30 crores were redeemed on october 23, 2020.
As per the terms of the issue NcD 2013 ( 2 ) Rs. 114.68 crores were redeemed on october 23, 2018.
As per the terms of the issue Rs. 294.01 crores were redeemed on october 24, 2016. ii) Public issue of redeemable non-convertible debentures of Rs. 1,000/- each-(2014)
Nature of security
Secured by specific assets covered under hypothecation loan agreements and by way of exclusive charge and equitable mortgage of immovable property.
The company had utilised the entire sum of Rs. 1,974.85 crores raised from public issue (net off expenses) towards asset financing activities as per the objects stated in the prospectus for the issue.
Debentures may be bought back subject to applicable statutory and/or regulatory requirements, upon the terms and conditions as may be decided by the company.
As per the terms of the issue Rs. 427.15 crores were redeemed on July 15, 2019.
As per the terms of the issue Rs. 1,348.33 crores were redeemed on July 15, 2017.
Nature of security
Secured by specific assets covered under hypothecation loan agreements and by way of exclusive charge and equitable mortgage of immovable property.
The company had utilised the entire sum of Rs. 606.79 crores raised from public issue (net off expenses) for the purpose of onward disbursements as per the objects stated in the prospectus for the issue.
Nature of security
Secured by specific assets covered under hypothecation loan agreements and by way of exclusive charge and equitable mortgage of immovable property.
The company has utilised the entire sum of Rs. 339.94 crores raised from public issue (net off expenses) for the purpose of onward disbursements as per the objects stated in the prospectus for the issue.
On March 31, 2021, the Company issued and allotted USD 225,000,000 4.40% senior secured notes due 2024 in offshore market (Social Bonds) for sum of Rs.1,630.35 crores to be consolidated and form a single series with the u.S.$500,000,000 4.40 per cent Senior Secured Notes due 2024 issued on January 13, 2021 under uSD 3 Billion Global Medium Term Note Programme. The said Social Bonds were listed on Singapore Stock Exchange (SGX- St) on April 01, 2021. The proceeds of the issue of the Social Bonds are being utilised as per the companyâs Social Finance Framework, for onward lending and other activities as permitted by the RBI Master Direction â External Commercial Borrowings, Trade Credits and Structured obligations.
On January 13, 2021, the Company issued and allotted USD 500,000,000 4.40% Senior Secured Notes due 2024 in offshore market (Social Bonds) for sum of USD 499,950,000 equivalent to Rs. 3,672.50 crores under USD 3 Billion GMTN Programme. The said Social Bonds were listed on Singapore Stock Exchange (SGX-ST) on January 14, 2021. The proceeds of the issue of the Social Bonds are being utilised as per the Companyâs Social Finance Framework, for onward lending and other activities as permitted by the RBI Master Direction - External Commercial Borrowings, Trade Credits, and Structured Obligations.
During the year ended March 31, 2020, the Company issued and allotted USD 250,000,000 5.3750% senior secured notes due 2022 in offshore market (notes) equivalent to Rs. 1,714.38 crores under USD 2,000,000,000 Global Medium Term Note Programme. The said notes are listed on Singapore Stock Exchange (SGX- ST). The proceeds of the issue of the notes have been utilised for the purpose of onward lending and other activities as may be permitted by the ECB Directions.
During the year ended March 31, 2020, the Company issued and allotted USD 500,000,000 5.100% senior secured notes due 2023 in offshore market (Social Bonds) equivalent to Rs. 3,541.75 crores under USD 3,000,000,000 Global Medium Term Note Programme. The said Social Bonds are listed on Singapore Stock Exchange (SGX- ST). The proceeds of the issue of the Social Bonds have been utilised for the purpose of onward lending and other activities as per the Companyâs Social Finance Framework and as may be permitted by the ECB Directions.
During the year ended March 31, 2019, the Company issued and allotted senior secured notes in offshore market (notes) aggregating to INR 2,849.90 crores consisting of 5.70% notes due 2022 under INR 5,000 crores Medium Term Note Programme. The notes issued by the Company are listed on Singapore Stock Exchange (SGX- ST). The proceeds of the issue have been utilised for the purpose of onward disbursements.
Nature of security
Secured by way of an exclusive fixed charge over hypothecation loan receivables of the Company.
During the year ended March 31, 2018, the Company had issued senior secured notes in offshore market (notes) aggregating to INR 1,160 crores consisting of INR 840 crores 8.10% notes due 2023 and INR 320 crores 7.90% notes due 2021 payable in US dollars under INR 5,000 crores Medium Term Note Programme. The notes issued by the Company are listed on Singapore Stock Exchange (SGX- ST).
The Company had utilised the entire sum of Rs. 1,160.00 crores raised from Senior secured notes towards asset financing activities as per the objects stated in the prospectus for the issue.
During the year ended March 31, 2017, the Company had issued Rs. 1,350.00 crores 8.25 % senior secured notes at the price of 100.18% that are due for repayment on February 18, 2020. The said notes (with ISIN - XS 1549374475) are listed and traded on the Singapore Exchange (SGX-ST) with a minimum board lot size of S $200,000.
# On August 06, 2020, the Company allotted fully paid-up 261,78,777 Equity Shares of face value of Rs. 10/- each to the eligible equity shareholders at an issue price of Rs. 570/- per equity Share (including premium of Rs. 560/- per equity Share) in the Rights Issue, which opened on July 16, 2020 and closed on July 30, 2020. The entire proceeds of the Rights Issue have been utilised as per the objects stated in the offer document for the Rights issue. The fresh allotment of equity shares through Rights issue as stated above has resulted in an increase of equity share capital by Rs. 26.18 crores and securities premium reserve by Rs. 1,446.46 crores (net of share issue expenses of Rs. 19.55 crores).
b. Terms/ rights attached to equity shares
The company has only one class of equity shares having a par value of Rs. 10/- per share. each holder of equity shares is entitled to one vote per share. The dividend is subject to the approval of the shareholders in the ensuing annual general meeting.
During the year ended March 31, 2021, the total dividend per equity share proposed for distribution to equity shareholders is Rs. 18.00 (March 31, 2020 : Rs. 5.00). out of the said total dividend proposed for the year ended March 31, 2021, the total amount of interim dividend declared during the year was Rs. 12.00 (March 31, 2020 : Rs. 5.00) per equity share and amount of final dividend proposed by the Board of directors is Rs. 6.00 (March 31, 2020: Rs. Nil) per equity share. The Board of Directors at its meeting held on october 29, 2020, had declared interim dividend of Rs. 6 /- per equity share of Rs. 10/- each for the financial year 2020-2021. The payment was made on november 26, 2020. The Board of directors at its meeting held on March 25, 2021, had declared interim dividend of Rs. 6 /- per equity share of Rs. 10/- each for the financial year 2020-2021. The payment was made on april 16, 2021.
in the event of liquidation of the company, the holders of equity shares will be entitled to receive remaining assets of the company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.
Securities premium: The amount received in excess of face value of the equity shares is recognised in Securities premium. In case of equity-settled share based payment transactions, the difference between fair value on grant date and nominal value of share is accounted as securities premium. The reserve can be utilised only for limited purposes such as issuance of bonus shares in accordance with the provisions of the companies Act, 2013.
Capital reserve: capital reserve is the excess of net assets taken over cost of consideration paid during amalgamation. Capital redemption reserve: The company has recognised capital redemption reserve on redemption of non-convertible redeemable preference shares from its retained earnings. The amount in capital redemption reserve is equal to nominal amount of the non-convertible redeemable preference shares redeemed. The company may issue fully paid up bonus shares to its members out of the capital redemption reserve.
Debenture redemption reserve:
(1) Pursuant to Section 71 of the companies act, 2013 and circular 04/2013, read with notification issued date June 19, 2016 issued by Ministry of corporate affairs, the company is required to transfer 25% of the value of the outstanding debentures issued through public issue as per the present SEBi (issue and Listing of Debt Securities) Regulation, 2008 to debenture redemption reserve (DRR) and no DRR is required in case of privately placed debenture. AIso the company is required before 30th day of april of each year to deposit or invest, as the case may be, a sum which shall not be less than 15% of the amount of its debenture issued through public issue maturing within one year from the Balance sheet date.
(2) As per the notification G.S.R. 574(E) dated august 16, 2019, the Ministry of corporate affairs has amended the companies (Share capital & debentures) Rules, DRR need not be created for debentures issued by a Non-Banking Finance company subsequent to the notification date. The company has not created DRR on public issue of nonconvertible debentures issued after the date of said notification.
(3) in respect of the debentures issued through public issue, the company has created DRR of Rs. 337.87 crores (March 31, 2020: Rs. 345.26 crores). The company subsequent to the year end has deposited a sum of Rs. 498.41 crores (March 31, 2020: Rs. 15.84 crores) in the form of fixed deposits with scheduled banks, representing 15% of the debenture issued through public issue, which are due for redemption within one year from the balance sheet date.
(4) on redemption of the debentures for which the DRR is created, the amounts no longer necessary to be retained in this account need to be transferred to the Retained earnings.
General reserve: Under the erstwhile Companies Act, 1956, general reserve was created through an annual transfer of net income at a specified percentage in accordance with applicable regulations. consequent to introduction of companies act, 2013, the requirement to mandatorily transfer a specified percentage of the net profit to general reserve has been withdrawn. However, the amount previously transferred to the general reserve can be utilised only in accordance with the specific requirements of companies act, 2013.
Statutory reserve: Every year the company transfers a of sum of not less than twenty per cent of net profit of that year as disclosed in the statement of profit and loss to its Statutory Reserve pursuant to Section 45-ic of the RBI AcE 1934.
The conditions and restrictions for distribution attached to statutory reserves as specified in Section 45-IC(1) in The Reserve Bank of india Act, 1934:
(1) every non-banking financial company (NBFc) shall create a reserve fund and transfer therein a sum not less than twenty per cent of its net profit every year as disclosed in the profit and loss account and before any dividend is declared.
(2) No appropriation of any sum from the reserve fund shall be made by the NBFc except for the purpose as may be specified by the RBi from time to time and every such appropriation shall be reported to the RBi within twenty-one days from the date of such withdrawal:
Provided that the RBi may, in any particular case and for sufficient cause being shown, extend the period of twenty-one days by such further period as it thinks fit or condone any delay in making such report.
(3) notwithstanding anything contained in sub-section (1), the central Government may, on the recommendation of the RBi and having regard to the adequacy of the paid-up capital and reserves of a NBFc in relation to its deposit liabilities, declare by order in writing that the provisions of sub-section (1) shall not be applicable to the NBFc for such period as may be specified in the order:
Provided that no such order shall be made unless the amount in the reserve fund under sub-section (1) together with the amount in the share premium account is not less than the paid-up capital of the NBFc.
Retained earnings: Retained earnings are the profits that the company has earned till date, less any transfers to statutory reserve, debenture redemption reserve, general reserve, dividends distributions paid to shareholders and transfer from debenture redemption reserve.
other comprehensive income: other comprehensive income includes cash flow hedge reserve and remeasurement gain/(loss) on defined benefit plan
a) cash flow hedge reserve represents the cumulative effective portion of gains or losses arising on changes in fair value of hedging instruments entered into for cash flow hedges, which shall be reclassified to the statement of profit and loss only when the hedged transaction affects the statement of profit and loss, or included as a basis adjustment to the non-financial hedged item, consistent with the company accounting policies.
b) Remeasurement gain/(loss) on defined benefit plan: Re-measurement, comprising of actuarial gains and losses and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability), are recognised immediately in the balance sheet with a corresponding debit or credit to retained earnings through oci in the period in which they occur. Remeasurements are not reclassified to the statement of profit and loss in subsequent periods.
a) Defined contribution plan
A defined contribution plan is a pension plan under which the Company pays fixed contributions; there is no legal or constructive obligation to pay further contributions. The assets of the plan are held separately from those of the company in a fund under the control of trustees.
The company makes Provident fund and Employee State Insurance Scheme contributions which are defined contribution plans for qualifying employees. under the schemes, the company is required to contribute a specified percentage of the payroll costs to fund the benefits. The company recognised Rs 42.95 crores (March 31, 2020: Rs. 41.06 crores) for Provident fund contributions and Rs. 10.30 crores (March 31, 2020: Rs. 12.54 crores) for employee State insurance Scheme contributions in the Statement of Profit and Loss. The contributions payable to these plans by the company are at rates specified in the rules of the schemes.
b) Defined benefit plan Gratuity
The company has a defined benefit gratuity plan (funded). The gratuity plan is governed by the Payment of Gratuity Act, 1972. under the act, employee who has completed five years of service is entitled to specific benefit. The level of benefits provided depends on the memberâs length of service and last drawn salary. The fund is managed by third party fund managers.
Each year, the Board of Trustees reviews the level of funding in the gratuity plan. Such a review includes the asset-liability matching strategy and investment risk management policy. This includes employing the use of annuities and longevity swaps to manage the risks. The Board of Trustees decides contribution to be made by the company based on the results of this annual review. The trust is in process of investing entire funds in government securities through third party fund managers and as on March 31, 2021, 85.82 % funds are invested in government securities and balance 14.18 % funds are invested in other equity and debt instruments. The Board of Trustees aim to keep annual contributions of the company relatively stable at a level such that no plan deficits (based on valuation performed) will arise.
The Company maintains an actively managed capital base to cover risks inherent in the business which includes issued equity capital, share premium and all other equity reserves attributable to equity holders of the company.
As an NBFc, the RBI requires us to maintain a minimum capital to risk weighted assets ratio (âcRARâ) consisting of Tier I and tier ii capital of 15% of our aggregate risk weighted assets. Further, the total of our tier ii capital cannot exceed 100% of our tier i capital at any point of time. The capital management process of the company ensures to maintain a healthy cRAR at all the times. Refer note 78 for the companyâs capital ratios.
The primary objectives of the companyâs capital management policy are to ensure that the company complies with externally imposed capital requirements and maintains strong credit ratings and healthy capital ratios in order to support its business and to maximise shareholder value.
The company manages its capital structure and makes adjustments to it according to changes in economic conditions and the risk characteristics of its activities. in order to maintain or adjust the capital structure, the company may adjust the amount of dividend payment to shareholders, return capital to shareholders or issue capital securities. No changes have been made to the objectives, policies and processes from the previous years except those incorporated on account of regulatory amendments. However, they are under constant review by the Board. The company has complied with the notification RBi/2019-20/170 DOR (NBFc).cc.PD.No.109/22.10.106/2019-20 âimplementation of indian Accounting Standardsâ.
52^ FAIR VALUE MEASUREMENT 52.01: Valuation principle
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction in the principal (or most advantageous) market at the measurement date under current market conditions (i.e., an exit price), regardless of whether that price is directly observable or estimated using a valuation technique. in order to show how fair values have been derived, financial instruments are classified based on a hierarchy of valuation techniques, as explained in Note 6.1 (xiii).
52.02: Fair value hierarchy of assets and liabilities
Fair values of financial assets, other than those which are subsequently measured at amortised cost, have been arrived at as under:
Equity instruments
Investment in units of mutual funds are measured based on their published net asset value (NAV), taking into account redemption and/or other restrictions. Such instruments are generally Level 2. Equity instruments in non-listed entities are initially recognised at transaction price and re-measured (to the extent information is available) and valued on a case-bycase and classified as level 3.
Derivative Financial Instruments
Foreign exchange contracts include foreign exchange forward and swap contracts, interest rate swaps and over- the-counter foreign exchange options. These instruments are valued by either observable foreign exchange rates, observable or calculated forward points and option valuation models. With the exception of contracts where a directly observable rate is available which are disclosed as level 1, the company classifies derivative financial instruments as level 2 financial instruments when no unobservable inputs are used for their valuation or the unobservable inputs used are not significant to the measurement (as a whole).
Certificate of deposits (CDs)
certificate of deposits are short-term financial instruments issued by Banks. Financial Benchmark india Private ltd (FBH) has developed the FBTh- cD, a new benchmark for the money market based on traded cDs reported on the FIMMDA Trade Reporting and confirmation System (FTRAc) platform of The clearing corporation of india ltd (ccIL). FBIL-cD is announced for seven tenors of 14 days, 1 month, 2 months, 3 months, 6 months, 9 months and 12 months. For valuation, the company uses FBIL-cD benchmark and based on that benchmark the company interpolates and calculates cD prices corresponding to their residual maturities and such instruments are classified as level 2.
52.04: Transfer between fair value hierarchy levels
During the year there were no transfers between level 1 and level 2. Similarly, there were no transfers from or transfer to level 3.
52.05: Movements in Level 3 financial instruments measured at fair value
The following tables show a reconciliation of the opening and closing amounts of level 3 financial assets and liabilities which are recorded at fair value. transfers from level 3 to level 2 occur when the market for some securities became more liquid, which eliminates the need for the previously required significant unobservable valuation inputs. Since the transfer, these instruments have been valued using valuation models incorporating observable market inputs. Transfers into level 3 reflect changes in market conditions as a result of which instruments become less liquid. Therefore, the company requires significant unobservable inputs to calculate their fair value.
52.07: Sensitivity of fair value measurements to changes in unobservable market data
The table below describes the effect of changing the significant unobservable inputs to reasonable possible alternatives. All changes would be reflected in the Statement of profit and loss. Sensitivity data are calculated using a number of techniques, including analysing price dispersion of different price sources, adjusting model inputs to reasonable changes within the fair value methodology.
The ranges are not comparable or symmetrical as the model inputs are usually not in the middle of the favourable/ unfavourable range.
The table below shows data in relation to level 3 inputs that are already aggregated on the underlying product levels without assuming any potential diversification effect, but including potential off-sets from economic or accounting hedge relationships in place. The company is of the opinion that, whilst there may be some diversification benefits, incorporating
these would not be significant to the analysis
Note:
The management assessed that cash and cash equivalents, trade receivables, trade payables, other receivables, other payables, bank overdrafts and other financial liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments.
52.09: Valuation methodologies of financial instruments not measured at fair value
Below are the methodologies and assumptions used to determine fair values for the above financial instruments which are not recorded and measured at fair value in the companyâs financial statements. These fair values were calculated for disclosure purposes only. The below methodologies and assumptions relate only to the instruments in the above tables.
Short-term financial assets and liabilities
For financial assets and financial liabilities that have a short-term maturity (less than twelve months), the carrying amounts, which are net of impairment, are a reasonable approximation of their fair value. Such instruments include: trade receivables, other receivables, balances other than cash and cash equivalents and trade payables without a specific maturity.
Loans and advances to customers
The fair values of loans and receivables are estimated by discounted cash flow models based on contractual cash flows using actual yields.
pass through certificates
These instruments include asset backed securities. The market for these securities is not active. Therefore, the Company uses a variety of valuation techniques to measure their fair values. Expected cash flow levels are estimated by using quantitative and qualitative measures regarding the characteristics of the underlying assets including prepayment rates, default rates and other economic drivers such as loan-to-value ratios, emergence period estimation, indebtedness and rental income levels. Instruments with no comparable instruments or valuation inputs are classified as Level 3.
