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Accounting Policies of IDFC Ltd. Company
Mar 31, 2023
NOTE 1: SIGNIFICANT ACCOUNTING POLICIES
IA. BACKGROUND
IDFC Limited (''the Company'') having CIN âL65191TN1997PLC037415â is a public limited company incorporated in India under the provisions of Companies Act, 2013 applicable in India and is a Non-Banking Finance Company (NBFC) regulated by the Reserve Bank of India (''RBI''). The Company is listed on both the stock exchange (BSE Limited and National Stock exchange of India Limited). The registered office of the Company is located at 4th Floor, Capitale Tower, 555 Anna Salai, Thiru Vi Ka Kudiyiruppu, Teynampet Chennai - 600 018 , Tamil Nadu and the corporate office is located at 906/907, 9th Floor, Embassy Centre, Jamnalal Bajaj Road, Nariman Point, Mumbai - 400 021.
The Company had received in principle approval from the RBI to set up a new private sector bank in April 2014. Since October 1, 2015 the Company is operating as NBFC - Investment (NBFC - I).
These standalone financial statements were authorized for issue in accordance with a resolution of the Board of Directors on May 04, 2023.
The Company along with its three wholly owned subsidiaries viz. IDFC Projects Limited, IDFC Trustee Company Limited and IDFC Alternatives Limited had filed scheme of amalgamation with Official Liquidator (''OL'') - Chennai on December 06, 2021 and to Regional Director (''RD'') /Registrar of Companies (''ROC'') - Chennai through GNL-1 form on December 06, 2021 seeking their objections / suggestions to the said scheme under Section 233 (1) (a) of the Companies Act, 2013 and rules made thereunder. Physical copies of the same have also been filed with the ROC on December 08, 2021. Appointed date for the merger in the scheme is April 1, 2021.
The ROC, Chennai vide its letter dated February 01, 2022 intimated it''s no observations/suggestions to the aforesaid scheme of amalgamation. Also, the OL of Madras High Court vide its letter dated March 24, 2022, communicated it''s no observations to the aforesaid scheme of amalgamation.
The Company filed petition with National Company Law Tribunal (NCLT) - Chennai on April 13, 2022. NCLT heard the petition on October 20, 2022 and passed the order on November 22, 2022 in favor of the Company. The order is effective from December 09, 2022.
Consequently, previous period presented in the statement have been restated.
IB. NEW AND AMENDED STANDARDS ADOPTED
The Company has applied the following amendments to Ind AS for the first time for their annual reporting period commencing April 01, 2022:
- Indian Accounting Standard (Ind AS) 101
- Indian Accounting Standard (Ind AS) 103
- Indian Accounting Standard (Ind AS) 109
- Indian Accounting Standard (Ind AS) 16
- Indian Accounting Standard (Ind AS) 37
- Indian Accounting Standard (Ind AS) 41
IC. Standards issued but not yet effective upto the date of issuance of the financial statements:
Ministry of Corporate affairs have made changes on March 31, 2023, in the following Indian Accounting Standards (Ind AS) amended namely:
- Indian Accounting Standard (Ind AS) 101
- Indian Accounting Standard (Ind AS) 102
- Indian Accounting Standard (Ind AS) 103
- Indian Accounting Standard (Ind AS) 107
- Indian Accounting Standard (Ind AS) 109
- Indian Accounting Standard (Ind AS) 115
- Indian Accounting Standard (Ind AS) 1
- Indian Accounting Standard (Ind AS) 8
- Indian Accounting Standard (Ind AS) 12
- Indian Accounting Standard (Ind AS) 34
These amendments shall be applicable from annual reporting periods beginning on or after April 01, 2023.
2. BASIS OF PREPARATION
(i) Compliance with Ind AS
The standalone financial statements comply in all material aspects with Indian Accounting Standards (Ind AS) notified under Section 133 of the Companies Act, 2013 (the Act) [Companies (Indian Accounting Standards) Rules, 2015] and other relevant provisions of the Act.
(ii) Historical cost convention
The financial statements have been prepared on a historical cost basis, except for the following:
⢠certain financial assets and liabilities and contingent consideration is measured at fair value;
⢠assets held for sale - measured at fair value less cost to sell;
⢠defined benefit plans - plan assets measured at fair value; and
⢠share-based payments - measured at fair value.
(iii) Presentation of financial statements
The Company presents its balance sheet in order of liquidity. An analysis regarding recovery or settlement within 12 months after the reporting date (current) and more than 12 months after the reporting date (non-current) is presented in note 35.
Financial assets and financial liabilities are generally reported gross in the balance sheet. They are only offset and reported net when, in addition to having an unconditional legally enforceable right to offset the recognised amounts without being contingent on a future event, the parties also intend to settle on a net basis in all of the following circumstances:
⢠The normal course of business
⢠The event of default
⢠The event of insolvency or bankruptcy of the Company and/or its counterparties
3. INVESTMENT IN SUBSIDIARY AND ASSOCIATES
Investment in subsidiaries and associates are measured at cost less accumulated impairment. See note 14 (iii) below for the accounting policy for Impairment of Non-financial assets.
4. REVENUE RECOGNITION
Revenue (other than for those items to which Ind AS 109 Financial Instruments are applicable) is measured at fair value of the consideration received or receivable.
(i) Interest income
The Company calculates interest income by applying the Effective Interest Rate (''EIR'') to the gross carrying amount of financial assets other than credit-impaired assets.
The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the gross carrying amount of a financial asset (i.e. its amortised cost before any impairment allowance). The calculation does not consider expected credit losses and includes transaction costs, premiums or discounts paid or received that are integral to the effective interest rate, such as origination fees, commitment fees, etc.
When a financial asset becomes credit-impaired and is, therefore, regarded as ''Stage 3'', the Company calculates interest income by applying the effective interest rate to the net amortised cost of the financial asset. If the financial assets cures and is no longer credit-impaired, the Company reverts to calculating interest income on a gross basis.
(ii) Dividend income
Dividend income is recognised when the Company''s right to receive the payment is established, it is probable that the economic benefits associated with the dividend will flow to the entity and the amount of the dividend can be measured reliably. This is generally when the shareholders of the investee Company approve the dividend.
5. INCOME TAX
The income tax expense or credit for the period is the tax payable on the taxable income of the current period based on the applicable income tax rates adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and unused tax losses.
i. Current Tax
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the company and its subsidiaries and associates operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
ii. Deferred Tax
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit.
Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences, unused tax losses and unused tax credits to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority.
Deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity.
6. GOODS AND SERVICE TAX
Expenses and assets are recognised net of the goods and services tax paid, except:
⢠When the tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case, the tax paid is recognised as part of the cost of acquisition of the asset or as part of the expense item, as applicable
⢠When receivables and payables are stated with the amount of tax included
The net amount of tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet.
7. LEASES
The determination of whether an arrangement is a lease, or contains a lease, is based on the substance of the arrangement and requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets or whether the arrangement conveys a right to use the asset.
(i) Company as a lessee
Leases are recognised as a right-of-use asset and corresponding liability at the date at which the leased asset is available for use by the Company. Contracts may contain both lease and non-lease components. The Company allocates the consideration in the contract to the lease and non-lease components based on their relative stand-alone prices. However, for leases of real estate for which the Company is a lessee, it has elected not to separate lease and non-lease components and instead accounts for these as a single lease component.
Asset and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the fixed payments (including in-substance fixed payments), less any lease incentives receivable.
Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability. The lease payments are discounted using the interest rate implicit in the lease. If the rate cannot be readily determined, which is generally the case for leases in the Company, the lessee''s incremental borrowing rate is used, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions .
Right-of-use assets are measured at cost comprising the following:
⢠the amount of the initial measurement of lease liability
⢠any lease payments made at or before the commencement date less any lease incentives received
⢠any initial direct costs, and
⢠restoration costs
Right-of-use assets are generally depreciated over the shorter of the asset''s useful life and the lease term on a straight-line basis. If the Company is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying asset''s useful life.
Payment associated with short-term leases of equipment and all leases of low-value assets are recognised on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less.
(ii) Company as a lessor
Lease income from operating leases where the company is a lessor is recognised in income on a straight-line basis over the lease term. Initial direct costs incurred in obtaining an operating lease are added to the carrying amount of the underlying asset and recognised as expense over the lease term on the same basis as lease income. The respective leased assets are included in the balance sheet based on their nature.
8. FINANCIAL INSTRUMENT
Initial Recognition and Measurement
Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisions of the instruments. Regular way purchases and sales of financial assets are recognised on trade-date, the date on which the Company commits to purchase or sell the asset.
At initial recognition, the Company measures a financial asset or financial liability at its fair value plus or minus, in the case of a financial asset or financial liability not at fair value through profit or loss, transaction costs that are incremental and directly attributable to the acquisition or issue of the financial asset or financial liability, such as fees and commissions. Transaction costs of financial assets and financial liabilities carried at Fair value through profit or loss are expensed in profit or loss.
Financial assets
(i) Classification and subsequent measurement of financial assets
The Company classifies its financial assets in the following measurement categories:
⢠Fair value through profit and loss (FVTPL)
⢠Fair value through other comprehensive income (FVOCI)
⢠Amortised cost
The classification requirements for debt and equity instruments are described below:
Debt Instruments
Debt instruments are those instruments that meet the definition of a financial liability from the issuer''s perspective such as venture capital fund units.
For investments in debt instruments, measurement will depend on the classification of debt instruments depending on:
⢠the Company''s business model for managing the asset; and
⢠the cash flow characteristics of the asset.
Business Model Assessment-
The business model reflects how the Company manages the assets in order to generate cash flows. The business model determines whether the Company''s objective is solely to collect the contractual cash flows from the assets or is to collect both the contractual cash flows and cash flows arising from the sale of assets. If neither of these is applicable or when performance of portfolio of financial assets managed is evaluated on a fair value basis, then the financial assets are classified as part of ''other'' business model and measured at FVTPL. Factors considered by the company in assessing the business model test include- Past experience on how the cash flows for these assets were collected
- how the asset''s performance and the business model is evaluated and reported to key management personnel,
- the risks that affect the performance of the business model and how these risks are assessed and managed.
Solely payment of principal and Interest Assessment (SPPI)
Where the business model is to hold assets to collect contractual cash flows or to collect contractual cash flows and sell, the Company assesses whether the financial instruments cash flows represent solely payments of principal and interest (the ''SPPI test'').
Based on these factors, the Company classifies its debt instruments into one of the following three measurement categories
Amortised cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost. A gain or loss on a debt investment that is subsequently measured at amortised cost is recognised in profit or loss when the asset is derecognised or impaired.
Fair value through other comprehensive income: Debt instruments that meet the following conditions are subsequently measured at FVOCI:
⢠the asset is held within a business model whose objective is achieved both by collecting contractual cash flows and selling financial assets;
⢠the contractual terms of the instrument give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding; and
⢠that are designated at fair value
Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains and losses on the instrument''s amortised cost which are recognised in profit or loss.
Fair value through profit or loss: Assets that do not meet the criteria for amortised cost or FVOCI, are measured at FVTPL. A gain or loss on a debt investment that is subsequently measured at FVTPL is recognised in profit or loss and presented in the statement of profit and loss within other gains/ (losses) in the period in which it arises. Company''s investment in venture capital fund units are classified as financial assets measured at FVTPL.
Equity Instruments
Equity instruments are instruments that meet the definition of equity from the issuer''s perspective; that is, instruments that do not contain a contractual obligation to pay and that evidence a residual interest in the issuer''s net assets.
Changes in fair value of equity investments at FVTPL are recognised in the statement of profit and loss, except where the Company''s management has elected, at initial recognition, to irrevocably designate an equity investment at FVOCI.
Where the management has elected to present gains and losses on equity instruments in other comprehensive income, there is no subsequent reclassification of fair value gains and losses to statement of profit and loss. Dividends from such investments are recognised in statement of profit and loss.
Currently, Company''s investment in equity instruments has been classified as financial assets measured at FVTPL.
9. FINANCIAL ASSETS AND LIABILITIES
(i) Bank balance, Loans, Trade receivables and financial investment at amortised cost.
The Company measures Bank balances, Loans, Trade receivables and other financial investments at amortised cost if both of the following conditions are met:
⢠The financial asset is held within a business model with the objective to hold financial assets in order to collect contractual cash flows
⢠The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding.
(ii) Financial assets held for trading
The Company classifies financial assets as held for trading when they have been purchased or issued primarily for short-term profit making through trading activities or form part of a portfolio of financial instruments that are managed together, for which there is an evidence of a recent pattern of short-term profit-taking. Held-for-trading assets and liabilities are recorded and measured in the balance sheet at fair value. Changes in fair value are recognised in net gain on fair value changes. Interest and dividend income or expense is recorded in net gain on fair value changes according to the terms of the contract, or when the right to payment has been established. Included in this classification investments in mutual fund units, debt securities and equities that have been acquired principally for the purpose of selling or repurchasing in the near term.
(iii) Equity instruments at FVOCI
The Company subsequently measures all equity investments at fair value through profit or loss, unless the Company''s management has elected to classify irrevocably some of its equity investments as equity instruments at FVOCI, when such instruments meet the definition of definition of Equity under Ind AS 32 Financial Instruments: Presentation and are not held for trading. Such classification is determined on an instrument-by-instrument basis.
Gains and losses on these equity instruments are never recycled to profit or loss. Dividends are recognised in profit or loss as dividend income when the right of the payment has been established, except when the Company benefits from such proceeds as a recovery of part of the cost of the instrument, in which case, such gains are recorded in OCI. Equity instruments at FVOCI are not subject to an impairment assessment.