Investment in associate at cost
Investment in associate: As per Ind AS 28 Interest in associate are recognised at cost and not adjusted to fair value at the end of each reporting period. Cost represents amount paid for acquisition of the said investments. Loan and other similar arrangements with subsidiaries which are probable to be settled for a fixed number of equity share of the borrower for a fixed price are classified as equity investment. The company assesses at the end of each reporting period, if there are any indications that the said investments may be impaired. If so, the Company estimates the recoverable value/amount of the investment and provides for impairment, if any i.e. the deficit in the recoverable value over cost.
5^ FAIR VALUE MEASUREMENT (Contd.)
Investment in government securities at amortised cost
The fair values financial assets held-to-maturity investments are estimated using a discounted cash flow model based on contractual cash flows using actual or estimated yields and discounting by yields incorporating the counterpartiesâ credit risk.
Issued debt and borrowings
The fair value of issued debt is estimated by a discounted cash flow model incorporating interest rate from market-observable data such as secondary prices for its traded debt.
Deposits
The fair value of public deposits and deposit from corporates is estimated by discounting the future cash flows considering the interest rate applicable on the reporting date for deposits of similar tenure and scheme (cumulative/non-cumulative). Inter-corporate deposits are estimated at their carrying amounts due to the short-term maturities of these deposits.
off-balance sheet positions
Estimated fair values of off-balance sheet positions are based on the carrying amounts due to the short-term maturities of these positions.
risk management
Whilst risk is inherent in the Companyâs activities, it is managed through an integrated risk management framework including ongoing identification, measurement and monitoring, subject to risk limits and other controls. This process of risk management is critical to the companyâs continuing profitability and each individual within the company is accountable for the risk exposures relating to his or her responsibilities. The Company is exposed to credit risk, liquidity risk and market risk. It is also subject to various operating and business risks.
53.01: Introduction and risk profile
53.01.01: Risk management structure
The Board of Directors are responsible for the overall risk management approach and for approving the risk management strategies and principles.
The Board has constituted the Risk Management Committee which is responsible for monitoring the overall risk process within the Company.
The Risk Management Committee has the overall responsibility for the development of the risk strategy and implementing principles, frameworks, policies and limits. The Risk Management Committee is responsible for managing risk decisions and monitoring risk levels.
The Chief Risk officer is responsible for implementing and maintaining risk related procedures to ensure an independent control process is maintained. The Risk owners within each department will report to the Risk Committee.
The Risk owners are responsible for monitoring compliance with risk principles, policies and limits across the Company. Each department has its Risk owner who is responsible for the control of risks, including monitoring the actual risk of exposures against authorised limits and the assessment of risks.
The Companyâs Treasury is responsible for managing its assets and liabilities and the overall financial structure. It is also primarily responsible for the funding and liquidity risks of the Company.
The Companyâs policy is that risk management processes throughout the Company are audited annually by the Internal Audit function, which examines both the adequacy of the procedures and the Companyâs compliance with the procedures. Internal Audit discusses the results of all assessments with management, and reports its findings and recommendations to Risk Management Committee.
53.01.02: Risk mitigation and risk culture
As part of its overall risk management, the Company can use derivatives and other instruments to manage exposures resulting from changes in interest rates and foreign currencies associated with foreign currency transactions.
53.01.03: Risk measurement and reporting systems
The Companyâs risks are measured using a method that reflects both the expected loss likely to arise in normal circumstances and unexpected losses, which are an estimate of the ultimate actual loss. The models make use of probabilities derived from historical experience, adjusted to reflect the economic environment, as necessary.
The Companyâs policy is to measure and monitor the overall risk-bearing capacity in relation to the aggregate risk exposure
across all risk types and activities.
information compiled from all the departments is examined and processed in order to analyse, control and identify risks on a timely basis. This information is presented and explained to the Risk Management committee and the head of each department.
The Risk Management committee receives a comprehensive risk report once a quarter which is designed to provide all the necessary information to assess and conclude on the risks of the company.
it is the companyâs policy to ensure that a robust risk awareness is embedded in its organisational risk culture. Employees are expected to take ownership and be accountable for the risks the company is exposed to that they decide to take on. The companyâs continuous training and development emphasises that employees are made aware of the companyâs risk appetite and they are supported in their roles and responsibilities to monitor and keep their exposure to risk within the companyâs risk appetite limits. compliance breaches and internal audit findings are important elements of employeesâ annual ratings and remuneration reviews.
53.01.04: Excessive risk concentration
concentrations arise when a number of counterparties are engaged in similar business activities, or activities in the same geographical region, or have similar economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic, political or other conditions.
in order to avoid excessive concentrations of risk, the companyâs policies and procedures include specific guidelines to focus on spreading its lending portfolio across all the states with a cap on maximum limit of exposure for a state and also for an individual/Group.
53.02: Credit risk
credit risk is the risk that the company will incur a loss because its customers or counterparties fail to discharge their contractual obligations. The company manages and controls credit risk by setting limits on the amount of risk it is willing to accept for individual counterparties and for geographical concentrations, and by monitoring exposures in relation to such limits.
credit risk is monitored by the credit department of the company. it is their responsibility to review and manage credit risk, including environmental and social risk for all types of counterparties. credit risk consists of line credit managers who are responsible for their business lines and manage specific portfolios and experts who support both the line credit manager, as well as the business with tools like credit risk systems, policies, models and reporting.
The company has established a credit quality review process to provide early identification of possible changes in the creditworthiness of counterparties.
The credit quality review process aims to allow the company to assess the potential loss as a result of the risks to which it is exposed and take corrective actions.
The companyâs internal credit rating grades on days past due(dpd) basis:
|
internal rating grade |
internal rating description |
|
performing |
|
|
High grade |
0 dpd |
|
Standard grade |
1 to 30 dpd |
|
Sub-standard grade |
31 to 60 dpd |
|
Past due but not impaired |
61 to 90 dpd |
|
Non-performing |
90 dpd |
53.02.01: Derivative financial instruments
credit risk arising from derivative financial instruments is, at any time, limited to those with positive fair values, as recorded on the balance sheet.
With gross-settled derivatives, the company is also exposed to a settlement risk, being the risk that the company honours its obligation, but the counterparty fails to deliver the counter value.
53.02.02: Impairment assessment
The references below show where the companyâs impairment assessment and measurement approach is set out in this report. it should be read in conjunction with the Summary of significant accounting policies.
The companyâs definition and assessment of default (Note 53.02.02.01).
- How the company defines, calculates and monitors the probability of default, exposure at default and loss given default (Notes 53.02.02.02 to 53.02.02.04)
- When the company considers there has been a significant increase in credit risk of an exposure (Note 53.02.02.05)
- The companyâs policy of segmenting financial assets where EcL is assessed on a collective basis (Note 53.02.02.06)
- The details of the EcL calculations for stage 1, stage 2 and stage 3 assets (Note 6.1.xi)
53.02.02.01: Definition of default
The Company considers a financial instrument defaulted and therefore stage 3 (credit-impaired) for ECL calculations in all cases when the borrower becomes 90 days past due on its contractual payments.
As a part of a qualitative assessment of whether a customer is in default, the company also considers a variety of instances that may indicate unlikeliness to pay. When such events occur, the company carefully considers whether the event should result in treating the customer as defaulted and therefore assessed as stage 3 for EcL calculations or whether stage 2 is appropriate. Such events include:
- The borrower requesting emergency funding from the company.
- a material decrease in the underlying collateral value where the recovery of the loan is expected from the sale of the collateral.
- A covenant breach not waived by the company.
- The debtor (or any legal entity within the debtorâs company) filing for bankruptcy application/protection.
- All the facilities of a borrower are treated as stage 3 when one of his facility becomes 90 days past due i.e. credit impaired.
- The restructuring of a loan or advance by the company on terms that the company would not consider otherwise. 53.02.02.02: PD estimation process
It is an estimate of the likelihood of default over a given time horizon. PD estimation process is done based on historical internal data available with the company. While arriving at the PD, the company also ensures that the factors that affects the macro economic trends are considered to a reasonable extent, wherever necessary. company calculates the 12 month PD by taking into account the past historical trends of the portfolio and its credit performance. In case of assets where there is a significant increase in credit risk, lifetime PD has been applied which is computed based on survival analysis. For credit impaired assets, a PD of 100% has been applied.
53.02.02.03: Exposure at default (EAD)
The exposure at default (EAD) represents the gross carrying amount of the financial instruments subject to the impairment calculation, addressing both the ability to increase its exposure while approaching default and potential early repayments too.
To calculate the EAD for a Stage 1 loan, the company assesses the possible default events within 12 months for the calculation of the 12 months EcL.
For stage 2 and stage 3 financial assets, the exposure at default is considered for events over the lifetime of the instruments.
In case of undrawn loan commitments, a credit conversion factor of 100% is applied for expected drawdown.
53.02.02.04: Loss Given default (LGD)
LGD is an estimate of the loss arising in case where a default occurs. It is based on the difference between the contractual cash flows due and those that the company would expect to receive, including from the realisation of any security.
53.02.02.05: Significant increase in credit risk(SICR)
The company continuously monitors all assets subject to EcLs in order to determine whether an instrument or a portfolio of instruments is subject to 12 month EcL or lifetime EcL. The company assesses whether there has been an event which could cause a significant increase in the credit risk of the underlying asset or the customersâ ability to pay and accordingly change the 12 month EcL to a lifetime EcL.
In certain cases, the company may also consider that events explained in Note 53.02.02.01 are a significant increase in credit risk as opposed to a default. Regardless of the above, if contractual payments are more than 30 days past due, the credit risk is deemed to have increased significantly since initial recognition.
When estimating EcLs on a collective basis for a company of similar assets (as set out in Note 53.02.02.06), the company applies the same principles for assessing whether there has been a significant increase in credit risk since initial recognition.
53.02.02.06: Forward looking information
The Company has incorporated forward looking information and macro-economic factors while calculating PD and LGD rate. Refer note 63 for impact of coVID-19 on estimate of Pd, LGD and SicR.
53.02.02.07: Grouping financial assets measured on a collective basis
As explained in Note 6.1.(xi) dependent on the factors below, the company calculates Eds only on a collective basis.
The company segments the exposure into smaller homogeneous portfolios, based on a combination of internal and external characteristics of the loans as described below.
1. new vehicle finance
2. Pre owned vehicle finance
3. Business Loans
53.02.03: Analysis of risk concentration
The maximum credit exposure to any individual client or counterparty as of March 31, 2021 was Rs. 52.22 crores (March 31, 2020: Rs. 51.01 crores).
53.03: Liquidity risk and funding management
in assessing the companyâs liquidity position, consideration shall be given to: (1) present and anticipated asset quality (2) present and future earnings capacity (3) historical funding requirements (4) current liquidity position (5) anticipated future funding needs, and (6) sources of funds. The Company maintains a portfolio of marketable assets that are assumed to be easily liquidated and undrawn cash credit limits which can be used in the event of an unforeseen interruption in cash flow. The Company also enters into securitisation deals (direct assignment as well as pass through certificates) of their loan portfolio, the funding from which can be accessed to meet liquidity needs. in accordance with the Companyâs policy, the liquidity position is assessed under a variety of scenarios, giving due consideration to stress factors relating to both the market in general and specifically to the Company. Net liquid assets consist of cash, short-term bank deposits and investments in mutual fund available for immediate sale, less issued securities and borrowings due to mature within the next month. Borrowings from banks and financial institutions, issue of debentures and bonds and acceptance of public deposits are considered as important sources of funds to finance lending to customers. They are monitored using the advances to borrowings ratio, which compares loans and advances to customers as a percentage of secured and unsecured borrowings. Asset Liability Management Committee(ALCO) reviews or monitors Asset Liability Management (ALM) mismatch. ALCO conducts periodic reviews relating to the liquidity position and stress test assuming various what if scenarios.
The Board of Directors also approves constitution of Asset Liability Committee (ALCO), Asset Liability Management Committee(ALCO) reviews or monitors Asset Liability Management (ALM) mismatch. ALCO conducts periodic reviews relating to the liquidity position and stress test assuming various what if scenarios. The ALCO is responsible for ensuring adherence to the limits set by the Board as well as for deciding the business strategy of the Company in line with the Companyâs budget and decided risk management objectives. The ALCO is a decision-making unit responsible for balance sheet planning from risk-return perspective including strategic management of interest rate and liquidity risks. The ALCO also evaluates the Borrowing Plan of subsequent quarters on the basis of previous borrowings of the company. The ALCO will be responsible for ensuring the adherence to the target set by the Board of Directors. The meetings of ALCO are held at quarterly intervals. The ALM Support Groups consisting of operating staff are responsible for analysing, monitoring and reporting the risk profiles to the ALCO. ALCO support group meets every fortnight. The minutes of ALCO meetings are placed before the RMC and the Board of Directors in its next meeting for its ratification.
53.04: Market Risk
Market risk that the fair value or future cash flows of financial instruments will fluctuate due to changes in market variables such as interest rates, foreign exchange rates and equity prices. The company classifies exposures to market risk into either trading or non-trading portfolios and manages each of those portfolios separately.
Interest rate risk
The Companyâs exposure to changes in interest rates relates to the Companyâs outstanding floating rate liabilities. Most of the Companyâs outstanding liability is on fixed rate basis and hence not subject to interest rate risk. Some of the borrowings of the Company are linked to rate benchmarks such as Bank Marginal Cost of Funds based Lending Rate (MCLR) or London Inter-bank Offered Rate (LIBOR) and Mumbai Inter-Bank Offer Rate (MIBOR) and hence subject to interest rate risk. The Company hedges interest rate risks of foreign currency borrowings through derivative transactions. The sensitivity of the Companyâs floating rate borrowings to change in interest rate (assuming all other variables constant) is given below:
Inter-bank Offered Rate (IBOR) reform
Following the decision by global regulators to phase out Inter-bank Offered Rate (IBORs) and replace them with alternative reference rates, the Company is closely monitoring the global and local developments in respect of the IBOR transition and is in the process of establishing a project to manage the transition of its contracts.
The table below shows the Companyâs exposure at the year end to significant IBORs subject to reform that have yet to transition to alternative Risk Free Rates (RFRs). These exposures will remain outstanding until the IBOR ceases and will therefore transition in future and the table excludes exposures to IBOR that will expire before transition is required. The derivative hedging instruments provide a close approximation to the extent of the risk exposure the Company manages through hedging relationships.
Foreign Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. The company is exposed to foreign currency fluctuation risk for its foreign currency borrowing. The companyâs borrowings in foreign currency are governed by RBI Master Direction External Commercial Borrowings, Trade Credits and Structured Obligations dated March 26, 2019 (as and when updated) which requires entities raising External Commercial Borrowings (ECB) for an average maturity of less than 5 years to hedge minimum 70% of the its ECB exposure. The Company hedges its entire ECB and external commercial bond exposure as per Board approved hedging policy and resource mobilisation policy. The Company manages foreign currency risk by entering in to cross currency swaps and forward contract. When a derivative is entered in to for the purpose of being a hedge, the Company negotiates the terms of those derivatives to match with the terms of the hedge exposure. The Company holds derivative financial instruments such as Cross currency interest rate swap to mitigate risk of changes in exchange rate in foreign currency and floating interest rate. The Counterparty for these contracts is generally a bank. These derivative financial instruments are valued based on quoted prices for similar assets and liabilities in active markets or inputs that are directly or indirectly observable in market place. Refer Note 22 B and 23 C, respectively for terms and conditions of external commercial bonds and external commercial borrowings.
The Companyâs hedging policy only allows for effective hedge relationships to be established. Hedge effectiveness is determined at the inception of the hedge relationship, and through periodic prospective effectiveness assessments to ensure that an economic relationship exists between the hedged item and hedging instrument. The company enters into hedge relationships where the critical terms of the hedging instrument match exactly with the terms of the hedged item, and so a qualitative assessment of effectiveness is performed. If changes in circumstances affect the terms of the hedged item such that the critical terms no longer match exactly with the critical terms of the hedging instrument, the company uses the hypothetical derivative method to assess effectiveness.
ineffectiveness is recognised on a cash flow hedge where the cumulative change in the designated component value of the hedging instrument exceeds on an absolute basis the change in value of the hedged item attributable to the hedged risk. in such cases, ineffectiveness may arise if:
(a) The critical terms of the hedging instrument and the hedged item differ (i.e. nominal amounts, timing of the forecast transaction, interest resets changes from what was originally estimated), or
(b) differences arise between the credit risk inherent within the hedged item and the hedging instrument.
There were no ineffectiveness recognised in the statement of profit and loss during March 31, 2021.
There were no other sources of ineffectiveness in these hedge relationships.
5^ DISCLOSURE REGARDING AUDITORS REMUNERATION DISCLOSED UNDER LEGAL AND PROFESSIONAL FEES
In addition to the auditors remuneration shown in note 42 Other expenses, the Company has also incurred auditors remuneration in connection with audit and related statutory services to be performed by auditors in connection with issue of senior secured notes of Rs. 0.34 crores (March 31, 2020: Rs. 0.83 crores) shown under Legal and professional fees in note 42 other expenses.
5^ DISCLOSURE REGARDING AUDITORS REMUNERATION DISCLOSED UNDER FINANCE COST
In addition to the auditors remuneration shown under note 42 other expenses, the company has also incurred auditors remuneration in connection with audit and related statutory services to be performed by auditors in connection with public issue of non-convertible debentures of Rs. Nil (March 31, 2020: Rs.0.36 crores) amortised portion of which is included in note 37 Finance costs under interest on debentures and unamortised portion of which is included in note 22 Debt securities under Redeemable non-convertible debentures - Secured -Public issue.
57 DISCLOSURE REGARDING AUDITORS REMUNERATION DISCLOSED UNDER RIGHT ISSUE EXPENSES
in addition to the auditors remuneration shown in note 42 other expenses, the company has also incurred auditors remuneration in connection with audit and related statutory services to be performed by auditors in connection with issue of Right Shares of Rs. 0.27 crores (March 31, 2020: Rs. Ml) netted off against Securities premium under other equity in note 31 other equity.
The company is primarily engaged in the business of financing and there are no separate reportable segments identified as per the ind AS 108 - Segment Reporting.
TRANSFER OF FINANCIAL ASSETSNote 59.01: Transferred financial assets that are not derecognised in their entirety
The following table provides a summary of financial assets that have been transferred in such a way that part or all of the transferred financial assets do not qualify for derecognition, together with the associated liabilities.