(iv) Debt instruments and other borrowed funds
After initial measurement, debt issued and other borrowed funds are subsequently measured at amortised cost. Amortised cost is calculated by taking into account any discount or premium on issue funds, and costs that are an integral part of the EIR. A compound financial instrument which contains both a liability and an equity component is separated at the issue date.
10. RECLASSIFICATION OF FINANCIAL ASSETS AND LIABILITIES
The Company does not reclassify its financial assets subsequent to their initial recognition, apart from the exceptional circumstances in which the Company acquires, disposes of, or terminates a business line. Financial liabilities are never reclassified.
11. DERECOGNITION OF FINANCIAL ASSETS
Financial Assets
Financial assets, or a portion thereof, are derecognised when the contractual rights to receive the cash flows from the assets have expired, or when they have been transferred.
⢠the Company transfers substantially all the risks and rewards of ownership, or
⢠the Company neither transfers nor retains substantially all the risks and rewards of ownership and the Company has not retained control.
12. DERECOGNITION OF FINANCIAL LIABILITIES
Financial liabilities
A financial liability is derecognised when the obligation under the liability is discharged, cancelled or expires. Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability. The difference between the carrying value of the original financial liability and the consideration paid is recognised in profit or loss.
If the exchange or modification is not accounted for as an extinguishment, any costs or fees incurred are adjusted to the carrying amount of the liability and are amortised over the remaining term of the modified liability.
13. IMPAIRMENT OF FINANCIAL ASSET
(i) Overview of the ECL principles
The Company assesses on a forward looking basis the expected credit losses associated with its assets carried at amortised cost and FVOCI debt instruments. The impairment methodology applied depends on whether there has been a significant increase in credit risk. Note 34 details how the Company determines whether there has been a significant increase in credit risk.
The ECL allowance is based on the credit losses expected to arise over the life of the asset, unless there has been no significant increase in credit risk since origination, in which case, the allowance is based on the 12 months'' expected credit loss (12m ECL). The Company has established a policy to perform an assessment, at the end of each reporting period, of whether a financial instrument''s credit risk has increased significantly since initial recognition, by considering the change in the risk of default occurring over the remaining life of the financial instrument. This is further explained in Note 34.
At each reporting date, the Company assesses whether the above financial assets are credit impaired. A financial asset is ''credit impaired'' when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. The Company''s ECL calculations are outputs of statistical models with a number of underlying assumptions regarding the choice of variable inputs and their interdependencies such as macroeconomic scenarios.
The Company assesses on a forward-looking basis the ECL associated with its financial instrument. The Company recognises a loss allowance for such losses at each reporting date. The measurement of ECL reflects:
⢠an unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes;
⢠the time value of money, and
Reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions and forecasts of future economic conditions.
(ii) Trade receivables and contract assets
For trade receivables only, the Company applies the simplified approach required by Ind AS 109 Financial Instruments, which requires expected lifetime losses to be recognised from initial recognition of the receivables. The Company uses a provision matrix to determine impairment loss allowance on its trade receivables. The provision matrix is based on its historically observed default rates over the expected life of the trade receivables and is adjusted for forward-looking estimates. At every reporting date, the historical observed default rates are updated for changes in the forward-looking estimates.
Trade receivable are initially recognised at transaction price.
14. IMPAIRMENT OF NON-FINANCIAL ASSET
(i) Non-financial assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset''s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset''s fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Nonfinancial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded companies or other available fair value indicators.
(ii) Impairment of investment in subsidiary and Associates
The Company is required to assess on a forward looking basis the expected credit losses associated with its assets carried at amortised cost. As per IND AS 36 investments are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset''s carrying amount exceeds its recoverable amount. In assessing whether there is any impairment management considers indications through external and internal sources of information.
15. DETERMINATION OF FAIR VALUE
The Company measures certain financial instruments at fair value at each balance sheet date. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. In order to show how fair values have been derived, financial instruments are classified based on a hierarchy of valuation techniques, as summarised below:
Level 1 includes financial instruments measured using quoted prices. This includes listed equity instruments, traded bonds and mutual funds that have quoted price. The mutual funds are valued using the closing NAV.
Level 2 financial instruments the fair value of financial instruments that are not traded in an active market is determined using valuation techniques which maximise the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.
Level 3 - If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.
The Company evaluates the levelling at each reporting period on an instrument-by-instrument basis and reclassifies instruments when necessary based on the facts at the end of the reporting period. This is further explained in Note 33.
16. CASH AND CASH EQUIVALENTS
For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the balance sheet.
17. STATEMENT OF CASH FLOWS
Statement of Cash Flows is prepared segregating the cash flows into operating, investing and financing activities. Cash flow from operating activities is reported using indirect method adjusting the net profit for the effects of:
i. changes during the period in inventories and operating receivables and payables transactions of a non-cash nature;
ii. non-cash items such as depreciation, provisions, deferred taxes, unrealised foreign currency gains and losses, and undistributed profits of associates and joint ventures; and
iii. all other items for which the cash effects are investing or financing cash flows.
Cash and cash equivalents (including bank balances) shown in the Statement of Cash Flows exclude items which are not available for general use as on the date of Balance Sheet.
18. PROPERTY, PLANT AND EQUIPMENT
All items of property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset''s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred.
(i) Depreciation methods, estimated useful lives and residual value
Depreciation is calculated using the straight-line method to allocate their cost, net of their residual values, over their estimated useful lives prescribed in Schedule II to the Companies Act, 2013 except in respect of following categories of assets, in which case life of asset has been assessed based on the technical assessment.
a) Mobile Phone - 2 years b) Motor Cars - 4 years
Depreciation on additions during the year is provided on a pro-rata basis. Assets costing less than 5,000 each are fully depreciated in the year of capitalisation.
The useful lives have been determined based on technical evaluation done by the management''s expert which are higher than those specified by Schedule II to the Companies Act, 2013, in order to reflect the actual usage of the assets. The residual values are not more than 5% of the original cost of the asset.
The assets'' residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.
An asset''s carrying amount is written down immediately to its recoverable amount if the asset''s carrying amount is greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in statement of profit or loss within other gains/ (losses).
19. EMPLOYEE BENEFITS
(i) Defined contribution plan
The Company pays provident fund contributions to publicly administered provident funds as per local regulations. The Company has no further payment obligations once the contributions have been paid. The contributions are accounted for as defined contribution plans and the contributions are recognised as employee benefit expense when they are due.
(ii) Defined benefit plan
The liability or asset recognised in the balance sheet in respect of gratuity plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by actuaries using the projected unit credit method.
The present value of the defined benefit obligation denominated in INR is determined by discounting the estimated future cash outflows by reference to market yields at the end of the reporting period on government bonds that have terms approximating to the terms of the related obligation. The estimated future payments which are denominated in a currency other than INR, are discounted using market yields determined by reference to high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms approximating to the terms of the related obligation.
The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. This cost is included in employee benefit expense in the statement of profit and loss.
Remeasurement gains and losses arising from experience adjustments and changes in actuarial assumptions are recognised in the period in which they occur, directly in other comprehensive income. They are included in retained earnings in the statement of changes in equity and in the balance sheet.
Changes in the present value of the defined benefit obligation resulting from plan amendments or curtailments are recognised immediately in profit or loss as past service cost.
(iii) Compensated absences
Based on the leave rules of the group companies, employees are not permitted to accumulate leave. Any unavailed privilege leave to the extent encashable is paid to the employees and charged to the Statement of Profit and Loss for the year. Short term compensated absences are provided based on estimates of availment / encashment of leaves.
20. PROVISIONS
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of past events, and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. When the effect of the time value of money is material, the Company determines the level of provision by discounting the expected cash flows at a pre-tax rate reflecting the current rates specific to the liability. The expense relating to any provision is presented in the statement of profit and loss net of any reimbursement.
21. SEGMENT REPORTING
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The Company''s primary business segments are reflected based on the principal business carried out, i.e. investing. The risk and returns of the business of the Company is not associated with geographical segmentation, hence there is no secondary segment.
22. FOREIGN CURRENCY TRANSLATION
(i) Functional and presentation currency
Items included in the financial statements of each of the Company''s entities are measured using the currency of the primary economic environment in which the entity operates (''the functional currency''). The consolidated financial statements are presented in Indian rupee (INR), which is the Company''s functional and presentation currency.
(ii) Transactions and balances
Transactions in foreign currencies are initially recorded in the functional currency at the spot rate of ex-change ruling at the date of the transaction. However, for practical reasons, the Company uses an average rate if the average approximates the actual rate at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are retranslated into the functional currency at the spot rate of exchange at the reporting date. All differences arising on non-trading activities are taken to other income/expense in the statement of profit and loss.
Non-monetary items that are measured at historical cost in a foreign currency are translated using the spot exchange rates as at the date of recognition.
23. SHARE-BASED PAYMENTS
The Company has formulated Employee Stock Option Schemes (''the ESOS'') in accordance with the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 (''the Guidelines''). The ESOS provides for grant of stock options to employees (including employees of subsidiary companies) to acquire equity shares of the Company that vest in a graded manner and that are to be exercised within a specified period.
The fair value of options granted under the ESOS is recognised as an employee benefits expense with a corresponding increase in equity. The total amount to be expensed is determined by reference to the fair value of the options granted:
⢠including any market performance conditions (e.g., the entity''s share price)
⢠excluding the impact of any service and non-market performance vesting conditions (e.g. profitability, sales growth targets and remaining an employee of the entity over a specified time period), and
⢠including the impact of any non-vesting conditions (e.g. the requirement for employees to save or holdings shares for a specific period of time).
The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each period, the entity revises its estimates of the number of options that are expected to vest based on the non-market vesting and service conditions. It recognises the impact of the revision to original estimates, if any, in profit or loss, with a corresponding adjustment to equity.
24. EARNINGS PER SHARE
Basic earnings per share is calculated by dividing:
⢠the profit attributable to owners of the Company
⢠by the weighted average number of equity shares outstanding during the financial year.
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account:
⢠the after-income tax effect of interest and other financing costs associated with dilutive potential equity shares, and
⢠the weighted average number of additional equity shares that would have been outstanding assuming the conversion of all dilutive potential equity shares.
25. ROUNDING OFF
All amounts disclosed in the financial statements and notes have been rounded off to the nearest âcroresâ as per the requirement of Schedule III, unless otherwise stated.
26. CONTRIBUTED EQUITY
Equity shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceed.
27. DIVIDENDS
Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the entity, on or before the end of the reporting period but not distributed at the end of the reporting period.
Note 2: Significant accounting judgments, estimates and assumptions
The preparation of the Company''s financial statements requires management to make judgements, estimates and assumptions that affect the reported amount of revenues, expenses, assets and liabilities, and the accompanying disclosures, as well as the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.
Judgements
In the process of applying the Company''s accounting policies, management has made the following judgements, which have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.
1. Fair value of financial instruments
The fair value of financial instruments 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 another valuation technique. When the fair values of financial assets and financial liabilities recorded in the balance sheet cannot be derived from active markets, they are determined using a variety of valuation techniques that include the use of valuation models. The inputs to these models are taken from observable markets where possible, but where this is not feasible, estimation is required in establishing fair values. Judgements and estimates include considerations of liquidity and model inputs related to items such as credit risk (both own and counterparty), funding value adjustments, correlation and volatility. For further details about determination of fair value please see Note 33.
2. Provision and other contingent liabilities
The Company operates in a regulatory and legal environment that, by nature, has a heightened element of litigation risk inherent to its operations. As a result, it is involved in various litigation, arbitration and regulatory investigations and proceedings in the ordinary course of the Company''s business.
When the Company can reliably measure the outflow of economic benefits in relation to a specific case and considers such outflows to be probable, the Company records a provision against the case. Where the probability of outflow is considered to be remote, or probable, but a reliable estimate cannot be made, a contingent liability is disclosed.
Given the subjectivity and uncertainty of determining the probability and amount of losses, the Company considers a number of factors including legal advice, the stage of the matter and historical evidence from similar incidents. Significant judgement is required to conclude on these estimates.
Commitments are future liabilities for contractual expenditure, classified and disclosed as follows:
i. estimated amount of contracts remaining to be executed on capital account and not provided for;
ii. uncalled liability on shares and other investments partly paid;
iii. other non-cancellable commitments, if any, to the extent they are considered material and relevant in the opinion of management.
Mar 31, 2022
NOTE 1: SIGNIFICANT ACCOUNTING POLICIESIA. BACKGROUND
IDFC Limited (''the Company'') is a public limited company incorporated in India under the provisions of Companies Act, 2013 applicable in India and is a Non-Banking Finance Company (NBFC) regulated by the Reserve Bank of India (''RBI''). The Company is listed on both the stock exchange (BSE Limited and National Stock exchange of India Limited). The registered office of the Company is located at 4th Floor, Capitale Tower, 555 Anna Salai, Thiru Vi Ka Kudiyiruppu, Teynampet Chennai - 600 018 , Tamil Nadu and the corporate office is located at 906/907, 9th Floor, Embassy Centre, Jamnalal Bajaj Road, Nariman Point, Mumbai - 400 021.
The Company had received in principle approval from the RBI to set up a new private sector bank in April 2014. Since October 1, 2015 the Company is operating as NBFC - Investment (NBFC - I).
These standalone financial statements were authorized for issue in accordance with a resolution of the Board of Directors on May 20, 2022.
The Company along with its three wholly owned subsidiaries viz. IDFC Projects Limited, IDFC Trustee Company Limited and IDFC Alternatives Limited has filed scheme of amalgamation with Official Liquidator (''OL'') - Chennai on December 06, 2021 and to Regional Director (''RD'') /Registrar of Companies (''ROC'') - Chennai through GNL-1 form on December 06, 2021 seeking their objections / suggestions to the said scheme under Section 233 (1) (a) of the Companies Act, 2013 and rules made thereunder. Physical copies of the same have also been filed with the ROC on December 08, 2021. Appointed date for the merger in the scheme is April 1, 2021.