The Company had granted moratorium upto six months on the payment of installments falling due between March 01, 2020 and August 31, 20
Mar 31, 2019
1. CORPORATE INFORMATION
Shriram Transport Finance Company Limited (the Company) is a public company domiciled in India and incorporated under the provisions of the Companies Act, 1956. Its shares are listed on BSE Limited and National Stock Exchange of India Limited. The Company is primarily engaged in the business of financing commercial vehicles. It also provides loans for equipment and other business purposes. The Company is registered with the Reserve Bank of India (RBI), Ministry of Corporate Affairs and Insurance Regulatory and Development Authority of India (IRDA). The registration details are as follows:
RBI 07-00459
Corporate Identity Number (CIN) L65191TN1979PLC007874
IRDA CA0197
The Company is associate of Shriram Capital Limited.
The registered office of the Company is Mookambika Complex, 3rd floor, No.4, Lady Desika Road, Mylapore, Chennai -600 004. The principal place of business is Wockhardt Towers, West Wing, Level-3, C-2, G-Block, Bandra -Kurla Complex, Bandra (East), Mumbai, Maharashtra- 400 051.
The financial statements of the Company for the year ended March 31, 2019 were approved for issue in accordance with the resolution of the Board of Directors on May 08, 2019.
2. BASIS OF PREPARATION
The financial statements of the Company have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under the Companies (Indian Accounting Standards) Rules, 2015 (as amended from time to time).The financial statements have been prepared under the historical cost convention, as modified by the application of fair value measurements required or allowed by relevant Accounting Standards. Accounting policies have been consistently applied to all periods presented, unless otherwise stated.
The preparation of financial statements requires the use of certain critical accounting estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosed amount of contingent liabilities. Areas involving a higher degree of judgement or complexity, or areas where assumptions are significant to the Company are discussed in Note 6- Significant accounting judgements, estimates and assumptions.
The financial statements are presented in Indian Rupees (INR) and all values are rounded to the nearest lacs, except when otherwise indicated.
3. PRESENTATION OF FINANCIAL STATEMENT
The financial statements of the Company are presented as per Schedule III (Division III) of the Companies Act, 2013 applicable to NBFCs, as notified by the Ministry of Corporate Affairs (MCA). Financial assets and financial liabilities are generally reported on a gross basis except when, there is an unconditional legally enforceable right to offset the recognised amounts without being contingent on a future event and the parties intend to settle on a net basis in the following circumstances:
i. The normal course of business
ii. The event of default
iii. The event of insolvency or bankruptcy of the Company and/or its counterparties
Derivative assets and liabilities with master netting arrangements (e.g. International Swaps and Derivative Association Arrangements) are presented net if all the above criteria are met.
4. STATEMENT OF COMPLIANCE
These standalone or separate financial statements of the Company have been prepared in accordance with Indian Accounting Standards as per the Companies (Indian Accounting Standards) Rules, 2015 as amended and notified under Section 133 of the Companies Act, 2013 and the other relevant provisions of the Act.
5. NEW ACCOUNTING STANDARDS ISSUED BUT NOT EFFECTIVE
The Standards that are issued, but not yet effective, are disclosed below. The Company intends to adopt these standards when they became effective:
Ind AS 116 Leases was notified on March 30, 2019 and it replaces Ind AS 17 on Leases. Ind AS 116 is effective for annual periods beginning on or after April 01, 2019. Ind AS 116 sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for all leases under a single on-balance sheet model similar to the accounting for finance leases under Ind AS 17. The standard includes two recognition exemptions for lessees - leases of âlow-valueâ assets (e.g., personal computers) and short-term leases (i.e., leases with a lease term of 12 months or less). At the commencement date of a lease, a lessee will recognise a liability to make lease payments (i.e., the lease liability) and an asset representing the right to use the underlying asset during the lease term (i.e., the right-of-use asset). Lessees will be required to separately recognise the interest expense on the lease liability and the depreciation expense on the right-of-use asset. As the Company does not have any material leases, the adoption of this standard is not likely to have a material impact in its Financial Statements.
SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
The preparation of financial statements in conformity with the Ind AS requires the management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the accompanying disclosure and the disclosure of contingent liabilities, at the end of the reporting period. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and future periods are affected. Although these estimates are based on the managementâs best knowledge of current events and actions, uncertainty about these assumptions and estimates could result in the outcomes requiring a material adjustment to the carrying amounts of assets or liabilities in future periods.
In particular, information about significant areas of estimation, uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the financial statements is included in the following notes:
6.1 Business model Assessment
Classification and measurement of financial assets depends on the results of the SPPI and the business model test. The Company determines the business model at a level that reflects how groups of financial assets are managed together to achieve a particular business objective. This assessment includes judgement reflecting all relevant evidence including how the performance of the assets is evaluated and their performance measured, the risks that affect the performance of the assets and how these are managed and how the managers of the assets are compensated. The Company monitors financial assets measured at amortised cost or fair value through other comprehensive income that are derecognised prior to their maturity to understand the reason for their disposal and whether the reasons are consistent with the objective of the business for which the asset was held. Monitoring is part of the Companyâs continuous assessment of whether the business model for which the remaining financial assets are held continues to be appropriate and if it is not appropriate whether there has been a change in business model and so a prospective change to the classification of those assets.
6.2 Defined employee benefit assets and liabilities
The cost of the defined benefit gratuity plan and the present value of the gratuity obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate; future salary increases and mortality rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed annually.
6.3 Fair value measurement
When the fair values of financial assets and financial liabilities recorded in the balance sheet cannot be measured based on quoted prices in active markets, their fair value is measured using various valuation techniques. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values. Judgments include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments.
6.4 Impairment of loans portfolio
The measurement of impairment losses across all categories of financial assets requires judgement, in particular, the estimation of the amount and timing of future cash flows and collateral values when determining impairment losses and the assessment of a significant increase in credit risk. These estimates are driven by a number of factors, changes in which can result in different levels of allowances.
It has been the Companyâs policy to regularly review its models in the context of actual loss experience and adjust when necessary.
The impairment loss on loans and advances is disclosed in more detail in Note 6.1(xi) Overview of ECL principles.
6.5 Contingent liabilities and provisions other than impairment on loan portfolio
Provisions and liabilities are recognized in the period when it becomes probable that there will be a future outflow of funds resulting from past operations or events and the amount of cash outflow can be reliably estimated. The timing of recognition and quantification of the liability requires the application of judgement to existing facts and circumstances, which can be subject to change. The carrying amounts of provisions and liabilities are reviewed regularly and revised to take account of changing facts and circumstances.
6.6 Effective Interest Rate (EIR) method
The Companyâs EIR methodology, recognises interest income / expense using a rate of return that represents the best estimate of a constant rate of return over the expected behavioural life of loans given / taken and recognises 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 behaviour and life-cycle of the instruments, as well expected changes to Indiaâs base rate and other fee income/expense that are integral parts of the instrument
6.7 Other estimates:
These include contingent liabilities, useful lives of tangible and intangible assets etc.
FIRST TIME ADOPTION
These financial statements, for the year ended March 31, 2019 are the first financial statements the Company has prepared in accordance with Ind AS. For periods up to and including the year ended March 31, 2018 the Company prepared its financial statements in accordance with Accounting Standards notified under section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 (Indian GAAP or previous GAAP).
Accordingly, the Company has prepared financial statements which comply with Ind AS applicable for periods ending on March 31, 2019 together with the comparative period data as at and for the year ended March 31, 2018 as described in the summary of significant accounting policies. In preparing these financial statements, the Companyâs opening balance sheet was prepared as at April 01, 2017 the Companyâs date of transition to Ind AS. This note explains the principal adjustments made by the Company in restating its Indian GAAP financial statements, including the balance sheet as at April 01, 2017 and the financial statements as at and for the year ended March 31, 2018.
Exemptions applied
Ind AS 101 allows first-time adopters certain exemptions from the retrospective application of certain requirements under Ind AS. The Company has applied the following exemptions:
7.1 Investment in Subsidiaries, associates
Ind AS 101 permits a first time adopter to measure its investment, at the date of transition, at cost determined in accordance with Ind AS 27, or deemed cost. The deemed cost of such investment shall be its fair value at the Companyâs date of transition to Ind AS, or Previous GAAP carrying amount at that date. The Company has elected to measure its investment in subsidiary at the Previous GAAP carrying amount as its deemed cost on the transition date.
7.2 Lease arrangements
Appendix C to Ind AS 17 requires entity to assess whether contract or arrangement contains a lease. In accordance with same, this assessment should be carried out at the inception of arrangement. However, the company has used exemption under Ind AS 101 and assessed all arrangements based on conditions in place as on date of transition.
7.3 Property, plant, equipment & intangible assets
On transition to Ind AS, the company has elected to continue with the carrying value of all of its property, plant and equipment and intangible assets as at March 31, 2017 measured as per the previous GAAP and use that carrying value as the deemed cost of the property, plant and equipment and intangible assets as on April 01, 2017.
7.4 Business Combination
Ind AS 103 Business Combinations has not been applied to acquisitions of subsidiaries, which are considered businesses under Ind AS that occurred before April 01, 2017. Use of this exemption means that the Indian GAAP carrying amounts of assets and liabilities, that are required to be recognised under Ind AS, is their deemed cost at the date of the acquisition. After the date of the acquisition, measurement is in accordance with respective Ind AS.
7.5 Derecognition of previously recognised financial instruments
As per Ind AS 101 - An entity shall apply the exception to the retrospective application in case of âderecognition of financial assets and financial liabilitiesâ wherein a first-time adopter shall apply the derecognition requirements in Ind AS 109 prospectively for transactions occurring on or after the date of transition to Ind ASs. For example, if a first-time adopter derecognised non-derivative financial assets or non-derivative financial liabilities in accordance with its previous GAAP as a result of a transaction that occurred before the date of transition to Ind ASs, it shall not recognise those assets and liabilities in accordance with Ind ASs (unless they qualify for recognition as a result of a later transaction or event). The Company has opted not to re-evaluate financial assets derecognised in the past. However, for loans and advances securitised, the Company has applied the derecognition requirements retrospectively.
7.6 Fair value measurement of financial assets or financial liabilities at initial recognition
Under Ind AS 109, if an entity measures a financial instrument on initial recognition based on valuation techniques that only use observable market data or current market transactions in the same instrument, and the fair value at initial recognition is different from the transaction price, then it is required to recognise the âday oneâ gain or loss at initial recognition of this financial instrument. Ind AS 101 allows an entity to apply the âday oneâ gain or loss recognition requirement of Ind AS 109 prospectively to transactions entered into on or after the date of transition to Ind AS. The Company has opted for this exemption to recognise the âday oneâ gain or loss on initial recognition arising due to difference in transaction cost and fair value prospectively for transactions entered into on or after the date of transition to Ind AS.
7.7 Investment Property
For transition to Ind AS, the company has elected to adopt as deemed cost, the carrying value of investment property as per Indian GAAP less accumulated depreciation and cumulative impairment (if any) as on the transition date of April 01, 2017.
MANDATORY EXCEPTIONS
Following mandatory exceptions are applicable to the Company:
8.1 Estimates
An entityâs estimates in accordance with Ind AS at the date of transition to Ind AS shall be consistent with estimates made for the same date in accordance with previous GAAP (after adjustments to reflect any difference in accounting policies).
8.2 Classification and measurement of financial assets
Ind AS 101 requires an entity to assess classification and measurement of financial assets (investment in debt instruments) on the basis of the facts and circumstances that existed at the date of transition to Ind AS.
Balances with banks earn interest at fixed rates. Short term deposits are made for varying periods of between one day and three months, depending on the immediate cash requirements of the Company, and earn interest at the respective short-term deposit rates. The Company has not taken bank overdraft, therefore the cash and cash equivalent for cash flow statement is same as cash and for cash equivalent given above.
Fixed deposit and other balances with banks earns interest at fixed rate.
^Includes deposits Rs. 273,821.29 lacs (March 31, 2018: Rs. 219,040.91 lacs; April 01, 2017: Rs. 186,800.93 lacs) as margin for guarantees and Rs. 306.29 lacs (March 31, 2018: Rs. 607.93 lacs; April 01, 2017: Rs. 602.51 lacs) pledged as lien against loans taken.
No trade or other receivable are due from directors or other officers of the Company either severally or jointly with any other person. Nor any trade or other receivable are due from firms or private companies respectively in which any director is a partner, a director or a member.
Trade receivables are non-interest bearing and are generally on terms of 30 days.
(i)Amounts recognised in Statement of Profit and Loss for Investment Property
(ii) Contractual obligations
The Company has no contractual obligations to purchase, construct or develop investment property. However, the responsibility for its repairs, maintenance or enhancements is with the Company.
(iii) Fair value
The fair valuation of investment property as at March 31, 2019 is Rs. 647.73 lacs.
(iv) Pledged details
Investment property is not pledged.
(v) Estimation of fair value
The fair values of investment property is determined by guidance value given by the local government of the area where the investment properties are located.
During the year ended March 31, 2018, the Company issued senior secured notes in offshore market (notes) aggregating to INR 116,000 lacs consisting of INR 84,000 lacs 8.10% notes due 2023 and INR 32,000 lacs 7.90% notes due 2021 payable in US dollars under INR 500,000 lacs Medium Term Note Programme. The notes issued by the Company are listed on Singapore Stock Exchange (SGX- ST).
The Company has utilised the entire sum of Rs. 116,000.00 lacs raised from Senior secured notes towards asset financing activities as per the objects stated in the prospectus for the issue.
During the year ended March 31, 2017, the Company has issued Rs. 135,000.00 lacs 8.25 % senior secured notes at the price of 100.18% that are due for repayment on February 18, 2020. The said notes (with ISIN - XS 1549374475) are listed and traded on the Singapore Exchange (SGX-ST) with a minimum board lot size of S $200,000.
The Company has utilised the entire sum of Rs. 135,000.00 lacs raised from Senior secured notes towards asset financing activities as per the objects stated in the prospectus for the issue.
Nature of security
Secured by way of an exclusive fixed charge over hypothecation loan receivables of the Company.
B) External commercial bond (ED) Secured
Privately Placed Redeemable External commercial bond of Rs. 100,000/- each
During the year ended March 31, 2019, the Company issued and allotted senior secured notes in offshore market (notes) aggregating to INR 284,990 lacs consisting of 5.70% notes due 2022 under INR 500,000 lacs Medium Term Note Programme. The notes issued by the Company are listed on Singapore Stock Exchange (SGX- ST). The proceeds of the Issue have been utilized for the purpose of onward disbursements.
Outstanding as at March 31, 2018 and April 01, 2017 is Rs. Nil.
Nature of security
Secured by way of an exclusive fixed charge over hypothecation loan receivables of the Company.
C) Redeemable non-convertible debenture (NCD) -secured
i) Privately placed redeemable non-convertible debentures of Rs. 1,000/- each
Outstanding as at March 31, 2019 is Rs. Nil.
nature of security
Secured by equitable mortgage of immovable property. Further secured by charge on plant and machinery, furniture and other fixed assets of the Company, charge on Companyâs hypothecation loans, other loans, advances and investments of the Company subject to prior charges created or to be created in favour of the Companyâs bankers, financial institutions and others.
Debentures may be bought back subject to applicable statutory and/or regulatory requirements, upon the terms and conditions as may be decided by the Company.
* Amount pertains to debentures issued prior to notification of the RBI Circular DNBD(PD) CC No. 330/03.10.001/201213 dated June 27, 2013.
Nature of security
Secured by specific assets covered under hypothecation loan and by way of exclusive charge and equitable mortgage of immovable property.
Debentures may be bought back subject to applicable statutory and/or regulatory requirements, upon the terms and conditions as may be decided by the Company.
iii)Privately placed redeemable non-convertible debenture of Rs. 3,000,000/- each
Outstanding as at March 31, 2019 and March 31, 2018 is Rs. Nil.
Nature of security
Secured by specific assets covered under hypothecation loan and by way of exclusive charge and equitable mortgage of immovable property.
Debentures may be bought back subject to applicable statutory and/or regulatory requirements, upon the terms and conditions as may be decided by the Company.
iv) Public issue of redeemable non-convertible debentures of Rs. 1,000/- each - (2010)
Terms of repayment
Outstanding as at March 31, 2019 and March 31, 2018: Rs. Nil.
Nature of security
Secured by specific assets covered under hypothecation loan and by way of exclusive charge and equitable mortgage of immovable property.
The Company has utilised the entire sum of Rs. 41,689.68 lacs raised from public issue (net off expenses) towards asset financing activities as per the objects stated in the prospectus for the issue.
Debentures may be bought back subject to applicable statutory and/or regulatory requirements, upon the terms and conditions as may be decided by the Company.
Subject to the provisions of The Companies Act, 2013, where the Company has fully redeemed or repurchased any Secured NCD(s), the Company shall have the right to keep such Secured NCDs in effect without extinguishment thereof, for the purpose of resale or reissue.
The Company has bought back NCDs of Rs. 1,000.00 lacs on July 14, 2011, Rs. 128.64 lacs on October 28, 2014 and as per the terms of the issue Rs. 7,472.34 lacs were redeemed on June 1, 2013, Rs. 7,472.34 lacs were redeemed on June 1, 2014 and Rs. 10,443.36 lacs were redeemed on June 1, 2015.
Put options were exercised for option I on June 01, 2013 and Rs. 9,019.04 lacs were paid on July 05, 2013 in compliance with the terms of issue.
Put options were exercised for option II on June 01, 2015 and Rs. 1,440.95 lacs were paid on July 02, 2015 and Rs. 251.58 lacs were paid on July 03, 2015 in compliance with the terms of issue.
As per the terms of the issue Rs. 4,461.43 lacs were redeemed on June 01, 2017.
v) Public issue of redeemable non-convertible debentures of Rs. 1,000/- each-(2012)
Terms of repayment
Outstanding as at March 31, 2019 and March 31, 2018: Rs. Nil.
nature of security
Secured by specific assets covered under hypothecation loan agreements and by way of exclusive charge and equitable mortgage of immovable property.
The Company has utilised the entire sum of Rs. 60,000/- lacs raised from public issue (net off expenses) towards asset financing activities as per the objects stated in the prospectus for the issue.
Debentures may be bought back subject to applicable statutory and/or regulatory requirements, upon the terms and conditions as may be decided by the Company.
The Company has bought back non-convertible debentures of Rs. 54.85 lacs on October 28, 2014.
As per the terms of the issue Rs. 27,323.76 lacs were redeemed on August 07, 2015 and Rs. 32,621.39 lacs were redeemed on August 09, 2017.
vi) Public issue of redeemable non-convertible debentures of Rs. 1,000/- each-(2013)-1 Terms of repayment
Outstanding as at March 31, 2019: Rs. Nil.
As per the terms of the issue NCD 2013 ( 1 ) Rs. 23,478.41 lacs were redeemed on July 31, 2018.
Nature of security
Secured by specific assets covered under hypothecation loan agreements and by way of exclusive charge and equitable mortgage of immovable property.