The ROC, Chennai vide its letter dated February 01, 2022 intimated it''s no observations/suggestions to the aforesaid scheme of amalgamation. Also, the OL of Madras High Court vide its letter dated March 24, 2022, communicated it''s no observations to the aforesaid scheme of amalgamation. Approval from RD is still awaited.
If approval of RD is received post adoption of accounts by the Board of Directors but before the approval by the members in Annual General Meeting, accounts will be reinstated and merged with effect from Appointed Date i.e. April 01, 2021. The reinstated accounts will be approved by the members at Annual General Meeting and the same will be considered for all regulatory and tax compliances.
IB. NEW AND AMENDED STANDARDS ADOPTED
There are no new standards and amendments applicable to the Company for the annual reporting period commencing on April 1, 2021.
(i) Compliance with Ind AS
The standalone financial statements comply in all material aspects with Indian Accounting Standards (Ind AS) notified under Section 133 of the Companies Act, 2013 (the Act) [Companies (Indian Accounting Standards) Rules, 2015] and other relevant provisions of the Act.
(ii) Historical cost convention
The financial statements have been prepared on a historical cost basis, except for the following:
⢠certain financial assets and liabilities and contingent consideration is measured at fair value;
⢠assets held for sale - measured at fair value less cost to sell;
⢠defined benefit plans - plan assets measured at fair value; and
⢠share-based payments - measured at fair value.
(iii) Presentation of financial statements
The Company presents its balance sheet in order of liquidity. An analysis regarding recovery or settlement within 12 months after the reporting date (current) and more than 12 months after the reporting date (non-current) is presented in note 36.
Financial assets and financial liabilities are generally reported gross in the balance sheet. They are only offset and reported net when, in addition to having an unconditional legally enforceable right to offset the recognised amounts without being contingent on a future event, the parties also intend to settle on a net basis in all of the following circumstances:
⢠The normal course of business
⢠The event of default
⢠The event of insolvency or bankruptcy of the Company and/or its counterparties
3. INVESTMENT IN SUBSIDIARY AND ASSOCIATES
Investment in subsidiaries and associates are measured at cost less accumulated impairment. See note 14 (iii) below for the accounting policy for Impairment of Non-financial assets.
Revenue (other than for those items to which Ind AS 109 Financial Instruments are applicable) is measured at fair value of the consideration received or receivable.
(i) Interest income
The Company calculates interest income by applying the Effective Interest Rate (''EIR'') to the gross carrying amount of financial assets other than credit-impaired assets.
The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the gross carrying amount of a financial asset (i.e. its amortised cost before any impairment allowance). The calculation does not consider expected credit losses and includes transaction costs, premiums or discounts paid or received that are integral to the effective interest rate, such as origination fees, commitment fees, etc.
When a financial asset becomes credit-impaired and is, therefore, regarded as ''Stage 3'', the Company calculates interest income by applying the effective interest rate to the net amortised cost of the financial asset. If the financial assets cures and is no longer credit-impaired, the Company reverts to calculating interest income on a gross basis.
(ii) Dividend income
Dividend income is recognised when the Company''s right to receive the payment is established, it is probable that the economic benefits associated with the dividend will flow to the entity and the amount of the dividend can be measured reliably. This is generally when the shareholders of the investee Company approve the dividend.
(iii) Revenue from power supply
Revenue from power supply is accounted on accrual basis unless there is any uncertainty relating to its recovery.
The income tax expense or credit for the period is the tax payable on the taxable income of the current period based on the applicable income tax rates adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and unused tax losses.
i. Current Tax
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the company and its subsidiaries and associates operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
ii. Deferred Tax
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit.
Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences, unused tax losses and unused tax credits to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority.
Deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity.
Expenses and assets are recognised net of the goods and services tax paid, except:
⢠When the tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case, the tax paid is recognised as part of the cost of acquisition of the asset or as part of the expense item, as applicable
⢠When receivables and payables are stated with the amount of tax included
The net amount of tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet.
The determination of whether an arrangement is a lease, or contains a lease, is based on the substance of the arrangement and requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets or whether the arrangement conveys a right to use the asset.
(i) Company as a lessee
Leases are recognised as a right-of-use asset and corresponding liability at the date at which the leased asset is available for use by the Company. Contracts may contain both lease and non-lease components. The Company allocates the consideration in the contract to the lease and non-lease components based on their relative stand-alone prices. However, for leases of real estate for which the Company has is a lessee, it has elected not to separate lease and non-lease components and instead accounts for these as a single lease component.
Asset and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the fixed payments (including in-substance fixed payments), less any lease incentives receivable.
Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability. The lease payments are discounted using the interest rate implicit in the lease. If the rate cannot be readily determined, which is generally the case for leases in the Company, the lessee''s incremental borrowing rate is used, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions .
Right-of-use assets are measured at cost comprising the following:
⢠the amount of the initial measurement of lease liability
⢠any lease payments made at or before the commencement date less any lease incentives received
⢠any initial direct costs, and
⢠restoration costs
Right-of-use assets are generally depreciated over the shorter of the asset''s useful life and the lease term on a straight-line basis. If the Company is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying asset''s useful life.
Payment associated with short-term leases of equipment and all leases of low-value assets are recognised on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less.
(ii) Company as a lessor
Lease income from operating leases where the group is a lessor is recognised in income on a straight-line basis over the lease term. Initial direct costs incurred in obtaining an operating lease are added to the carrying amount of the underlying asset and recognised as expense over the lease term on the same basis as lease income. The respective leased assets are included in the balance sheet based on their nature.
Initial Recognition and Measurement
Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisions of the instruments. Regular way purchases and sales of financial assets are recognised on trade-date, the date on which the Company commits to purchase or sell the asset.
At initial recognition, the Company measures a financial asset or financial liability at its fair value plus or minus, in the case of a financial asset or financial liability not at fair value through profit or loss, transaction costs that are incremental and directly attributable to the acquisition or issue of the financial asset or financial liability, such as fees and commissions. Transaction costs of financial assets and financial liabilities carried at Fair value through profit or loss are expensed in profit or loss.
Financial assets
(i) Classification and subsequent measurement of financial assets
The Company classifies its financial assets in the following measurement categories:
⢠Fair value through profit and loss (FVTPL)
⢠Fair value through other comprehensive income (FVOCI)
⢠Amortised cost
The classification requirements for debt and equity instruments are described below:
Debt Instruments
Debt instruments are those instruments that meet the definition of a financial liability from the issuer''s perspective such as venture capital fund units.
For investments in debt instruments, measurement will depend on the classification of debt instruments depending on:
⢠the Company''s business model for managing the asset; and
⢠the cash flow characteristics of the asset.