The Company has utilised the entire sum of Rs. 73,589.04 lacs raised from public issue (net off expenses) towards asset financing activities as per the objects stated in the prospectus for the issue.
Debentures may be bought back subject to applicable statutory and/or regulatory requirements, upon the terms and conditions as may be decided by the Company.
The Company has bought back non-convertible debentures of Rs. 19.14 lacs on October 28, 2014.
As per the terms ofthe issue Rs. 32,510.10 lacs were redeemed on July 31, 2016 and Rs. 17,581.39 lacs were redeemed on July 31, 2017.
Nature of security
Secured by specific assets covered under hypothecation loan agreements and by way of exclusive charge and equitable mortgage of immovable property.
The Company has utilised the entire sum of Rs. 50,000.00 lacs raised from public issue (net off expenses) towards asset financing activities as per the objects stated in the prospectus for the issue.
Debentures may be bought back subject to applicable statutory and/or regulatory requirements, upon the terms and conditions as may be decided by the Company.
As per the terms of the issue Rs. 29,401.44 lacs were redeemed on October 24, 2016.
Nature of security
Secured by specific assets covered under hypothecation loan agreements and by way of exclusive charge and equitable mortgage of immovable property.
The Company has utilised the entire sum of Rs. 197,484.71 lacs raised from public issue (net off expenses) towards asset financing activities as per the objects stated in the prospectus for the issue.
Debentures may be bought back subject to applicable statutory and/or regulatory requirements, upon the terms and conditions as may be decided by the Company.
As per the terms of the issue Rs. 134,832.63 lacs were redeemed on July 15, 2017.
Nature of security
Secured by specific assets covered under hypothecation loan agreements and by way of exclusive charge and equitable mortgage of immovable property.
The Company has utilised the entire sum of Rs. 364,851.86 lacs raised from public issue (net off expenses) towards repayment of borrowings as per the objects stated in the prospectus for the issue.
nature of security
Secured by specific assets covered under hypothecation loan agreements and by way of exclusive charge and equitable mortgage of immovable property.
The Company has utilised the entire sum of Rs. 60,679.19 lacs raised from public issue (net off expenses) for the purpose of onward disbursements as per the objects stated in the prospectus for the issue.
nature of security
Secured by specific assets covered under hypothecation loan agreements and by way of exclusive charge and equitable mortgage of immovable property.
The Company has utilised the entire sum of Rs. 53,731.89 lacs raised from public issue (net off expenses) for the purpose of onward disbursements as per the objects stated in the prospectus for the issue.
Loan Commitment Credit quality of exposure
The table below shows the credit quality and the maximum exposure to credit risk based on the Companyâs internal credit rating system and year-end stage classification. The amounts presented are gross of impairment allowances. Details of the Companyâs internal grading system are explained in Note 54.2 and policies on whether ECL allowances are calculated on an individual or collective basis are set out in Note 54.2.2.6
b. Terms/ rights attached to equity shares
The Company has only one class of equity shares having a par value of Rs. 10/- per share. Each holder of equity shares is entitled to one vote per share. The dividend is subject to the approval of the shareholders in the ensuing annual general meeting.
During the year ended March 31, 2019, the amount of per equity share dividend proposed in total for distributions to equity shareholders is Rs. 12.00 (March 31, 2018 : Rs. 11.00). Out of the said total dividend proposed for the year ended March 31, 2019, amount of interim dividend paid during the year was Rs. 5.00 (March 31, 2018 : Rs. 5.00) per equity share and amount of final dividend proposed by the Board of Directors is Rs. 7.00 (March 31, 2018: Rs. 6.00) per equity share. In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.
c. Aggregate number of equity shares issued for consideration other than cash during the period of five years immediately preceding the reporting date:
The Company has issued total Nil (March 31, 2018 : 18,800, April 01, 2017 : 582,168) equity shares during the period of five years immediately preceding the reporting date on exercise of options granted under the employee stock option plan (ESOP) wherein part consideration was received in form of employee service and includes Nil (March 31, 2018 : Nil, April 01, 2017 : 500,868) equity shares issued on account of merger of Shriram Holdings (Madras) Private Limited.
nature and purpose of Reserves
Securities premium account: The amount received in excess of face value of the equity shares is recognised in Securities Premium Reserve. In case of equity-settled share based payment transactions, the difference between fair value on grant date and nominal value of share is accounted as securities premium reserve. The reserve can be utilised only for limited purposes such as issuance of bonus shares in accordance with the provisions of the Companies Act, 2013.
Capital Reserve: Capital reserve is the excess of net assets taken over cost of consideration paid during amalgamation. Capital Redemption Reserve: The Company has recognised Capital Redemption Reserve on redemption of Non-Convertible Redeemable Preference Shares from its retained earnings. The amount in Capital Redemption Reserve is equal to nominal amount of the Non-Convertible Redeemable Preference Shares redeemed. The Company may issue fully paid up bonus shares to its members out of the capital redemption reserve account.
Debenture redemption reserve: (1)Pursuant to Section 71 of the Companies Act, 2013 and circular 04/2013, read with notification issued date June 19, 2016 issued by Ministry of Corporate Affairs, the Company is required to transfer 25% of the value of the outstanding debentures issued through public issue as per the present SEBI (Issue and Listing of Debt Securities) Regulation, 2008 to Debenture redemption reserve (DRR) and no DRR is required in case of privately placed debenture. Also the Company is required before 30th day of April of each year to deposit or invest, as the case may be, a sum which shall not be less than 15% of the amount of its debenture issued through public issue maturing within one year from the Balance sheet date.
(2) In respect of the debentures issued through public issue, the Company has created DRR of Rs. 25,147.25 lacs (March 31, 2018: Rs. 9,206.55 lacs). The Company subsequent to the year end has deposited a sum of Rs. 7,000.00 lacs (March 31, 2018: Rs. 6,200.00 lacs, April 01, 2017: Rs. 31,750.00 lacs) in the form of fixed deposits with scheduled banks, representing 15% of the debenture issued through public issue, which are due for redemption within one year from the balance sheet date. General reserve: Under the erstwhile Companies Act 1956, general reserve was created through an annual transfer of net income at a specified percentage in accordance with applicable regulations. Consequent to introduction of Companies Act 2013, the requirement to mandatorily transfer a specified percentage of the net profit to general reserve has been withdrawn. However, the amount previously transferred to the general reserve can be utilised only in accordance with the specific requirements of Companies Act, 2013.
Statutory reserve: Every year the Company transfers a of sum of not less than twenty per cent of net profit of that year as disclosed in the statement of profit and loss to its Statutory Reserve pursuant to Section 45-IC of the RBI Act, 1934.
The conditions and restrictions for distribution attached to statutory reserves as specified in Section 45-IC(1) in The Reserve Bank of India Act, 1934:
(1) Every non-banking financial company (NBFC) shall create a reserve fund and transfer therein a sum not less than twenty per cent of its net profit every year as disclosed in the profit and loss account and before any dividend is declared.
(2) No appropriation of any sum from the reserve fund shall be made by the NBFC except for the purpose as may be specified by the RBI from time to time and every such appropriation shall be reported to the RBI within twenty-one days from the date of such withdrawal:
Provided that the RBI may, in any particular case and for sufficient cause being shown, extend the period of twenty-one days by such further period as it thinks fit or condone any delay in making such report.
(3) Notwithstanding anything contained in sub-section (1) the Central Government may, on the recommendation of the RBI and having regard to the adequacy of the paid-up capital and reserves of a NBFC in relation to its deposit liabilities, declare by order in writing that the provisions of sub-section (1) shall not be applicable to the NBFC for such period as may be specified in the order:
Provided that no such order shall be made unless the amount in the reserve fund under sub-section (1) together with the amount in the share premium account is not less than the paid-up capital of the NBFC.
Retained earnings: Retained earnings are the profits that the Company has earned till date, less any transfers to statutory reserve, debenture redemption reserve, general reserve, dividends distributions paid to shareholders and transfer from debenture redemption reserve.
Reconciliation of the total tax charge:
The tax charge shown in the statement of profit and loss differs from the tax charge that would apply if all profits had been charged at India corporate tax rate. A reconciliation between the tax expense and the accounting profit multiplied by Indiaâs domestic tax rate for the year ended March 31, 2019 and March 31, 2018 is, as follows:
- earnings per share
Basic earnings per share (EPS) is calculated by dividing the net profit for the year attributable to equity holders of Company by the weighted average number of equity shares outstanding during the year.
Diluted EPS is calculated by dividing the net profit attributable to equity holders of Company (after adjusting for interest on the convertible preference shares and interest on the convertible bond, in each case, net of tax) by the weighted average number of equity shares outstanding during the year plus the weighted average number of equity shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares.
- investment in subsidiaries and structured entities
During the year ended March 31, 2018, the Company sold the controlling stake in its wholly owned subsidiary, Shriram Automall India Limited (SAMIL) to the extent of 16,630,435 equity shares (representing 55.44% of paid-up capital) @ Rs. 94.03 per share for a total consideration of Rs. 1,565.76 lacs to MXC Solutions India Private Limited (MXC). Consequently, SAMIL ceased to be a subsidiary and is an associate of the Company from February 07, 2018.
- RETIREMENT BENEFIT PLAN
Defined Contribution Plan
A defined contribution plan is a pension plan under which the Company pays fixed contributions; there is no legal or constructive obligation to pay further contributions. The assets of the plan are held separately from those of the Company in a fund under the control of trustees.
The Company makes Provident Fund, Leave encashment and Employee State Insurance Scheme contributions which are defined contribution plans for qualifying employees. Under the Schemes, the Company is required to contribute a specified percentage of the payroll costs to fund the benefits. The Company recognized Rs. 4,489.04 lacs (March 31, 2018: Rs. 3,592.95 lacs:, April 01, 2017: Rs. 2,672.46 lacs) for Provident Fund contributions, Rs. 1,451.82 lacs (March 31, 2018: Rs. 1,263.58 lacs, April 01, 2017: Rs. 1,105.09 lacs) for Leave encashment and Rs. 1,429.81 lacs (March 31, 2018: Rs. 1,153.44 lacs, April 01, 2017: Rs. 562.66 lacs) for Employee State Insurance Scheme contributions in the Statement of Profit and Loss. The contributions payable to these plans by the Company are at rates specified in the rules of the Schemes.
Defined Benefit Plan
The Company has a defined benefit gratuity plan (funded). The Companyâs defined benefit gratuity plan is a final salary plan for employees, which requires contributions to be made to a separately administered fund. The gratuity plan is governed by the Payment of Gratuity Act, 1972. Under the act, employee who has completed five years of service is entitled to specific benefit. The level of benefits provided depends on the memberâs length of service and last drawn salary. The fund is managed by some third party fund managers.
Each year, the Board of Trustees reviews the level of funding in the India gratuity plan. Such a review includes the asset-liability matching strategy and investment risk management policy. This includes employing the use of annuities and longevity swaps to manage the risks. The Board of Trustees decides its contribution based on the results of this annual review. Generally, it aims to have a portfolio mix of equity instruments, property and debt instruments. Generally equity instruments and property should not exceed 30% of total portfolio. The Board of Trustees aim to keep annual contributions relatively stable at a level such that no plan deficits (based on valuation performed) will arise.
The following tables summaries the components of net benefit expense recognised in the statement of profit and loss and the funded status and amounts recognized in the balance sheet for the gratuity plan.
The Company expects to contribute Rs. 673.02 lacs to the fund in the next financial year.
The weighted average duration of the defined benefit obligation as at March 31, 2019 is 9 years (March 31, 2018: 9 years) Asset Liability Matching Strategies
The plan faces the ALM risk as to the matching cash flow. Since the plan is invested in lines of Rule 101 of Income Tax Rules, 1962, this generally reduces ALM risk.
Future cash outflows in respect of (a), (b) and (c) above are determinable only on receipt of judgements /decisions pending with various forums/authorities. The Company is of the opinion that above demands are not sustainable and expects to succeed in its appeals. The management believes that the ultimate outcome of these proceedings will not have a material adverse effect on the Companyâs financial position and results of operations.
Disputed income tax demands are on account of royalty, disallowance of ESOP expenses, 14A, derivatives etc.
(C) Lease Disclosures As a lessee Operating Lease :
The Company has taken various office premises, furniture and fixtures, computers and plant and machinery under operating lease. The lease payments recognised in the Statement of Profit and Loss are Rs. 10,124.71 lacs (March 31, 2018: Rs. 9,912.98 lacs). Certain agreements provide for cancellation by either party or certain agreements contains clause for escalation and renewal of agreements. The non-cancellable operating lease agreements are ranging for a period 11 to 180 months. There are no restrictions imposed by lease arrangements.
Future minimum lease payments under non-cancellable operating leases as at March 31, 2019 are as follows:
As a lessor Operating Lease :
The Company has given office premises under operating lease. The income from operating lease recognised in the Statement of Profit and Loss are Rs. 21.86 lacs (March 31, 2018: Rs. 20.90 lacs). Agreements provide for cancellation by either party or contain clause for escalation and renewal of agreements. The non-cancellable operating lease agreement is for a period of 108 months.
Future minimum lease payments under non-cancellable operating leases as at March 31, 2019 are as follows:
9 CAPITAL
The Company maintains an actively managed capital base to cover risks inherent in the business which includes issued equity capital, share premium and all other equity reserves attributable to equity holders of the Company.
As an NBFC, the RBI requires us to maintain a minimum capital to risk weighted assets ratio (âCRARâ) consisting of Tier I and tier ii capital of 15% of our aggregate risk weighted assets. Further, the total of our tier ii capital cannot exceed 100% of our tier i capital at any point of time. The capital management process of the Company ensures to maintain a healthy CRAR at all the times.
Capital Management
The primary objectives of the Companyâs capital management policy are to ensure that the Company complies with externally imposed capital requirements and maintains strong credit ratings and healthy capital ratios in order to support its business and to maximise shareholder value.
The Company manages its capital structure and makes adjustments to it according to changes in economic conditions and the risk characteristics of its activities. in order to maintain or adjust the capital structure, the Company may adjust the amount of dividend payment to shareholders, return capital to shareholders or issue capital securities. No changes have been made to the objectives, policies and processes from the previous years. However, they are under constant review by the Board.
Regulatory capital consists of tier 1 capital, which comprises share capital, share premium, retained earnings including current year profit less accrued dividends. Certain adjustments are made to ind AS-based results and reserves, as prescribed by the Reserve Bank of india. The other component of regulatory capital is Tier 2 Capital, which includes subordinated debt.
The Company is meeting the capital adequacy requirements of Reserve Bank of india (RBi) of india.
10 FAIR VALUE MEASUREMENT
10.1 valuation Principle
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction in the principal (or most advantageous) market at the measurement date under current market conditions (i.e., an exit price), regardless of whether that price is directly observable or estimated using a valuation technique. in order to show how fair values have been derived, financial instruments are classified based on a hierarchy of valuation techniques, as explained in Note 6.1 (xiii).
10.2 Fair value Hierarchy of assets and liabilities
The following table shows an analysis of financial instruments recorded at fair value by level of the fair value hierarchy:
10.3 Valuation techniques Equity instruments
Units held in funds are measured based on their published net asset value (NAV), taking into account redemption and/or other restrictions. Such instruments are generally Level 2. Equity instruments in non-listed entities are initially recognised at transaction price and re-measured (to the extent information is available) and valued on a case-by-case and classified as Level 3.
Foreign exchange contracts
Foreign exchange contracts include foreign exchange forward and swap contracts, interest rate swaps and over- the-counter foreign exchange options. These instruments are valued by either observable foreign exchange rates, observable or calculated forward points and option valuation models. With the exception of contracts where a directly observable rate is available which are disclosed as Level 1, the Company classifies foreign exchange contracts as Level 2 financial instruments when no unobservable inputs are used for their valuation or the unobservable inputs used are not significant to the measurement (as a whole). other valuation adjustments and inputs that may impact the fair value of these instruments are discussed below in note 53.4.
Certificate of deposits
Certificate of Deposits are short-term financial instruments issued by Banks. FBIL has developed the FBIL- CD, a new benchmark for the money market based on traded CDs reported on the FTRAC platform of CCiL. FBIL-CD is announced for seven tenors of 14 days, 1 month, 2 months, 3 months, 6 months, 9 months and 12 months. For Valuation, company use FBIL-CD benchmark and based on that benchmark company interpolate and calculate CD prices corresponding to their residual maturities and such instruments are classified as Level 2.
10.4 valuation adjustments and other inputs and considerations
The Company applies the following fair value adjustments to its base valuation procedures to better reflect the individual characteristics of trades that market participants would consider when trading in or setting specific prices for these instruments.
Credit and debit valuation adjustments
The Company calculates Credit Value Adjustments (CVA) / debit Value Adjustments (DVA) on a counterparty basis over the entire life of the exposure. CVA is calculated by multiplying the probability of default (PD), the loss given default (LGD) and the expected exposure (EE) at the time of default.
A debit valuation adjustment (DVA) is applied to incorporate the Companyâs own credit risk in the fair value of derivatives (i.e., the risk that the Company might default on its contractual obligations), using the same methodology as for CVA (i.e., applying the Companyâs PD and multiplying it with LGD and EE).
The Company applies CVA to all relevant (not fully collateralised) over-the-counter positions with the exception of positions settled through central clearing houses and DVA to all relevant (not fully collateralised) over-the-counter positions and positions settled through central clearing houses. Based on regular assessment of the extent of the adjustments, the Company concluded that these adjustments were not significant to the levelling classification of the relevant instruments in 2018 or 2019.
10.5 Impact of valuation adjustments and other inputs
The following table shows the amount recorded in the statement of profit and loss:
10.6 During the year there were no transfers between level 1 and level 2. similarly, there were no transfers from or transfer to level 3.
10.7 Movements in Level 3 financial instruments measured at fair value
The following tables show a reconciliation of the opening and closing amounts of Level 3 financial assets and liabilities which are recorded at fair value. Transfers from Level 3 to Level 2 occur when the market for some securities became more liquid, which eliminates the need for the previously required significant unobservable valuation inputs. Since the transfer, these instruments have been valued using valuation models incorporating observable market inputs. Transfers into Level 3 reflect changes in market conditions as a result of which instruments become less liquid. Therefore, the Company requires significant unobservable inputs to calculate their fair value.
The following tables show the reconciliation of the opening and closing amounts of Level 3 financial assets and liabilities measured at fair value:
10.8 Impact on fair value of level 3 financial instruments measured at fair value of changes to key assumptions
The table summarises the valuation techniques together with the significant unobservable inputs used to calculate the fair value of the Companyâs Level 3 assets and liabilities. The range of values indicates the highest and lowest level input used in the valuation technique and, as such, only reflects the characteristics of the instruments as opposed to the level of uncertainty to their valuation. Relationships between unobservable inputs have not been incorporated in this summary.