Business Model Assessment-
The business model reflects how the Company manages the assets in order to generate cash flows. The business model determines whether the Company''s objective is solely to collect the contractual cash flows from the assets or is to collect both the contractual cash flows and cash flows arising from the sale of assets. If neither of these is applicable or when performance of portfolio of financial assets managed is evaluated on a fair value basis, then the financial assets are classified as part of ''other'' business model and measured at FVTPL. Factors considered by the company in assessing the business model test include- Past experience on how the cash flows for these assets were collected
- how the asset''s performance and the business model is evaluated and reported to key management personnel,
- the risks that affect the performance of the business model and how these risks are assessed and managed.
Solely payment of principal and Interest Assessment (SPPI)
Where the business model is to hold assets to collect contractual cash flows or to collect contractual cash flows and sell, the Company assesses whether the financial instruments cash flows represent solely payments of principal and interest (the ''SPPI test'').
Based on these factors, the Company classifies its debt instruments into one of the following three measurement categories
Amortised cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost. A gain or loss on a debt investment that is subsequently measured at amortised cost is recognised in profit or loss when the asset is derecognised or impaired.
Fair value through other comprehensive income: Debt instruments that meet the following conditions are subsequently measured at FVOCI:
⢠the asset is held within a business model whose objective is achieved both by collecting contractual cash flows and selling financial assets;
⢠the contractual terms of the instrument give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding; and
⢠that are designated at fair value
Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains and losses on the instrument''s amortised cost which are recognised in profit or loss.
Fair value through profit or loss: Assets that do not meet the criteria for amortised cost or FVOCI, are measured at FVTPL. A gain or loss on a debt investment that is subsequently measured at FVTPL is recognised in profit or loss and presented in the statement of profit and loss within other gains/ (losses) in the period in which it arises. Company''s investment in venture capital fund units are classified as financial assets measured at FVTPL.
Equity Instruments
Equity instruments are instruments that meet the definition of equity from the issuer''s perspective; that is, instruments that do not contain a contractual obligation to pay and that evidence a residual interest in the issuer''s net assets.
Changes in fair value of equity investments at FVTPL are recognised in the statement of profit and loss, except where the Company''s management has elected, at initial recognition, to irrevocably designate an equity investment at FVOCI.
Where the management has elected to present gains and losses on equity instruments in other comprehensive income, there is no subsequent reclassification of fair value gains and losses to statement of profit and loss. Dividends from such investments are recognised in statement of profit and loss.
Currently, Company''s investment in equity instruments has been classified as financial assets measured at FVTPL.
9. FINANCIAL ASSETS AND LIABILITIES
(i) Bank balance, Loans, Trade receivables and financial investment at amortised cost.
The Company measures Bank balances, Loans, Trade receivables and other financial investments at amortised cost if both of the following conditions are met:
⢠The financial asset is held within a business model with the objective to hold financial assets in order to collect contractual cash flows
⢠The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding.
(ii) Financial assets held for trading
The Company classifies financial assets as held for trading when they have been purchased or issued primarily for short-term profit making through trading activities or form part of a portfolio of financial instruments that are managed together, for which there is an evidence of a recent pattern of short-term profit-taking. Held-for-trading assets and liabilities are recorded and measured in the balance sheet at fair value. Changes in fair value are recognised in net gain on fair value changes. Interest and dividend income or expense is recorded in net gain on fair value changes according to the terms of the contract, or when the right to payment has been established. Included in this classification investments in mutual fund units, debt securities and equities that have been acquired principally for the purpose of selling or repurchasing in the near term.
(iii) Equity instruments at FVOCI
The Company subsequently measures all equity investments at fair value through profit or loss, unless the Company''s management has elected to classify irrevocably some of its equity investments as equity instruments at FVOCI, when such instruments meet the definition of definition of Equity under Ind AS 32 Financial Instruments: Presentation and are not held for trading. Such classification is determined on an instrument-by-instrument basis.
Gains and losses on these equity instruments are never recycled to profit or loss. Dividends are recognised in profit or loss as dividend income when the right of the payment has been established, except when the Company benefits from such proceeds as a recovery of part of the cost of the instrument, in which case, such gains are recorded in OCI. Equity instruments at FVOCI are not subject to an impairment assessment.
(iv) Debt instruments and other borrowed funds
After initial measurement, debt issued and other borrowed funds are subsequently measured at amortised cost. Amortised cost is calculated by taking into account any discount or premium on issue funds, and costs that are an integral part of the EIR. A compound financial instrument which contains both a liability and an equity component is separated at the issue date.
10. RECLASSIFICATION OF FINANCIAL ASSETS AND LIABILITIES
The Company does not reclassify its financial assets subsequent to their initial recognition, apart from the exceptional circumstances in which the Company acquires, disposes of, or terminates a business line. Financial liabilities are never reclassified.
11. DERECOGNITION OF FINANCIAL ASSETS
Financial Assets
Financial assets, or a portion thereof, are derecognised when the contractual rights to receive the cash flows from the assets have expired, or when they have been transferred.
⢠the Company transfers substantially all the risks and rewards of ownership, or
⢠the Company neither transfers nor retains substantially all the risks and rewards of ownership and the Company has not retained control.
12. DERECOGNITION OF FINANCIAL LIABILITIES
Financial liabilities
A financial liability is derecognised when the obligation under the liability is discharged, cancelled or expires. Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability. The difference between the carrying value of the original financial liability and the consideration paid is recognised in profit or loss.
If the exchange or modification is not accounted for as an extinguishment, any costs or fees incurred are adjusted to the carrying amount of the liability and are amortised over the remaining term of the modified liability.
13. IMPAIRMENT OF FINANCIAL ASSET
(i) Overview of the ECL principles
The Company assesses on a forward looking basis the expected credit losses associated with its assets carried at amortised cost and FVOCI debt instruments. The impairment methodology applied depends on whether there has been a significant increase in credit risk. Note 35 details how the Company determines whether there has been a significant increase in credit risk.
The ECL allowance is based on the credit losses expected to arise over the life of the asset, unless there has been no significant increase in credit risk since origination, in which case, the allowance is based on the 12 months'' expected credit loss (12m ECL).
The Company has established a policy to perform an assessment, at the end of each reporting period, of whether a financial instrument''s credit risk has increased significantly since initial recognition, by considering the change in the risk of default occurring over the remaining life of the financial instrument. This is further explained in Note 35.
At each reporting date, the Company assesses whether the above financial assets are credit impaired. A financial asset is ''credit impaired'' when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. The Company''s ECL calculations are outputs of statistical models with a number of underlying assumptions regarding the choice of variable inputs and their interdependencies such as macroeconomic scenarios.
The Company assesses on a forward-looking basis the ECL associated with its financial instrument. The Company recognises a loss allowance for such losses at each reporting date. The measurement of ECL reflects:
⢠an unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes;
⢠the time value of money, and
Reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions and forecasts of future economic conditions.