10.9 sensitivity of fair value measurements to changes in unobservable market data
The table below describes the effect of changing the significant unobservable inputs to reasonable possible alternatives. All changes would be reflected in the Statement of profit and loss. Sensitivity data are calculated using a number of techniques, instruments classified as FVTPL would be reflected in the Statement of profit and loss. Sensitivity data are calculated using a number of techniques, including analysing price dispersion of different price sources, adjusting model inputs to reasonable changes within the fair value methodology.
The ranges are not comparable or symmetrical as the model inputs are usually not in the middle of the favourable/ unfavourable range.
The table below shows data in relation to Level 3 inputs that are already aggregated on the underlying product levels without assuming any potential diversification effect, but including potential off-sets from economic or accounting hedge relationships in place. The Company is of the opinion that, whilst there may be some diversification benefits, incorporating these would not be significant to the analysis.
10.10 Fair value of financial instruments not measured at fair value
Set out below is a comparison, by class, of the carrying amounts and fair values of the Companyâs financial instruments that are not carried at fair value in the financial statements. This table does not include the fair values of non-financial assets and non financial liabilities.
Note:
The management assessed that cash and cash equivalents, trade receivables, trade payables, bank overdrafts and other current liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments.
10.10.1 valuation methodologies of financial instruments not measured at fair value
Below are the methodologies and assumptions used to determine fair values for the above financial instruments which are not recorded and measured at fair value in the Companyâs financial statements. These fair values were calculated for disclosure purposes only. The below methodologies and assumptions relate only to the instruments in the above tables and, as such, may differ from the techniques and assumptions explained in Notes 6.1
short-term financial assets and liabilities
For financial assets and financial liabilities that have a short-term maturity (less than twelve months), the carrying amounts, which are net of impairment, are a reasonable approximation of their fair value. Such instruments include: cash and bank balances, Trade receivables, other receivables, balances other than cash and cash equivalents and trade payables without a specific maturity. Such amounts have been classified as Level 2 on the basis that no adjustments have been made to the balances in the balance sheet.
Loans and advances to customers
The fair values of loans and receivables are estimated by discounted cash flow models based on contractual cash flows using actual or estimated yields.
Pass through certificates
These instruments include asset backed securities. The market for these securities is not active. Therefore, the Company uses a variety of valuation techniques to measure their fair values. Expected cash flow levels are estimated by using quantitative and qualitative measures regarding the characteristics of the underlying assets including prepayment rates, default rates and other economic drivers such as loan-to-value ratios, emergence period estimation, indebtedness and rental income levels. Securities with no significant unobservable valuation inputs are classified as Level 2, while instruments with no comparable instruments or valuation inputs are classified as Level 3.
Financial assets at amortised cost
The fair values financial assets held-to-maturity investments are estimated using a discounted cash flow model based on contractual cash flows using actual or estimated yields and discounting by yields incorporating the counterpartiesâ credit risk.
Issued debt
The fair value of issued debt is estimated by a discounted cash flow model incorporating the Companyâs own credit risk. The Company estimates and builds its own credit spread from market-observable data such as secondary prices for its traded debt and the credit spread on credit default swaps and traded debt of itself.
Borrowings
The fair value of issued debt is estimated by a discounted cash flow model incorporating the Companyâs own credit risk. The Company estimates and builds its own credit spread from market-observable data.
Off-balance sheet positions
Estimated fair values of off-balance sheet positions are based on market prices for similar instruments or on discounted cash flow models, as explained above, which incorporate the credit risk element through the discount factor.
risk management
Whilst risk is inherent in the Companyâs activities, it is managed through an integrated risk management framework including ongoing identification, measurement and monitoring, subject to risk limits and other controls. This process of risk management is critical to the Companyâs continuing profitability and each individual within the Company is accountable for the risk exposures relating to his or her responsibilities. The Company is exposed to credit risk, liquidity risk and market risk. It is also subject to various operating and business risks.
11.1 Introduction and Risk Profile
11.1.1 Risk management structure
The Board of Directors are responsible for the overall risk management approach and for approving the risk management strategies and principles.
The Board has constituted the Risk Management Committee which is responsible for monitoring the overall risk process within the Company.
The Risk Management Committee has the overall responsibility for the development of the risk strategy and implementing principles, frameworks, policies and limits. The Risk Management Committee is responsible for managing risk decisions and monitoring risk levels.
The Chief Risk officer is responsible for implementing and maintaining risk related procedures to ensure an independent control process is maintained. The Risk owners within each department will report to the Risk Committee.
The Risk Owners are responsible for monitoring compliance with risk principles, policies and limits across the Company. Each department has its Risk owner who is responsible for the control of risks, including monitoring the actual risk of exposures against authorised limits and the assessment of risks.
The Companyâs Treasury is responsible for managing its assets and liabilities and the overall financial structure. It is also primarily responsible for the funding and liquidity risks of the Company.
The Companyâs policy is that risk management processes throughout the Company are audited annually by the Internal Audit function, which examines both the adequacy of the procedures and the Companyâs compliance with the procedures. Internal Audit discusses the results of all assessments with management, and reports its findings and recommendations to Risk Management Committee.
11.1.2 Risk mitigation and risk culture
As part of its overall risk management, the Company can use derivatives and other instruments to manage exposures resulting from changes in interest rates and foreign currencies associated with foreign currency transactions.
11.1.3 risk measurement and reporting systems
The Companyâs risks are measured using a method that reflects both the expected loss likely to arise in normal circumstances and unexpected losses, which are an estimate of the ultimate actual loss. The models make use of probabilities derived from historical experience, adjusted to reflect the economic environment, as necessary.
The Companyâs policy is to measure and monitor the overall risk-bearing capacity in relation to the aggregate risk exposure across all risk types and activities.
Information compiled from all the departments is examined and processed in order to analyse, control and identify risks on a timely basis. This information is presented and explained to the Risk Management Committee and the head of each department.
The Risk Management Committee receives a comprehensive risk report once a quarter which is designed to provide all the necessary information to assess and conclude on the risks of the Company.
It is the Companyâs policy to ensure that a robust risk awareness is embedded in its organisational risk culture. Employees are expected to take ownership and be accountable for the risks the Company is exposed to that they decide to take on. The Companyâs continuous training and development emphasises that employees are made aware of the Companyâs risk appetite and they are supported in their roles and responsibilities to monitor and keep their exposure to risk within the Companyâs risk appetite limits. Compliance breaches and internal audit findings are important elements of employeesâ annual ratings and remuneration reviews.
11.1.4 Excessive risk concentration
Concentrations arise when a number of counterparties are engaged in similar business activities, or activities in the same geographical region, or have similar economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic, political or other conditions.
In order to avoid excessive concentrations of risk, the Companyâs policies and procedures include specific guidelines to focus on spreading its lending portfolio across all the states with a cap on maximum limit of exposure for a state and also for an individual/Group.
11.2 Credit risk
Credit risk is the risk that the Company will incur a loss because its customers or counterparties fail to discharge their contractual obligations. The Company manages and controls credit risk by setting limits on the amount of risk it is willing to accept for individual counterparties and for geographical concentrations, and by monitoring exposures in relation to such limits.
Credit risk is monitored by the credit department of the Company. It is their responsibility to review and manage credit risk, including environmental and social risk for all types of counterparties. Credit risk consists of line credit managers who are responsible for their business lines and manage specific portfolios and experts who support both the line credit manager, as well as the business with tools like credit risk systems, policies, models and reporting.
The Company has established a credit quality review process to provide early identification of possible changes in the creditworthiness of counterparties.
The credit quality review process aims to allow the Company to assess the potential loss as a result of the risks to which it is exposed and take corrective actions.
The Companyâs internal credit rating grades on days past due(dpd) basis:
11.2.1 Derivative financial instruments
Credit risk arising from derivative financial instruments is, at any time, limited to those with positive fair values, as recorded on the balance sheet.
With gross-settled derivatives, the Company is also exposed to a settlement risk, being the risk that the Company honours its obligation, but the counterparty fails to deliver the counter value.
11.2.2 impairment assessment
The references below show where the Companyâs impairment assessment and measurement approach is set out in this report. it should be read in conjunction with the Summary of significant accounting policies.
The Companyâs definition and assessment of default (Note 54.2.2.1).
- How the Company defines, calculates and monitors the probability of default, exposure at default and loss given default) (Notes 54.2.2.2 to 54.2.2.4)
- When the Company considers there has been a significant increase in credit risk of an exposure (Note 54.2.2.5)
- The Companyâs policy of segmenting financial assets where ECL is assessed on a collective basis (Note 54.2.2.6)
- The details of the ECL calculations for Stage 1, Stage 2 and Stage 3 assets (Note 6.1.xi)
11.2.2.1 Definition of default
The Company considers a financial instrument defaulted and therefore Stage 3 (credit-impaired) for ECL calculations in âall cases when the borrower becomes 90 days past due on its contractual payments.
As a part of a qualitative assessment of whether a customer is in default, the Company also considers a variety of instances that may indicate unlikeliness to pay. When such events occur, the Company carefully considers whether the event should result in treating the customer as defaulted and therefore assessed as Stage 3 for ECL calculations or whether Stage 2 is appropriate. Such events include:
- The borrower requesting emergency funding from the Company.
- A material decrease in the underlying collateral value where the recovery of the loan is expected from the sale of the collateral.
- A covenant breach not waived by the Company.
- The debtor (or any legal entity within the debtorâs Company) filing for bankruptcy application/protection.
- All the facilities of a borrower are treated as Stage 3 when one of his facility becomes 90 days past due i.e. credit impaired.
11.2.2.2 PD estimation process
it is an estimate of the likelihood of default over a given time horizon. PD estimation process is done based on historical internal data available with the Company. While arriving at the PD, the Company also ensures that the factors that affects the macro economic trends are considered to a reasonable extent, wherever necessary. Company calculates the 12 month PD by taking into account the past historical trends of the portfolio and its credit performance. in case of assets where there is a significant increase in credit risk, lifetime PD has been applied which is computed
Mar 31, 2018
CORPORATE INFORMATION
Shriram Transport Finance Company Limited (the Company) is a public company domiciled in India and incorporated under the provisions of the Companies Act, 1956. Its shares are listed on BSE Limited and National Stock Exchange of India Limited. The Company is primarily engaged in the business of financing commercial vehicles. It also provides loans for equipment and other business purposes.
The Company is registered with the Reserve Bank of India (RBI), Ministry of Corporate Affairs and Insurance Regulatory and Development Authority of India (IRDA). The registration details are as follows:
RBI 07-00459
Corporate Identity Number (CIN) L65191TN1979PLC007874
IRDA CA0197
BASIS OF PREPARATION
The financial statements have been prepared under the historical cost convention on an accrual basis in conformity with generally accepted accounting principles in India (âIndian GAAPâ) to comply in all material respects with the notified Accounting Standards (âASâ) under section 133 of the Companies Act, 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 and the Companies (Accounting Standards) Amendment Rules, 2016.
The Company follows directions prescribed by the Reserve Bank of India (âRBIâ) for Non-Banking Finance Company (âNBFCâ). 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 of the Act. The Company has ascertained its operating cycle to be 12 months for such classification.
The accounting policies have been consistently applied by the Company and are consistent with those used in the previous year.
These financial statements are presented in Indian rupees and rounded off to nearest lacs unless otherwise stated.
a. Terms/Rights attached to equity shares
The Company has only one class of equity shares having a par value of Rs. 10/- per share. Each holder of equity shares is entitled to one vote per share. The dividend is subject to the approval of the shareholders in the ensuing annual general meeting.
During the year ended March 31, 2018, the amount of per equity share dividend proposed in total for distributions to equity shareholders is Rs. 11.00 (March 31, 2017 : Rs. 10.00). Out of the said total dividend proposed for the year ended March 31, 2018, amount of interim dividend paid during the year was Rs. 5.00 (March 31, 2017 : Rs. 4.00) per equity share and amount of final dividend proposed by the Board of Directors is Rs. 6.00 ( March 31, 2017: Rs. 6.00) per equity share.
In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.
c. Aggregate number of equity shares issued for consideration other than cash during the period of five years immediately preceding the reporting date:
The Company has issued total 18,800 (March 31, 2017 : 582,168) equity shares during the period of five years immediately preceding the reporting date on exercise of options granted under the employee stock option plan (ESOP) wherein part consideration was received in form of employee service and includes Nil (March 31, 2017 : 500,868) equity shares issued on account of merger of Shriram Holdings (Madras) Private Limited.
Secured by equitable mortgage of immovable property. Further secured by charge on plant and machinery, furniture and other fixed assets of the Company, charge on Companyâs hypothecation loans, other loans, advances and investments of the Company subject to prior charges created or to be created in favour of the Companyâs bankers, financial institutions and others.
Debentures may be bought back subject to applicable statutory and/or regulatory requirements, upon the terms and conditions as may be decided by the Company.
* Amount pertains to debentures issued prior to notification of the RBI Circular DNBD(PD) CC No. 330/03.10.001/2012-13 dated June 27, 2013.
Nature of security
Secured by specific assets covered under hypothecation loan and by way of exclusive charge and equitable mortgage of immovable property.
Debentures may be bought back subject to applicable statutory and/or regulatory requirements, upon the terms and conditions as may be decided by the Company.
iii) Privately placed redeemable non-convertible debenture of Rs. 3,000,000/- each Terms of repayment as on March 31, 2018
Long-term borrowing (gross of unamortised discount on debenture of Rs. Nil.)
Outstanding as at March 31, 2018 : Rs. Nil.
Current maturity (gross of unamortised discount on debenture of Rs. Nil.)
Outstanding as at March 31, 2018 : Rs. Nil.
Terms of repayment as on March 31, 2017
Long-term borrowing (gross of unamortised discount on debenture of Rs. Nil.)
Outstanding as at March 31, 2017 : Rs. Nil.
Nature of security
Secured by specific assets covered under hypothecation loan and by way of exclusive charge and equitable mortgage of immovable property.
Debentures may be bought back subject to applicable statutory and/or regulatory requirements, upon the terms and conditions as may be decided by the Company.
iv) Public issue of redeemable non-convertible debentures of Rs. 1,000/- each - (2010)
Terms of repayment Long-term borrowing
Outstanding as at March 31, 2018 and March 31, 2017: Rs. Nil.
Nature of security
Secured by specific assets covered under hypothecation loan and by way of exclusive charge and equitable mortgage of immovable property.
The Company has utilised the entire sum of Rs. 41,689.68 lacs raised from public issue (net off expenses) towards asset financing activities as per the objects stated in the prospectus for the issue.
Debentures may be bought back subject to applicable statutory and/or regulatory requirements, upon the terms and conditions as may be decided by the Company.
Subject to the provisions of The Companies Act, 2013, where the Company has fully redeemed or repurchased any Secured NCD(s), the Company shall have the right to keep such Secured NCDs in effect without extinguishment thereof, for the purpose of resale or reissue.
The Company has bought back NCDs of Rs. 1,000.00 lacs on July 14, 2011, Rs 128.64 lacs on October 28, 2014 and as per the terms of the issue Rs. 7,472.34 lacs were redeemed on June 1, 2013, Rs. 7,472.34 lacs were redeemed on June 1, 2014 and Rs. 10,443.36 lacs were redeemed on June 1, 2015.
Put options were exercised for option I on June 1, 2013 and Rs. 9,019.04 lacs were paid on July 5, 2013 in compliance with the terms of issue.
Put options were exercised for option II on June 1, 2015 and Rs. 1,440.95 lacs were paid on July 2, 2015 and Rs. 251.58 lacs were paid on July 3, 2015 in compliance with the terms of issue.
As per the terms of the issue Rs. 4,461.43 lacs were redeemed on June 1, 2017.
v) Public issue of redeemable non-convertible debentures of Rs. 1,000/- each-(2012) Terms of repayment Long-term borrowing
Outstanding as at March 31, 2018 and March 31, 2017: Rs. Nil.
Nature of security
Secured by specific assets covered under hypothecation loan agreements and by way of exclusive charge and equitable mortgage of immovable property.
The Company has utilised the entire sum of Rs. 60,000/- lacs raised from public issue (net off expenses) towards asset financing activities as per the objects stated in the prospectus for the issue.
Debentures may be bought back subject to applicable statutory and/or regulatory requirements, upon the terms and conditions as may be decided by the Company.
The Company has bought back non-convertible debentures of Rs. 54.85 lacs on October 28, 2014.
As per the terms of the issue Rs. 27,323.76 lacs were redeemed on August 7, 2015 and Rs. 32,621.39 lacs were redeemed on August 9, 2017.
Secured by specific assets covered under hypothecation loan agreements and by way of exclusive charge and equitable mortgage of immovable property.
The Company has utilised the entire sum of Rs. 73,589.04 lacs raised from public issue (net off expenses) towards asset financing activities as per the objects stated in the prospectus for the issue.
Debentures may be bought back subject to applicable statutory and/or regulatory requirements, upon the terms and conditions as may be decided by the Company.
The Company has bought back non-convertible debentures of Rs. 19.14 lacs on October 28, 2014.
As per the terms of the issue Rs. 32,510.10 lacs were redeemed on July 31, 2016 and Rs. 17,581.39 lacs were redeemed on July 31, 2017.
Nature of security
Secured by specific assets covered under hypothecation loan agreements and by way of exclusive charge and equitable mortgage of immovable property.
The Company has utilised the entire sum of Rs. 50,000.00 lacs raised from public issue (net off expenses) towards asset financing activities as per the objects stated in the prospectus for the issue.
Debentures may be bought back subject to applicable statutory and/or regulatory requirements, upon the terms and conditions as may be decided by the Company.
As per the terms of the issue Rs. 29,401.44 lacs were redeemed on October 24, 2016.
Secured by specific assets covered under hypothecation loan agreements and by way of exclusive charge and equitable mortgage of immovable property.
The Company has utilised the entire sum of Rs. 197,484.71 lacs raised from public issue (net off expenses) towards asset financing activities as per the objects stated in the prospectus for the issue.
Debentures may be bought back subject to applicable statutory and/or regulatory requirements, upon the terms and conditions as may be decided by the Company.
As per the terms of the issue Rs. 134,832.63 lacs were redeemed on July 15, 2017.
During the year, the Company issued senior secured notes in offshore market (notes) aggregating to INR 116,000 Lacs consisting of INR 84,000 lacs 8.10% notes due 2023 and INR 32,000 lacs 7.90% notes due 2021 payable in US dollars under INR 500,000 lacs Medium Term Note Programme. The notes issued by the Company are listed on Singapore Stock Exchange (SGX- ST).
The Company has utilised the entire sum of borrowing raised from Senior secured notes towards asset financing activities as per the objects stated in the prospectus for the issue.