(ii) Trade receivables and contract assets
For trade receivables only, the Company applies the simplified approach required by Ind AS 109 Financial Instruments, which requires expected lifetime losses to be recognised from initial recognition of the receivables. The Company uses a provision matrix to determine impairment loss allowance on its trade receivables. The provision matrix is based on its historically observed default rates over the expected life of the trade receivables and is adjusted for forward-looking estimates. At every reporting date, the historical observed default rates are updated for changes in the forward-looking estimates.
14. IMPAIRMENT OF NON-FINANCIAL ASSET
(i) Non-financial assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset''s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset''s fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Nonfinancial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded companies or other available fair value indicators.
(ii) Impairment of investment in subsidiary and Associates
The Company is required to assess on a forward looking basis the expected credit losses associated with its assets carried at amortised cost. As per IND AS 36 investments are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset''s carrying amount exceeds its recoverable amount. In assessing whether there is any impairment management considers indications through external and internal sources of information.
15. DETERMINATION OF FAIR VALUE
The Company measures certain financial instruments at fair value at each balance sheet date. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. In order to show how fair values have been derived, financial instruments are classified based on a hierarchy of valuation techniques, as summarised below:
Level 1 includes financial instruments measured using quoted prices. This includes listed equity instruments, traded bonds and mutual funds that have quoted price. The mutual funds are valued using the closing NAV.
Level 2 financial instruments the fair value of financial instruments that are not traded in an active market is determined using valuation techniques which maximise the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.
Level 3 - If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.
The Company evaluates the levelling at each reporting period on an instrument-by-instrument basis and reclassifies instruments when necessary based on the facts at the end of the reporting period. This is further explained in Note 34.
For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the balance sheet.
17. PROPERTY, PLANT AND EQUIPMENT
All items of property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset''s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred.
(i) Depreciation methods, estimated useful lives and residual value
Depreciation is calculated using the straight-line method to allocate their cost, net of their residual values, over their estimated useful lives prescribed in Schedule II to the Companies Act, 2013 except in respect of following categories of assets, in which case life of asset has been assessed based on the technical assessment.
a) Mobile Phone - 2 years b) Motor Cars - 4 years
Depreciation on additions during the year is provided on a pro-rata basis. Assets costing less than '' 5,000 each are fully depreciated in the year of capitalisation.
The useful lives have been determined based on technical evaluation done by the management''s expert which are higher than those specified by Schedule II to the Companies Act, 2013, in order to reflect the actual usage of the assets. The residual values are not more than 5% of the original cost of the asset.
The assets'' residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.
An asset''s carrying amount is written down immediately to its recoverable amount if the asset''s carrying amount is greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in statement of profit or loss within other gains/ (losses).
(i) Defined contribution plan
The Company pays provident fund contributions to publicly administered provident funds as per local regulations. The Company has no further payment obligations once the contributions have been paid. The contributions are accounted for as defined contribution plans and the contributions are recognised as employee benefit expense when they are due.
(ii) Defined benefit plan
The liability or asset recognised in the balance sheet in respect of gratuity plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by actuaries using the projected unit credit method.
The present value of the defined benefit obligation denominated in INR is determined by discounting the estimated future cash outflows by reference to market yields at the end of the reporting period on government bonds that have terms approximating to the terms of the related obligation. The estimated future payments which are denominated in a currency other than INR, are discounted using market yields determined by reference to high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms approximating to the terms of the related obligation.
The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. This cost is included in employee benefit expense in the statement of profit and loss.
Remeasurement gains and losses arising from experience adjustments and changes in actuarial assumptions are recognised in the period in which they occur, directly in other comprehensive income. They are included in retained earnings in the statement of changes in equity and in the balance sheet.
Changes in the present value of the defined benefit obligation resulting from plan amendments or curtailments are recognised immediately in profit or loss as past service cost.
(iii) Compensated absences
Based on the leave rules of the group companies, employees are not permitted to accumulate leave. Any unavailed privilege leave to the extent encashable is paid to the employees and charged to the Statement of Profit and Loss for the year. Short term compensated absences are provided based on estimates of availment / encashment of leaves.
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of past events, and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. When the effect of the time value of money is material, the Company determines the level of provision by discounting the expected cash flows at a pre-tax rate reflecting the current rates specific to the liability. The expense relating to any provision is presented in the statement of profit and loss net of any reimbursement.
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The Company''s primary business segments are reflected based on the principal business carried out, i.e. investing. The risk and returns of the business of the Company is not associated with geographical segmentation, hence there is no secondary segment.
21. FOREIGN CURRENCY TRANSLATION
(i) Functional and presentation currency
Items included in the financial statements of each of the Company''s entities are measured using the currency of the primary economic environment in which the entity operates (''the functional currency''). The consolidated financial statements are presented in Indian rupee (INR), which is the Company''s functional and presentation currency.
(ii) Transactions and balances
Transactions in foreign currencies are initially recorded in the functional currency at the spot rate of ex-change ruling at the date of the transaction. However, for practical reasons, the Company uses an average rate if the average approximates the actual rate at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are retranslated into the functional currency at the spot rate of exchange at the reporting date. All differences arising on non-trading activities are taken to other income/expense in the statement of profit and loss.
Non-monetary items that are measured at historical cost in a foreign currency are translated using the spot exchange rates as at the date of recognition.
The Company has formulated Employee Stock Option Schemes (''the ESOS'') in accordance with the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 (''the Guidelines''). The ESOS provides for grant of stock options to employees (including employees of subsidiary companies) to acquire equity shares of the Company that vest in a graded manner and that are to be exercised within a specified period.
The fair value of options granted under the ESOS is recognised as an employee benefits expense with a corresponding increase in equity. The total amount to be expensed is determined by reference to the fair value of the options granted:
⢠including any market performance conditions (e.g., the entity''s share price)
⢠excluding the impact of any service and non-market performance vesting conditions (e.g. profitability, sales growth targets and remaining an employee of the entity over a specified time period), and
⢠including the impact of any non-vesting conditions (e.g. the requirement for employees to save or holdings shares for a specific period of time).
The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each period, the entity revises its estimates of the number of options that are expected to vest based on the non-market vesting and service conditions. It recognises the impact of the revision to original estimates, if any, in profit or loss, with a corresponding adjustment to equity.
Basic earnings per share is calculated by dividing:
⢠the profit attributable to owners of the Company
⢠by the weighted average number of equity shares outstanding during the financial year.
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account:
⢠the after-income tax effect of interest and other financing costs associated with dilutive potential equity shares, and
⢠the weighted average number of additional equity shares that would have been outstanding assuming the conversion of all dilutive potential equity shares.
All amounts disclosed in the financial statements and notes have been rounded off to the nearest âcroresâ as per the requirement of Schedule III, unless otherwise stated.
Equity shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceed.
Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the entity, on or before the end of the reporting period but not distributed at the end of the reporting period.