During the year ended March 31, 2017, the Company has issued Rs. 135,000.00 lacs 8.25 % senior secured notes at the price of 100.18% that are due for repayment on February 18, 2020. The said notes (with ISIN - XS 1549374475) are listed and traded on the Singapore Exchange (SGX-ST) with a minimum board lot size of S$200,000.
The Company has utilised the entire sum of Rs. 135,000.00 lacs raised from Senior secured notes towards asset financing activities as per the objects stated in the prospectus for the issue.
Current maturity
Outstanding as at March 31, 2018 and March 31, 2017: Rs. Nil.
Nature of security
Secured by way of an exclusive fixed charge over hypothecation loan receivables of the Company.
D) Term loans from banks- unsecured As at March 31, 2018 Terms of repayment
Outstanding as at March 31, 2018 : Rs. Nil.
SEGMENT INFORMATION
Segment information is presented in the Consolidated financial statement in terms of the accounting standard 17 -Segment Reporting.
LEASES Operating lease:
In case of assets taken on lease
The Company has taken various office premises, furniture and fixtures, computers and plant and machinery under operating lease. The lease payments recognised in the Statement of Profit and Loss are Rs. 9,972.83 lacs (March 31, 2017: Rs. 9,195.17 lacs). Certain agreements provide for cancellation by either party or certain agreements contains clause for escalation and renewal of agreements. The non-cancellable operating lease agreements are ranging for a period 11 to 180 months. There are no restrictions imposed by lease arrangements.
The future minimum lease payments in respect of non-cancellable operating lease as at the Balance Sheet date are summarised below :
In case of assets given on lease
The Company has given office premises under operating lease. The income from operating lease recognised in the Statement of Profit and Loss are Rs. 20.90 lacs (March 31, 2017: Rs. 7.20 lacs). Agreements provide for cancellation by either party or contain clause for escalation and renewal of agreements. The non-cancellable operating lease agreement is for a period of 108 months.
In accordance with the Master Direction - Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 2016 dated August 25, 2016, the Company has created a floating charge on the statutory liquid assets comprising of investment in government securities to the extent of Rs. 140,376.00 lacs (March 31, 2017: Rs. 140,376.00 lacs) in favour of trustees representing the public deposit holders of the Company.
RELATED PARTY DISCLOSURE Related party where control exists
Subsidiary : Shriram Automall India Limited (SAMIL) (up to February 06, 2018)
Other related parties
Enterprises having significant influence : Shriram Capital Limited over the Company Shriram Ownership Trust
Shriram Financial Ventures (Chennai) Private Limited Piramal Enterprises Limited
Associates : Shriram Automall India Limited (SAMIL) (from February 07, 2018)
Related parties as per AS 18 with whom transactions have taken place during the year
Key management personnel : Mr. Umesh Revankar, Managing Director & CEO (till April 29, 2016
and from October 26, 2016 onwards)
Mr. Jasmit Singh Gujral, Managing Director & CEO(from April 30, 2016 to October 25, 2016)
Relatives of key management personnel : Mrs. Suchita U. Revankar (spouse of Managing Director)
Mrs. Geeta G. Revankar (mother of Managing Director)
Mr. Anil G. Revankar (brother of Managing Director)
Mr. Shreyas U. Revankar (son of Managing Director)
Master Shirish U. Revankar (son of Managing Director)
Future cash outflows in respect of (a), (b) and (c) above are determinable only on receipt of judgements /decisions pending with various forums/authorities. The Company is of the opinion that above demands are not sustainable and expects to succeed in its appeals. The management believes that the ultimate outcome of these proceedings will not have a material adverse effect on the Companyâs financial position and results of operations.
Disputed income tax demands are on account of royalty , disallowances of ESOP expenses, 14A, derivatives, interest as per assessment orders, etc.
Based on the intimation received by the Company, some of the suppliers have confirmed to be registered under âThe Micro, Small and Medium Enterprises Development (âMSMEDâ) Act, 2006â. Accordingly, the disclosures relating to amounts unpaid as at the year ended together with interest paid /payable are furnished below:
1. In addition to the auditors remuneration shown in operating and other expenses, the Company has also incurred auditors remuneration in connection with audit and related statutory services to be performed by auditors in connection with issue of senior secured notes of Rs. 26.16 lacs (March 31, 2017: Rs. 126.37 lacs) [including out-of-pocket expenses of Rs. Nil (March 31, 2017: Rs. 2.45 lacs)] shown under professional charges-resource mobilisation in note 19.
2. During the year, pursuant to Reserve Bank India (RBI) notification no. DNBR 011/CGM (CDS) dated March 27, 2015, the Company has revised its recognition norms of Non-Performing Assets (NPA) from 120 days to 90 days and increased contingent provision on standard assets from 0.35% to 0.40% and applied the revised norms in the last quarter of the year. Had the Company continued to use the earlier policy of classification of NPA and contingent provision on standard assets, provisions and write offs for the year ended March 31, 2018 would have been lower by Rs. 72,156.19 lacs, revenue from operations for the same period would have been higher by Rs. 2,717.25 lacs and profit before tax for the same period would have been higher by Rs. 74,873.44 lacs (net of tax Rs. 48,961.24 lacs).
3.During the year ended March 31, 2018, the Company has sold the controlling stake in its wholly owned subsidiary, Shriram Automall India Limited (SAMIL) to the extent of 16,630,435 equity shares (representing 55.44% of paid-up capital) @ Rs. 94.03 per share for a total consideration of Rs.15,637.60 lacs to MXC Solutions India Private Limited (MXC). Consequently, SAMIL has ceased to be a subsidiary and is now an associate of the Company from February 07, 2018. Profit arising on the sale of SAMIL shares amounting to Rs. 13,974.55 lacs has been disclosed as an Exceptional Item in the statement of profit and loss.
The above provision relate to disputed tax demands in relation to VAT and Service tax. Due to the very nature of such provisions and litigations involved, it is not possible to estimate the timing/ uncertainties relating to their outflows.
4.1 Exchange Traded interest rate (IR) derivatives : Nil
4.2 Disclosures on risk exposure of derivatives Qualitative disclosures
The Company has a Board approved policy in dealing with derivative transactions. Derivative transaction consists of hedging of foreign exchange transactions, which includes interest rate and currency swaps, interest rate options and forwards. The Company undertakes derivative transactions for hedging on-balance sheet assets and liabilities. Such outstanding derivative transactions are accounted on accrual basis over the life of the underlying instrument. The Asset Liability Management Committee and Risk Management Committee closely monitors such transactions and reviews the risks involved.
4.3 No financial assets are sold to securitisation / reconstruction company for asset reconstruction as on March 31, 2018 and March 31, 2017.
4.4 The Company has not purchased/sold non-performing assets for the year ended March 31, 2018 and March 31, 2017.
5 DETAILS OF FINANCING OF PARENT COMPANY PRODUCTS
The Company has not financed parent company products.
6 DETAILS OF SINGLE BORROWER LIMIT (SGL) / GROUP BORROWER LIMIT (GBL) EXCEEDED BY THE NBFC
The Company has not exceeded the prudential exposure limits for Single Borrower Limit (SGL) / Group Borrower Limit (GBL).
7 UNSECURED ADVANCES
The Company has not granted unsecured advances against collateral of intangible securities such as charge over the rights, licenses or authority.
OVERSEAS ASSETS (FOR THOSE WITH JOINT VENTURES AND SUBSIDIARIES ABROAD)
The Company does not have any joint venture or subsidiary abroad, hence not applicable.
8 OFF-BALANCE SHEET SPVs SPONSORED
The Company has not sponsored any off-balance sheet SPV
9 PENALTIES:
No penalties have been levied by any regulator on the Company.
10 PREVIOUS YEAR COMPARATIVES
Previous yearâs figures have been regrouped/reclassified wherever necessary, to conform to current yearâs classification.
Mar 31, 2017
1. Terms/Rights attached to equity shares
The Company has only one class of equity shares having a par value of Rs. 10/- per share. Each holder of equity shares is entitled to one vote per share. The dividend is subject to the approval of the shareholders in the ensuing annual general meeting.
During the year ended March 31, 2017, the amount of per equity share dividend recognized as distributions to equity shareholders was Rs.10.00 (March 31, 2016 : Rs. 10.00). Out of the total dividend declared during the year ended March 31, 2017, amount of interim dividend paid was Rs. 4.00 per equity share (March 31, 2016: Rs. 4.00) and amount of final dividend proposed was Rs. 6.00 per equity share ( March 31, 2016: Rs. 6.00).
In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.
2. Shares reserved for issue under options
During the year ended March 31, 2017 Nil (March 31, 2016: Nil) equity shares were vested and exercised.
3. Aggregate number of equity shares issued for consideration other than cash during the period of five years immediately preceding the reporting date:
The Company has issued total 582,168 equity shares (March 31, 2016 : 722,068) during the period of five years immediately preceding the reporting date on exercise of options granted under the employee stock option plan (ESOP) wherein part consideration was received in form of employee service and includes 500,868 (March 31, 2016 : 500,868) equity shares issued on account of merger of Shriram Holdings (Madras) Private Limited.
Nature of security
Secured by equitable mortgage of immovable property. Further secured by charge on plant and machinery, furniture and other fixed assets of the Company, charge on Companyâs hypothecation loans, other loans, advances and investments of the Company subject to prior charges created or to be created in favour of the Companyâs bankers, financial institutions and others.
Debentures may be bought back subject to applicable statutory and/or regulatory requirements, upon the terms and conditions as may be decided by the Company.
* Amount pertains to debentures issued prior to notification of the RBI Circular DNBD(PD) CC No. 330/03.10.001/2012-13 dated June 27, 2013.
4. Privately placed redeemable non-convertible debenture of Rs. 3,000,000/- each Terms of repayment as on March 31, 2017
Long-term borrowing (gross of unamortized discount on debenture of Rs. Nil.)
Outstanding as at March 31, 2017 : Rs. Nil.
Current maturity (gross of unamortized discount on debenture of Rs. Nil.)
segment information
The Company operates in a single reportable segment that is financing, which has similar risks and returns for the purpose of AS-17 on âSegment Reportingâ notified under the Companies (Accounting Standard) Rules, 2014 and the Companies (Accounting Standards) Amendment Rules, 2016. The Company operates in a single geographical segment i.e. domestic.
LEASES In case of assets taken on lease
The Company has taken various office premises, furniture and fixtures, computers and plant and machinery under operating lease. The lease payments recognized in the Statement of Profit and Loss are Rs. 9,195.17 lacs (March 31, 2016: Rs. 8,683.95 lacs). Certain agreements provide for cancellation by either party or certain agreements contains clause for escalation and renewal of agreements. The non-cancellable operating lease agreements are ranging for a period 11 to 180 months. There are no restrictions imposed by lease arrangements.
The future minimum lease payments in respect of non-cancellable operating lease as at the Balance Sheet date are summarized below :
5. In accordance with the Master Direction - Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 2016 dated August 25, 2016, the Company has created a floating charge on the statutory liquid assets comprising of investment in government securities to the extent of Rs. 140,376.00 lacs (March 31, 2016: Rs. 116,276.00 lacs) in favour of trustees representing the public deposit holders of the Company.
In addition to the auditors remuneration shown in operating and other expenses, the Company has also incurred auditors remuneration in connection with audit and related statutory services to be performed by auditors in connection with issue of senior secured notes of Rs. 126.37 lacs (March 31, 2016: Rs. Nil) [including out-of-pocket expenses of Rs. 2.45 lacs (March 31, 2016 : Rs. Nil)] shown under professional charges-resource mobilization in note 19.
6. DETAILS OF Net ASSETS Taken OVER On amalgamation
Pursuant to the scheme of amalgamation (âthe Schemeâ) of erstwhile Shriram Equipment Finance Company Limited (SEFCL) with the Company under Sections 391 to 394 of the Companies Act, 1956 sanctioned by Honâble High Court of Madras on March 31, 2016 entire business and all assets and liabilities of Shriram Equipment Finance Company Limited were transferred and vested in the Company effective from April 1, 2015. Accordingly the Scheme has been given effect to in these financial statements.
SEFCL was non-banking finance Company âNBFCâ engaged in business of equipment financing.
The amalgamation has been accounted for under the âPooling of Interestâ method as prescribed by the Accounting Standard 14 âAccounting for Amalgamationsâ notified under the Companies (Accounts) Rules, 2014. Accordingly, the accounting treatment has been given as under:-
7. The assets and liabilities as at April 1, 2015 were incorporated in the financial statement of the Company at its book value.
8. Debit balance in the Statement of Profit and Loss of SEFCL as at April 1, 2015 amounting to Rs. 3,503.89 lacs was adjusted in âSurplus in Statement of Profit and Lossâ.
9. Credit balance in the Statutory Reserve pursuant to section 45-IC of the RBI Act, 1934 of SEFCL as at April 1, 2015 amounting to Rs. 4,655.65 lacs was adjusted in âStatutory Reserve pursuant to section 45-IC of the RBI Act, 1934â.
10. SEFCL being wholly owned subsidiary, the entire share capital i.e. 10,000,000 Equity Shares of Rs.10/- each fully paid and 25,000,000 0.01% Preference Share of Rs.100/- each in Shriram Equipment Finance Company Limited, held as investment by the Company stands cancelled.
11. Exchange Traded interest rate (IR) derivatives : Nil
12. Disclosures on risk exposure of derivatives Qualitative disclosures
The Company has a Board approved policy in dealing with derivative transactions. Derivative transaction consists of hedging of foreign exchange transactions, which includes interest rate and currency swaps, interest rate options and forwards. The Company undertakes derivative transactions for hedging on-balance sheet assets and liabilities. Such outstanding derivative transactions are accounted on accrual basis over the life of the underlying instrument. The Asset Liability Management Committee and Risk Management Committee closely monitors such transactions and reviews the risks involved.
In the ordinary course of business, loan borrowers of the Company have directly deposited cash as part of their loan repayments in the collection bank accounts of the Company with various banks, aggregating to Rs. 60,639.52 lacs during the period November 9, 2016 to December 30, 2016 the denomination wise details of which are currently not available with the Company and hence not included in the above table.
Explanation : For the purposes of this clause, the term âSpecified Bank Notesâ shall have the same meaning provided in the notification of the Government of India, in the Ministry of Finance, Department of Economic Affairs number S.O. 3407(E), dated the November 8, 2016.
13. PREVIOUS YEAR COMPARATIVES
Previous yearâs figures have been regrouped/reclassified wherever necessary, to conform to current yearâs classification.
Mar 31, 2014
1. Gratuity and other postemployment Benefit plans
The Company has an defined benefit gratuity plan. Every employee who has
completed five years or more of service is eligible for a gratuity on
separation at 15 days basic salary (last drawn salary) for each
completed year of service. The scheme is funded with an insurance
company in the form of qualifying insurance policy.
During the year the company has funded Rs. 1,849.88 lacs for gratuity
being defined benefit obligation outstanding as on September 30, 2013.
Consequent to the adoption of revised AS 15 ''Employee Benefits'' issued
under Companies Accounting Standard Rules, 2006, as amended, the
following disclosures have been made as required by the standard:
Statement of Profit and Loss
Net employee benefit expense (recognized in employee cost)
2. employee Stock option plan (Contd.)
Since the enterprise used the intrinsic value method the impact on the
reported net proft and earnings per share by applying the fair value
based method is as follows:
In March 2005, ICAI has issued a guidance note on "Accounting for
Employees Share Based Payments" applicable to employee based share plan
the grant date in respect of which falls on or after April 1, 2005. The
said guidance note requires that the preformed disclosures of the impact
of the fair value method of accounting of employee stock compensation
accounting in the financial statements. Applying the fair value based
method defined in the said guidance note, the impact on the reported net
profit and earnings per share would be as follows:
3. In accordance with the Reserve Bank of India circular
no.RBI/2006-07/ 225 DNBS (PD) C.C No. 87/03.02.004/2006- 07 dated
January 4, 2007, the Company has created a footing charge on the
statutory liquid assets comprising of investment in Government
Securities to the extent of Rs. 34,076.00 lacs (March 31, 2013: Rs.
24,161.00 lacs) in favor of trustees representing the public deposit
holders of the Company.
4. related parties disclosure
Related party where control exists
Subsidiary : Shriram Equipment Finance Company Limited (SEFCL)
Shriram Automall India Limited (SAMIL)
Shriram Insurance Broking Company Limited (SIBCL)
(upto December 13, 2013)
other related
parties
Enterprises
having
significant : Shriram Holdings (Madras) Private Limited
influence over
the Company (up to November 05, 2012)
Shriram Capital Limited
Newbridge India Investments II Limited (up to
May 10, 2013)
Shriram Ownership Trust
Shriram Financial Ventures (Chennai) Private Limited
( w.e.f. August 31, 2012)
Associates : Shriram Asset Management Company Limited
(up to June 18, 2013)
Key Management
Personnel : Mr. Umesh Revankar, Managing Director
Relatives of
Key Management
Personnel : Mrs. Suchita U. Revankar (spouse)
Master Shirish U. Revankar (son)
Master Shreyas U. Revankar (son)
Mrs. Geeta G. Revankar (mother)
5. Contingent Liabilities not provided For
(Rs. in lacs)
as at march 31, 2014 as at march 31, 2013
a. In respect of Income
tax demands where the
company has 52,678.52 46,689.12
fled appeal before
CIT (Appeals)
b. VAT demand where the
company has fled
appeal before 2,532.82 1,843.09
Tribunal
c. Service tax
liability pertaining
to HP/Lease 12,824.07 -
d. Guarantees and
counter guarantees 237,503.49 226,750.85
e. Guarantees given
for subsidiaries 300.00 500.00
Future cash outflows in respect of (a), (b) and (c) above are
determinable only on receipt of judgments /decisions pending with
various forums/authorities. The Company is of the opinion that above
demands are not sustainable and expects to succeed in its appeals.
The Company has received Show Cause Notice demanding service tax on
services rendered towards provision of collection of receivables and
liquidity facilities in respect of Securitisation / Direct Assignments
for the period 2008-09 to 2011-12 and the same is contested by the
Company.
6. merger of Shriram holdings (madras) private Limited [''ShmpL''] with
The Company during The year ended march 31, 2013, :
(a) On December 21, 2011, the Board of Directors of the Company have
approved the merger SHMPL with the Company. In terms of the Scheme of
Amalgamation & Arrangement (Scheme) approved by Hon''ble High Court of
Madras vide order dated September 13, 2012 and subsequent fling thereof
with the Registrar of Companies (''ROC''), Tamil Nadu dated November 05,
2012, Shriram Holdings (Madras) Private Limited ("SHMPL"), an
Investment company has been amalgamated with the Company with effect
from April 01, 2012. The scheme was effective only after the fling
thereof with ROC, Tamil Nadu and had an appointed date of April 01,
2012.
(b) Prior to the merger, SHMPL held 93,371,512 shares of the Company.
(c) The amalgamation has been accounted for under the "Purchase method"
as prescribed by "Accounting Standard 14 (AS-14) Accounting for
Amalgamation" notified under Companies (Accounting Standards) Rules,
2006 (as amended).
(d) In accordance with the said Scheme:
i) All the assets (other than shares of the Company held by "SHMPL" of
the Company), debts, liabilities, duties and obligations of SHMPL have
been vested in the Company with effect from April 01, 2012 and have
been recorded at their respective Fair values under the purchase method
of accounting for amalgamation. There were no difference in the
accounting policies of "SHMPL" and the Company.
ii) Exchange ratio determined at 313:124 (i.e. 313 equity shares of Rs.
10/- each of the Company for every 124 equity shares of Rs. 10/- each
of "SHMPL" and these equity shares ranking pari-passu with the existing
equity shares of the Company.
iii) Additional issue of 500,868 equity shares to the shareholders of
SHMPL, pursuant to Net Assets taken of SHMPL over by the Company.
iv) In accordance with the said scheme, excess of the Net Assets Value
taken over by the Company vis-a-vis additional equity shares issued has
been transferred to capital reserves.
7. previous year Comparatives
Previous year figures have been regrouped / rearranged, wherever
considered necessary, to conform with current year''s presentation.
Mar 31, 2013
1. CORPORATE INFORMATION
Shriram Transport Finance Company Limited (the Company) is a public
company domiciled in India and incorporated under the provisions of the
Companies Act, 1956. Its shares are listed on Bombay Stock Exchange and
National Stock Exchange. The company provides finance for commercial
vehicles, construction equipments and other loans.
2. BASIS OF PREPARATION
The fi nancial statements have been prepared in conformity with
generally accepted accounting principles to comply in all material
respects with the notifi ed Accounting Standards (''AS'') under
Companies Accounting Standard Rules, 2006, as amended, the relevant
provisions of the Companies Act, 1956 (''the Act'') and the
guidelines issued by the Reserve Bank of India (''RBI'') as
applicable to a Non Banking Finance Company (''NBFC''). The financial
statements have been prepared under the historical cost convention on
an accrual basis. The accounting policies have been consistently
applied by the Company and are consistent with those used in the
previous year except for the change in accounting policy explained
bellow.
a. Terms/rights attached to equity shares
The company has only one class of equity shares having a par value of
Rs. 10/- per share. Each holder of equity shares is entitled to one
vote per share. The dividend is subject to the approval of the
shareholders in the ensuing Annual General Meeting.
During the year ended March 31, 2013, the amount of per equity share
dividend recognized as distributions to equity shareholders was Rs.
7.00 ( March 31, 2012 : Rs. 6.50). Out of the total dividend declared
during the year ended March 31, 2013, amount of interim dividend paid
was Rs. 3.00 per equity share (March 31, 2012 : Rs. 2.50) and amount of
final dividend proposed was Rs. 4.00 per equity share (March 31, 2012 :
Rs. 4.00).
In the event of liquidation of the company, the holders of equity
shares will be entitled to receive remaining assets of the company,
after distribution of all preferential amounts. The distribution will
be in proportion to the number of equity shares held by the
shareholders.
b. Shares reserved for issue under options
The Company has reserved 18,800 (March 31, 2012, 195,750) equity shares
for issue under the employee stock option scheme 2005. Except for
14,800 (March 31, 2012, 61,300) equity shares which are unvested as of
March 31, 2013, the remaining equity shares reserved for issue are
vested and are exercisable as at March 31, 2013. The vesting date for
unvested 14,800 equity shares is May 12, 2013.
c. Aggregate number of equity shares issued for consideration other
than cash during the period of five years immediately preceeding the
reporting date:
The company has issued total 4,069,968 equity shares (March 31 2012 :
3,583,300) during the period of five years immediately preceding the
reporting date on exercise of options granted under the employee stock
option plan (ESOP) wherein part consideration was received in form of
employee service, and includes 500,868 equity shares issued on account
of merger of Shriram Holdings (Madras) Private Limited as per note (f)
given below.
d. The Hon''ble Madras High Court sanctioned the Scheme of
Arrangement for merger of Shriram Holdings (Madras) Private Limited
(SHMPL) with the Company (''the Scheme'') and the Scheme came into
effect from November 05,2012 when the Company fi led the Scheme with
the Registrar of Companies, Tamil Nadu, Chennai. Pursuant to the
Scheme, the investment of SHMPL in the share capital of the Company
viz. 93,371,512 fully paid-up Equity shares of Rs.10/- each stood
cancelled and the Company issued and allotted 93,872,380 new Equity
shares of Rs. 10/- each fully paid-up to the shareholders of SHMPL.
This resulted into increase of Rs.50.09 lacs in the paid-up capital of
the Company with effect from November 05, 2012. The merger is effective
from April 01, 2012 and the effect of the same is considered in the
above financial statements.
Nature of Security
Secured by equitable mortgage of immovable property. Further secured by
charge on plant and machinery, furniture and other fixed assets of the
Company, charge on Company''s hypothecation loans, other loans,
advances and investments of the Company subject to prior charges
created or to be created in favour of the Company''s bankers,
financial institutions and others.
Debentures may be bought back subject to applicable statutory and/or
regulatory requirements, upon the terms and conditions as may be
decided by the Company. The Company may grant loan against the security
of NCDs upon the terms and conditions as may be decided by the Company
and subject to applicable statutory and/or regulatory requirements.
Nature of Security
Secured by specific assets covered under hypothecation loan and by way
of exclusive charge and equitable mortgage of immovable property.
The funds raised from the Public issue of 9,999,996 Secured
Non-Convertible Debenture aggregating to Rs. 99,999.96 lacs have been
utilised, after meeting the expenditure of and related to the Public
issue, for various financing activities of the Company including
lending, investments and repayment of borrowings.
Debentures may be bought back subject to applicable statutory and/or
regulatory requirements, upon the terms and conditions as may be
decided by the Company. The Company may grant loan against the security
of NCDs upon the terms and conditions as may be decided by the Company
and subject to statutory and/or regulatory requirements.
Subject to the provisions of The Companies Act, 1956, where the company
has fully redeemed or repurchased any Secured NCD(s), the company shall
have the right to keep such Secured NCDs in effect without
extinguishment thereof, for the purpose of resale or reissue.
The Company has bought back Non- convertible Debentures of Rs. 4,215.23
lacs on 12-Mar-2010 and Rs. 3,000.00 lacs on 27-March-2012 , Rs.
23,505.26 lacs on 28-March-2012 and as per the terms of the issue Rs.
46,923.16 lacs were redeemed on 26-August-2012.
Nature of Security
Secured by specific assets covered under hypothecation loan and by way
of exclusive charge and equitable mortgage of immovable property.
The Company has utilised the entire sum of Rs. 41,689.68 lacs raised
from public issue (net off expenses) towards asset financing activities
as per the objects stated in the prospectus for the issue.
Debentures may be bought back subject to applicable statutory and/or
regulatory requirements, upon the terms and conditions as may be
decided by the Company. The Company may grant loan against the security
of NCDs upon the terms and conditions as may be decided by the Company
and subject to statutory and/or regulatory requirements.
Subject to the provisions of The Companies Act, 1956, where the company
has fully redeemed or repurchased any Secured NCD(s), the company shall
have the right to keep such Secured NCDs in effect without
extinguishment thereof, for the purpose of resale or reissue.
The Company has bought back Non- convertible Debentures of Rs. 1,000.00
lacs on 14-July-2011.
Nature of Security
Secured by specific assets covered under hypothecation loan agreements
and by way of exclusive charge and equitable mortgage of immovable
property.
The Company has utilised the entire sum of Rs. 99,999.93 lacs raised
from public issue (net off expenses) towards asset financing activities
as per the objects stated in the prospectus for the issue.
Debentures may be bought back subject to applicable statutory and/or
regulatory requirements, upon the terms and conditions as may be
decided by the Company. The Company may grant loan against the security
of NCDs upon the terms and conditions as may be decided by the Company
and subject to statutory and/or regulatory requirements.
Subject to the provisions of The Companies Act, 1956, where the company
has fully redeemed or repurchased any Secured NCD(s), the company shall
have the right to keep such Secured NCDs in effect without
extinguishment thereof, for the purpose of resale or reissue.
Nature of Security
Secured by specific assets covered under hypothecation loan agreements
and by way of exclusive charge and equitable mortgage of immovable
property.
The Company has utilised the entire sum of Rs. 60,000/- lacs raised
from public issue (net off expenses) towards asset financing activities
as per the objects stated in the prospectus for the issue.
Debentures may be bought back subject to applicable statutory and/or
regulatory requirements, upon the terms and conditions as may be
decided by the Company. The Company may grant loan against the security
of NCDs upon the terms and conditions as may be decided by the Company
and subject to statutory and/or regulatory requirements.
3. GRATUITY AND OTHER POST-EMPLOYMENT BENEFIT PLANS
The Company has an unfunded defined benefit gratuity plan. Every
employee who has completed five years or more of service is eligible
for a gratuity on separation at 15 days basic salary (last drawn
salary) for each completed year of service.
Consequent to the adoption of revised AS 15 ''Employee Benefits''
issued under Companies Accounting Standard Rules, 2006, as amended, the
following disclosures have been made as required by the standard:
The estimates of future salary increases, considered in actuarial
valuation, are on account of inflation, seniority, promotion and other
relevant factors, such as supply and demand in the employment market.
*5% in case of employees with service period of more than 5 years and
10% for all other employees.
4. The Company is engaged in financing activities. It operates in a
single business and geographical segment.
5. EMPLOYEE STOCK OPTION PLAN
The expected volatility was determined based on historical volatility
data equal to the NSE volatility rate of Bank Nifty which is considered
as a comparable peer group of the Company. To allow for the effects of
early exercise, it was assumed that the employees will exercise the
options within six months from the date of vesting in view of the
exercise price being significantly lower than the market price.
Effect of the employee share-based payment plans on the profit and loss
account and on its financial position:
Since the enterprise used the intrinsic value method the impact on the
reported net profit and earnings per share by applying the fair value
based method is as follows:
In March 2005, ICAI has issued a guidance note on "Accounting for
Employees Share Based Payments" applicable to employee based share
plan the grant date in respect of which falls on or after April 1,
2005. The said guidance note requires that the proforma disclosures of
the impact of the fair value method of accounting of employee stock
compensation accounting in the financial statements. Applying the fair
value based method defined in the said guidance note, the impact on the
reported net profit and earnings per share would be as follows:
6. LEASES
In case of assets taken on lease
The Company has taken various office premises, furniture and fixtures,
computers and plant and machinery under operating lease. The lease
payments recognized in the statement of profit & loss are Rs. 6,430.43
lacs (March 31, 2012: Rs. 5,836.21 lacs). Certain agreements provide
for cancellation by either party or certain agreements contains clause
for escalation and renewal of agreements. The non-cancellable operating
lease agreements are ranging for a period 11 to 144 months. There are
no restrictions imposed by lease arrangements. There are no sub leases.
In accordance with the Reserve Bank of India circular no.RBI/2006-07/
225 DNBS (PD) C.C No. 87/03.02.004/2006- 27 07 dated January 4, 2007,
the Company has created a floating charge on the statutory liquid
assets comprising of investment in Government Securities to the extent
of Rs. 24,161.00 lacs (March 31, 2012: Rs. 21,674.50 lacs) in favour
of trustees representing the public deposit holders of the Company.
Future cash outflows in respect of (a) and (b) above are determinable
only on receipt of judgements /decisions pending with various
forums/authorities. The Company is of the opinion that above demands
are not sustainable and expects to succeed in its appeals.
7. SECURITISATION/ DIRECT ASSIGNMENT
The Company sells loans through securitisation and direct assignment.
The information on securitisation of the Company as an originator in
respect of securitisation transaction done during the year is given
below:
8 In addition to the auditors remuneration shown in operating and
other expenses, the Company has also incurred auditors remuneration in
connection with audit and related statutory services to be performed by
auditors in connection with public issue of non convertible debentures
of Rs. 53.38 lacs (March 31, 2012: Rs. 44.24 lacs) [including out of
pocket expenses of Rs. 0.46 lacs (March 31, 2012: Rs. 0.12 lacs)] have
been amortised as per note 13 and shown under other assets.
MERGER OF SHRIRAM HOLDINGS (MADRAS) PRIVATE LIMITED [''SHMPL''] WITH
THE COMPANY
(a) On December 21, 2011, the Board of Directors of the Company have
approved the merger SHMPL with the Company. In terms of the Scheme of
Amalgamation & Arrangement (Scheme) approved by Hon''ble High Court of
Madras vide order dated September 13, 2012 and subsequent filing
thereof with the Registrar of Companies (''ROC''), Tamil Nadu dated
November 05, 2012, Shriram Holdings (Madras) Private Limited
("SHMPL"), an Investment company has been amalgamated with the
Company with effect from April 01, 2012. The scheme was effective only
after the filing thereof with ROC, Tamil Nadu and had an appointed date
of April 01, 2012.
(b) Prior to the merger, SHMPL held 93,371,512 shares of the Company.
(c) The amalgamation has been accounted for under the "Purchase
method" as prescribed by "Accounting Standard 14 (AS-14) Accounting
for Amalgamation" notified under Companies (Accounting Standards)
Rules, 2006 (as amended).
(d) In accordance with the said Scheme:
i. All the assets (other than shares of the Company held by
"SHMPL" of the Company), debts, liabilities, duties and obligations
of SHMPL have been vested in the Company with effect from April 01,
2012 and have been recorded at their respective Fair values under the
purchase method of accounting for amalgamation. There were no
difference in the accounting policies of "SHMPL" and the Company
except in case of valuation of quoted mutual fund investments, where
SHMPL values the investment at cost or market whichever is less and the
company values them at fair value as required Non-Banking Financial (
Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank)
Directions, 2007.
ii. Exchange ratio determined at 313:124 (i.e. 313 equity shares of
Rs. 10/- each of the Company for every 124 equity shares of Rs. 10/-
each of "SHMPL"and these equity shares ranking pari-passu with the
existing equity shares of the Company.
iii. Additional issue of 500,868 equity shares to the shareholders of
SHMPL, pursuant to Net Assets taken of SHMPL over by the Company.
iv. In accordance with the said scheme, excess of the Net Assets Value
taken over by the Company vis-a-vis additional equity shares issued has
been transferred to capital reserves.
9. PREVIOUS YEAR COMPARATIVES
Previous year figures have been regrouped / rearranged, wherever
considered necessary, to conform with current years presentation.
Mar 31, 2012
NOTE 1 CORPORATE INFORMATION
Shriram Transport Finance Company Limited (the Company) is a public
company domiciled in India and incorporated under the provisions of the
Companies Act, 1956. Its shares are listed on Bombay Stock Exchange and
National Stock Exchange. The company provides finance for commercial
vehicles, construction equipments and other loans.
NOTE 2 BASIS OF PREPARATION
The financial statements have been prepared in conformity with
generally accepted accounting principles to comply in all material
respects with the notified Accounting Standards ('AS') under
Companies Accounting Standard Rules, 2006, as amended, the relevant
provisions of the Companies Act, 1956 ('the Act') and the
guidelines issued by the Reserve Bank of India ('RBI') as
applicable to a Non Banking Finance Company ('NBFC'). The financial
statements have been prepared under the historical cost convention on
an accrual basis. The accounting policies have been consistently
applied by the Company and are consistent with those used in the
previous year, except for the change in accounting policy explained
below.
a. Terms/rights attached to equity shares
The company has only one class of equity shares having a par value of
Rs. 10 per share. Each holder of equity shares is entitled to one vote
per share.The dividend is subject to the approval of the shareholders
in the ensuing Annual General Meeting.
During the year ended March 31, 2012, the amount of per equity share
dividend recongnized as distributions to equity shareholders was Rs.
6.50 (March 31, 2011 : Rs. 6.50).
In the event of liquidation of the company, the holders of equity
shares will be entitled to receive remaining assets of the company,
after distribution of all preferential amounts. The distribution will
be in proportion to the number of equity shares held by the
shareholders.
b. Shares reserved for issue under options
The Company has reserved 195,750 equity shares for issue under the
employee stock option scheme 2005. Except for 61,300 equity shares
which are unvested as of March 31, 2012, the remaining equity shares
reserved for issue are vested and are exercisable as at March 31, 2012.
The vesting date for unvested 14,100 equity shares is May 12, 2012, for
28,400 unvested equity shares is July 14, 2012 and for 18,800 unvested
equity shares is May 12, 2013.
c. Aggregate number of equity shares issued for consideration other
than cash during the period of five years immediately preceeding the
reporting date:
The company has issued total 3,583,300 equity shares (March 31 2011 :
3,600,650) during the period of five years immediately preceding the
reporting date on exercise of options granted under the employee stock
option plan(ESOP) wherein part consideration was received in form of
employee service.
d. The Board of Directors at its meeting held on December 21, 2011,
has approved the Scheme of Arrangement for merger of Shriram Holdings
(Madras) Private Limited into the Company, subject to the approval of
shareholders, the Hon'ble High court and other necessary regulatory
approvals. The Scheme has been filed with Hon'ble High Court of
Judicature at Madras on March 28, 2012. The Appointed Date of merger is
fixed at April 01, 2012.
Nature of Security
Secured by equitable mortgage of immovable property. Further secured by
charge on plant and machinery, furniture and other fixed assets of the
Company, charge on Company's hypothecation loans, other loans,
advances and investments of the Company subject to prior charges
created or to be created in favour of the Company's bankers,
financial institutions and others.
Debentures may be bought back subject to applicable statutory and/or
regulatory requirements, upon the terms and conditions as may be
decided by the Company. The Company may grant loan against the security
of NCDs upon the terms and conditions as may be decided by the Company
and subject to applicable statutory and/or regulatory requirements.
Nature of Security
Secured by specific assets covered under hypothecation loan and by way
of exclusive charge and equitable mortgage of immovable property.
Debentures may be bought back subject to applicable statutory and/or
regulatory requirements, upon the terms and conditions as may be
decided by the Company.
Nature of Security
Secured by specific assets covered under hypothecation loan and by way
of exclusive charge and equitable mortgage of immovable property.
The funds raised from the Public issue of 9,999,996 secured
Non-Convertible Debenture aggregating to Rs. 99,999.96 lacs have been
utilised, after meeting the expenditure of and related to the Public
issue, for various financing activities of the Company including
lending, investments and repayment of borrowings
Debentures may be bought back subject to applicable statutory and/or
regulatory requirements, upon the terms and conditions as may be
decided by the Company. The Company may grant loan against the security
of NCDs upon the terms and conditions as may be decided by the Company
and subject to statutory and/or regulatory requirements.
Subject to the provisions of The Companies Act, 1956, where the company
has fully redeemed or repurchased any Secured NCD(s), the company shall
have the right to keep such Secured NCDs in effect without
extinguishment thereof, for the purpose of resale or reissue.
The Company has bought back Non- convertible Debentures of Rs. 4,215.23
lacs on 12-Mar-2010 and Rs. 3,000.00 lacs on 27-March-2012 and Rs.
23,505.26 lacs on 28-March-2012.
Nature of Security
Secured by specific assets covered under hypothecation loan and by way
of exclusive charge and equitable mortgage of immovable property.
The Company has utilised the entire sum of Rs. 41,689.68 lacs raised
from public issue (net off expenses) towards asset financing activities
as per the objects stated in the prospectus for the issue.
Debentures may be bought back subject to applicable statutory and/or
regulatory requirements, upon the terms and conditions as may be
decided by the Company. The Company may grant loan against the security
of NCDs upon the terms and conditions as may be decided by the Company
and subject to statutory and/or regulatory requirments.
Subject to the provisions of The Companies Act, 1956, where the company
has fully redeemed or repurchased any Secured NCD(s), the company shall
have the right to keep such Secured NCDs in effect without
extinguishment thereof, for the purpose of resale or reissue.
The Company has bought back Non- convertible Debentures of Rs. 1,000.00
lacs on 14-July-2011.
Nature of Security
Secured by specific assets covered under hypothecation loan agreements
and by way of exclusive charge and equitable mortgage of immovable
property.
The Company has utilised the entire sum of Rs. 99,999.93 lacs raised
from public issue (net off expenses) towards asset financing activities
as per the objects stated in the prospectus for the issue.
Debentures may be bought back subject to applicable statutory and/or
regulatory requirements, upon the terms and conditions as may be
decided by the Company. The Company may grant loan against the security
of NCDs upon the terms and conditions as may be decided by the Company
and subject to statutory and/or regulatory requirments.
Subject to the provisions of The Companies Act, 1956, where the company
has fully redeemed or repurchased any Secured NCD(s), the company shall
have the right to keep such Secured NCDs in effect without
extinguishment thereof, for the purpose of resale or reissue._
# Includes current maturities of long term loans and advances
A Advance given to the Company in which a director is interested Rs.
186.76 lacs (March 31, 2011: Rs. 112.00 lacs)
* Advance given to subsidiary M/s. Shriram Equipment Finance Company
Limited Rs. 41,023.88 lacs (March 31, 2011: Rs. 11,167.86 lacs)
$ Advance given to subsidiary M/s. Shriram Automall India Limited Rs.
521.88 lacs (March 31, 2011: Rs. 2,755.86 lacs)
# Includes deposits of Rs. 120,293.42 lacs (March 31, 2011 : Rs.
170,794.31 lacs) pledged with Banks as margin for credit enchancement,
Rs. 22,750.21 lacs (March 31, 2011: Rs. 11,112.38 lacs) as margin for
guarantees for credit enhancement and Rs. 1,957.31 lacs (March 31,
2011: Rs. 345.44 lacs) pledged as lien against loans taken.
NOTE 3 GRATUITY AND OTHER POST-EMPLOYMENT BENEFIT PLANS:
The Company has an unfunded defined benefit gratuity plan. Every
employee who has completed five years or more of service is eligible
for a gratuity on separation at 15 days basic salary (last drawn
salary) for each completed year of service.
Consequent to the adoption of revised AS 15 'Employee Benefits'
issued under Companies Accounting Standard Rules, 2006, as amended, the
following disclosures have been made as required by the standard:
Since the enterprise used the intrinsic value method the impact on the
reported net profit and earnings per share by applying the fair value
based method is as follows:
In March 2005, ICAI has issued a guidance note on "Accounting for
Employees Share Based Payments" applicable to employee based share
plan the grant date in respect of which falls on or after April 1,
2005. The said guidance note requires that the proforma disclosures of
the impact of the fair value method of accounting of employee stock
compensation accounting in the financial statements. Applying the fair
value based method defined in the said guidance note, the impact on the
reported net profit and earnings per share would be as follows:_
NOTE 4 LEASES
In case of assets taken on lease
The Company has taken various office premises, furniture and fixtures,
computers and plant and machinery under operating lease. The lease
payments recognized in the statement of profit & loss are Rs. 5,836.21
lacs (March 31, 2011: Rs. 4,870.72 lacs). Certain agreements provide
for cancellation by either party or certain agreements contains clause
for escalation and renewal of agreements. The non-cancellable operating
lease agreements are ranging for a period 11 to 180 months. There are
no restrictions imposed by lease arrangements. There are no sub leases.
NOTE 5 In accordance with the Reserve Bank of India circular
no.RBI/2006-07/ 225 DNBS (PD) C.C No. 87/03.02.004/2006- 07 dated
January 4, 2007, the Company has created a floating charge on the
statutory liquid assets comprising of investment in Government
Securities to the extent of Rs. 21,674.50 lacs (March 31, 2011: Rs.
16,677.50 lacs) in favour of trustees representing the public deposit
holders of the Company.
NOTE 6 CONTINGENT LIABILITIES NOT PROVIDED FOR
(Rs. in lacs)
As at As at
March 31, 2012 March 31, 2011
a. Demands in respect of Service tax Nil 330.00
[Amount of Rs. 15.00 lacs (March 31,
2011: Rs. 15.00 lacs) has been paid
under protest ]
b. Disputed sales tax demand Nil 412.33
[Amount of Rs. 63.92 lacs
(March 31, 2011: Rs. 63.92 lacs)
has been paid by the Company]
c. In respect of Income tax
demands/ESOP disallowance 5,691.53 7,794.91
d. Guarantees and Counter Guarantees 233,498.60 194,058.28
Future cash outflows in respect of (a), (b) and (c) above are
determinable only on receipt of judgements /decisions pending with
various forums/authorities.
NOTE 7 In addition to the auditors remuneration shown in operating and
other expenses, the Company has also incurred auditors remuneration in
connection with audit and related statutory services to be performed by
auditors in connection with public issue of non convertible debentures
of Rs. 44.24 lacs (March 31, 2011: Rs. 39.85 lacs) [including out of
pocket expenses of Rs. 0.12 lacs (March 31, 2011: Rs. 0.14 lacs)] have
been amortised as per note _13 and shown under other assets.
NOTE 8 Consequent to the re-assessment and reduction in the estimated
useful life of the certain items of fixed assets falling in the
category of Plant & Equipment, Office equipments, Furniture & Fixtures
and Vehicles, the net depreciation charge for the year is higher by Rs.
254.31 lacs with a corresponding decrease in the net block of fixed
assets.
NOTE 9 PREVIOUS YEARS FIGURES
Till the year ended March 31, 2011, the company was using pre-revised
Schedule VI to the Companies Act 1956, for preparation and presentation
of its financial statements. During the year ended March 31, 2012, the
revised Schedule VI notified under the Companies Act 1956, has become
applicable to the company. The company has reclassified previous year
figures to conform to this year's classification. Except accounting
for dividend on investments in subsidiaries, the adoption of revised
Schedule VI does not impact recognition and measurement principles
followed for preparation of financial statements. However, it
significantly impacts presentation and disclosures made in the
financial statements, particularly presentation of balance sheet. The
following is a summary of the effects that revised Schedule VI had on
presentation of balance sheet of the company for the year ended March
31, 2011:
Notes :
1. As defined in Paragraph 2(1)(xii) of the Non-Banking Financial
Companies Acceptance of Public Deposits (Reserve Bank) Directions,
1998.
2. Provisioning norms shall be applicable as prescribed in the
Non-Banking Financial Companies Prudential Norms (Reserve Bank)
Directions, 1998.
3. All Accounting Standards and Guidance Notes issued by ICAI are
applicable including for calculation of investments and other assets as
also assets acquired in satisfaction of debt. However, market value in
respect of quoted investments and break up/fair value/NAV in respect of
unquoted investments should be disclosed irrespective of whether they
are classified as long term or current in cloumn (5) above.
Mar 31, 2011
1. Related Party Disclosure
Related party where control exists Subsidiaries
Shriram Asset & Equipment Finance Private Limited (formerly Shriram
Equipment Finance Private Ltd.(SAEFPL)) (from June 04, 2009 upto
December 14, 2009)
Shriram Equipment Finance Company Ltd. (SEFCL) (from December 15, 2009)
Shriram Automall India Limited (SAIL) (from February 11, 2010)
Other Related Parties
Enterprises having significant influence
over the Company
Shriram Holdings (Madras) Private Limited Shriram Capital Limited
Newbridge India Investments II Limited Shriram Ownership Trust
Associates : Shriram Asset Management Company Limited
Key Managerial Personnel : R Sridhar, Managing Director
Relatives of Key Managerial Personnel : Mrs. Padmapriya Sridhar
(spouse)
2. Leases
In case of assets given on lease
The Company has given land and building on operating lease for period
of 11 months. During the year ended 31st March, 2010 the company had
also given its biomass plant on operating lease for the period 1st
April, 2009 to 30th September, 2009. The same was sold on October 1,
2009, hence gross carrying cost of and accumulated depreciation of the
asset as on the date of balance sheet is nil.
In case of assets taken on lease
The Company has taken various office premises, furniture and fi
-xtures, computers and plant and machinery under operating lease. The
lease payments recognized in the Profit & loss account are Rs.
4,870.72 lacs (March 31, 2010: Rs. 3,557.92 lacs). Certain agreements
provide for cancellation by either party or certain agreements contains
clause for escalation and renewal of agreements. The non-cancellable
operating lease agreements are ranging for a period 12 to 120 months.
There are no restrictions imposed by lease arrangements. There are no
sub leases.
3. In accordance with the Reserve Bank of India circular
no.RBI/2006-07/ 225 DNBS (PD) C.C No. 87/03.02.004/2006-07 dated
January 4, 2007, the Company has created a fl oating charge on the
statutory liquid assets comprising of investment in Government
Securities to the extent of Rs. 16,677.50 lacs (March 31, 2010: Rs.
3,497. 64 lacs) in favour of trustees representing the public deposit
holders of the Company.
4. As regards the recovery of Service Tax on Lease and hire purchase
transactions, the Honble Supreme Court vide its order dated October
26, 2010 has directed the competent authority under the Finance Act,
1994 to decide the matter in accordance with the law laid down.
In its replies to the demands of Rs. 7,775 lacs (interest & penalty not
quantifi ed) for the years 2003-04 to 2009-10 from the Commissioner of
Service Tax, the management has contended that no service tax is
leviable on the interest earned by the company on financing
transactions because of the specific exemption granted for the same
under the Finance Act 1994. However, the company shall continue to
hold the provision of Rs. 8,406.10 lacs in this respect and contest the
demands with the Appellate Authorities.
5. In addition to the auditors remuneration shown in operating and
other expenses, the Company has also incurred auditors remuneration in
connection with other services provided by auditors in connection with
public issue of non convertible debentures of Rs. 39.85 lacs (including
out of pocket expenses of Rs. 0.14 lacs) have been amortised as per
note 1(p) and shown under miscellaneous expenditure.
6. Previous year Comparatives
The figures for the previous year have been regrouped and reclassifi
-ed, wherever necessary to conform to current years classification.
Mar 31, 2010
1. Secured Loans
Secured by equitable mortgage of title deeds of immovable property.
Further secured by charge on plant and machinery, furniture and other
fixed assets of the Company, charge on CompanyÃs hypothecation loans,
other loans, advances and investments of the Company subject to prior
charges created or to be created in favour of the CompanyÃs bankers,
financial institutions and others.
Debentures are redeemable at par over a period of 12 months to 160
months from the date of allotment depending on the terms of the
agreement. the earliest date of redemption is 01.04.2010 (March 31,
2009: 01.04.2009)
Debentures may be bought back subject to applicable statutory and/or
regulatory requirements, upon the terms and conditions as may be
decided by the Company. the Company may grant loan against the security
of NCDs upon the terms and conditions as may be decided by the Company.
2. Subordinated Debt
the Company has issued subordinated debt bonds amounting to Rs.
53,196.13 Lacs (March 31, 2009: Rs. 60,553.56 Lacs) with coupon rate
of 9.5% to 13% per annum which are redeemable over a period of 62
months to 122 months.
3. Final dividend (including tax on dividend) includes an amount of
Rs. 380.45 lacs in respect of dividend paid by the Company for the year
ended March 31, 2009 on 81,29,550 equity shares as these have been
allotted before the record date for declaration of dividend for the
year ended March 31, 2009, and they rank pari- passu with the existing
equity shares for dividend.
4. Gratuity and other post-employment benefit plans:
The Company has an unfunded defined benefit gratuity plan. Every
employee who has completed five years or more of service is eligible
for a gratuity on separation at 15 days salary (last drawn salary) for
each completed year of service.
Consequent to the adoption of revised AS 15 ÃEmployee Beneftsà issued
under Companies Accounting Standard Rules, 2006, as amended, the
following disclosures have been made as required by the standard:
5. The Company is primarily engaged in financing activities. It
operates in a single business and geographical segment. the Company
owned windmills and biomass which generate income from sale of
electricity and also earned certain fee based income, these income have
the same has been classified as ÃUnallocated reconciling itemà as per
requirements of AS Ã 17 on ÃSegment ReportingÃ.
6. Related Party Disclosure
Related party where control exists
Subsidiaries
Shriram Asset & Equipment Finance Private Limited (formerly Shriram
Equipment Finance Private Ltd.(SAEFPL)) (from June 04, 2009 upto
December 14, 2009)
Shriram Equipment Finance Company Ltd. (SEFCL) (from December 15,
2009)
Shriram Automall India Limited (SAIL) (from February 11, 2010)
Other Related Parties
Enterprises having significant
influence over the Company
Shriram Holdings (Madras) Private Limited
Shriram Capital Limited
Newbridge India Investments II Limited
Associates : Shriram Asset Management Company Limited
Key Managerial Personnel : R Sridhar, Managing Director
Relatives of key Managerial : Mrs. Padmapriya Sridhar (spouse)
Personnel
7. Leases
In Case of Assets given on Lease
The Company has given land and building on operating lease for period
ranging 11 months to 60 months. During the year, the company had also
given its biomass plant on operating lease for the period 1st April,
2009 to 30th September, 2009. the same was sold on october 1, 2009,
hence gross carrying cost of and accumulated depreciation of the asset
as on the date of balance sheet is nil.
In Case of Assets taken on Lease
The Company has taken various office premises, furniture and fixtures,
computers and plant and machinery under operating lease. The lease
payments recognized in the profit & loss account are Rs. 3,557.92 lacs
(March 31, 2009: Rs. 2,636.98 lacs). Certain agreements provide for
cancellation by either party and certain agreements contains clause for
escalation and renewal of agreements. the non-cancellable operating
lease agreements are ranging for a period 22 to 122 months. there are
no restrictions imposed by lease arrangements. there are no sub leases.
8. In accordance with the Reserve Bank of India circular
no.RBI/2006-07/ 225 DNBS (PD) C.C No. 87/03.02.004/2006-07 dated
January 4, 2007, the Company has created a floating charge on the
statutory liquid assets comprising of investment in Government
Securities to the extent of Rs. 3,497.70 lacs (March 31, 2009: Rs.
283.00 lacs) in favour of trustees representing the public deposit
holders of the Company.
9. Contingent Liabilities not provided for
(Rs. in lacs)
As at As at
March 31, 2010 March 31, 2009
a. Disputed income tax/
interest tax demand contested in 157.26 164.76
appeals not provided for
[Against the above, a sum of
Rs. 29.66 lacs (March 31, 2009:
Rs. 29.66 lacs) has been paid under protest]
b. Demands in respect of Service tax 315.00 299.00
[Amount of Rs. 15.00 lacs (March
31, 2009 : Rs. 15.00
lacs) has been paid under protest ]
Disputed sales tax demand 412.33 -
c. [Amount of Rs. 63.92 lacs
(March 31, 2009: Rs. Nil) has - -
been paid by the Company]
d. Guarantees issued by the
Company & outstanding - 901.97
Future cash outflows in respect of (a), (b) and (c) above are
determinable only on receipt of judgements / decisions pending with
various forums/authorities.
10. Recovery of Service tax on lease and hire purchase transactions is
kept in abeyance in view of the petition pending before the Supreme
Court of India. If any liability arises it will be recovered from the
concerned parties. However, on contracts that have been terminated,
pending the decision from the Supreme Court of India, equivalent
service tax is written off. the company has recognized the deferred tax
asset on the amounts so written off, as in either case service tax
liability will be charged off or reversed as income.
11. During the year, the Company allotted 11,658,552 equity shares of
Rs. 10/- each at a premium of Rs. 490.80 per share to Qualified
Institutional Buyers (QIBs) in terms of Chapter VIII of SEBI (ICDR)
Regulations, 2009. the Company also converted 8,000,000 warrants which
were issued by way of preferential allotment to Shriram Holdings
(Madras) Private Limited into equity shares of Rs. 10/- each at a
premium of Rs. 290/-per share. the amount received has enhanced the
networth and was utilized for the purpose of business operations.
12. Based on the intimation received by the Company, none of the
suppliers have confirmed to be registered under Ãthe Micro, Small and
Medium Enterprises Development (ÃMSMEDÃ) Act, 2006Ã. Accordingly, no
disclosures relating to amounts unpaid as at the year ended together
with interest paid /payable are required to be furnished.
13. During the year, the Company sold its entire investment in the
wholly owned subsidiary, Shriram Asset and Equipment Finance Private
Limited (SAEFPL), which was incorporated on June 04, 2009. Further, the
Company incorporated wholly owned subsidiaries, Shriram Equipment
Finance Company Limited (SEFCL) and Shriram Automall India Limited
(SAIL). Both the companies have not commenced operations till March 31,
2010.
14. In addition to the auditors remuneration shown in operating and
other expenses, the Company has also incurred auditors remuneration in
connection with other services provided by auditors in connection with
public issue of non convertible debentures and issue expenses of equity
shares of Rs. 40.07 lacs (including out of pocket expenses of Rs. 0.36
lacs) and Rs. 58.96 lacs (including out of pocket expenses of Rs. 0.51
lacs) respectively and have been amortised as per note 1(q) and shown
under miscellaneous expenditure.
15. Since the company has not given any loans and advances in the
nature of loans to its subsidiaries and associate and the subsidiaries
/associates have not acquired any shares of the company, no disclosures
under clause 32 of the Listing Agreeement are required. the receivables
on current accounts consequent to expenditure incurred on behalf of the
subsidiaries and the associate are not treated as loans and advances in
the nature of loans.
16. During the year company sold windmills to Nupower Renewables Ltd.
for a consideration of Rs. 4,882.92 lacs out of which a sum of Rs.
324.71 lacs have been kept in escrow account pending completion of
certain formalities.
17. Previous year comparatives
The figures for the previous year have been regrouped and reclassifed,
wherever necessary to conform to current yearÃs classifcation.
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