NOTE 2: SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS
The preparation of the Company''s financial statements requires management to make judgements, estimates and assumptions that affect the reported amount of revenues, expenses, assets and liabilities, and the accompanying disclosures, as well as the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.
In the process of applying the Company''s accounting policies, management has made the following judgements, which have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.
1. FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of financial instruments 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 another valuation technique. When the fair values of financial assets and financial liabilities recorded in the balance sheet cannot be derived from active markets, they are determined using a variety of valuation techniques that include the use of valuation models. The inputs to these models are taken from observable markets where possible, but where this is not feasible, estimation is required in establishing fair values. Judgements and estimates include considerations of liquidity and model inputs related to items such as credit risk (both own and counterparty), funding value adjustments, correlation and volatility. For further details about determination of fair value please see Note 34.
2. ESTIMATION OF NAVS OF VENTURE CAPITAL FUNDS (VCFS)
Investment in Venture Capital Fund units are valued after appropriate markdown of Net Asset Value declared by the Funds for illiquidity discount.
3. PROVISION AND OTHER CONTINGENT LIABILITIES
The Company operates in a regulatory and legal environment that, by nature, has a heightened element of litigation risk inherent to its operations. As a result, it is involved in various litigation, arbitration and regulatory investigations and proceedings in the ordinary course of the Company''s business.
When the Company can reliably measure the outflow of economic benefits in relation to a specific case and considers such outflows to be probable, the Company records a provision against the case. Where the probability of outflow is considered to be remote, or probable, but a reliable estimate cannot be made, a contingent liability is disclosed.
Given the subjectivity and uncertainty of determining the probability and amount of losses, the Company takes into account a number of factors including legal advice, the stage of the matter and historical evidence from similar incidents. Significant judgement is required to conclude on these estimates.
4. TRANSFER FROM SPECIAL RESERVE U/S. 36(1)(VIII) OF THE INCOME-TAX ACT, 1961
As per section 36(1)(viii) of Income tax act, 1961, deduction shall be allowed in respect of any special reserve created and maintained by specified entities, for an amount not exceeding twenty percent (20%) of the profits derived from eligible business (computed under the head âProfits and gains of business or professionâ (before making any deduction under this clause) carried to such reserve account.
Provided that where the aggregate of the amounts carried to such reserve account from time to time exceeds twice the amount of the paid up share capital and of the general reserves of the specified entity, no allowance under this clause shall be made in respect of such excess.
The Company has created special reserve under section 36(i)(viii) of The Income Tax Act, 1961 on its infrastructure assets. As the Company is an investment company now, no further reserve under the said section is being created. The Company has claimed deduction for the creation of these reserves in earlier years. Section 41(4A) states that, âWhere a deduction has been allowed in respect of any special reserve created and maintained under clause (viii) of sub- section (1) of section 36, any amount subsequently withdrawn from such special reserve shall be deemed to be the profits and gains of business or profession and accordingly be chargeable to income-tax as the income of the previous year in which such amount is withdrawn.â
Mar 31, 2018
A. USE OF ESTIMATES
The preparation of the financial statements in conformity with Indian GAAP requires the Management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) and the reported income and expenses during the year. The Management believes that the estimates used in preparation of the financial statements are prudent and reasonable. Future results could differ due to these estimates and any revisions or the differences between the actual results and the estimates are recognised in the current and future periods.
B. CASH AND CASH EQUIVALENTS
Cash and cash equivalents for the purpose of the Cash Flow Statement comprises cash on hand, cash in bank, fixed deposits and other short-term highly liquid investments with an original maturity of three months or less that are readily convertible into known amount of cash and which are subject to an insignificant risk of change in value.
C. CASH FLOW STATEMENT
Cash flows are reported using the indirect method whereby cash flows from operating, investing and financing activities of the Company are segregated and profit before tax is adjusted for the effects of transactions of non-cash nature and any deferrals or accruals of past or future cash receipts or payments.
D. INVESTMENTS
Investments which are readily realisable and intended to be held for not more than one year from the date on which such investments are made are classified as current investments in accordance with the RBI guidelines and Accounting Standards notified under Section 133 of the 2013 Act. Current investments also include current maturities of long-term investments. All other investments are classified as long-term investments.
The Company follows settlement date method of accounting for recording of purchase and sale of investments. All investments are initially recorded at cost. The cost of an investment includes purchase price, directly attributable acquisition charges and reduced by recovery of costs, if any. On disposal of an investment, the difference between its carrying amount and the net disposal proceeds is charged or credited to the Statement of Profit and Loss.
Current investments are valued scrip-wise and depreciation / appreciation is aggregated for each category. Net appreciation in each category, if any, being unrealised gain is ignored, while net depreciation is provided for. Commercial papers, certificate of deposits and treasury bills are valued at carrying cost. Long-term investments are carried at acquisition cost. A provision is made for diminution other than temporary on an individual basis against long-term investments. Premium paid over the face value of longterm investment is amortised over the life of the investment on straight line method.
Inter-class transfer of investments from one category to the other, if any, is done in accordance with the RBI guidelines at the lower of book value and fair value / market value on the date of transfer
E. LOANS
In accordance with the RBI guidelines, all loans are classified under any of four categories i.e. (i) standard assets (ii) sub-standard assets (iii) doubtful assets and (iv) loss assets.
F. TANGIBLE FIXED ASSETS
Fixed assets are stated at cost of acquisition, including any cost attributable for bringing the asset to its working condition, less accumulated depreciation. Profit or loss arising from derecognition of fixed assets are measured as difference between the net disposal proceeds and the cost of the assets less accumulated depreciation upto the date of disposal and are recognised in the Statement of Profit and Loss.
G. DEPRECIATION ON TANGIBLE FIXED ASSETS
Depreciation on tangible fixed assets is provided on the straight line method, as per the useful life prescribed in Schedule II to the Companies Act, 2013 except in respect of following categories of assets, in which case life of asset has been assessed based on the technical advice.
a) Mobile phones - 2 years b) Motor Cars - 4 years.
Depreciation on additions during the year is provided on a pro-rata basis. Assets costing less than Rs.5,000 each are fully depreciated in the year of capitalisation.
H. INTANGIBLE ASSETS AND AMORTISATION
Intangible assets comprising of computer software are stated at cost of acquisition, including any cost attributable for bringing the asset to its working condition, less accumulated amortisation. Any technology support cost or annual maintenance cost for such software is charged annually to the Statement of Profit and Loss. Intangible assets are being amortised over the estimated useful life of the asset on a straight-line method. The estimated useful life of the intangible assets and amortisation period are reviewed at the end of each financial year
I. IMPAIRMENT OF ASSETS
The carrying amount of assets at each Balance Sheet date are reviewed for impairment. If any indication of impairment based on internal / external factors exists, the recoverable amount of such assets is estimated and impairment is recognised wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the net selling price and its value in use, which is arrived at by discounting the future cash flows to their present value, based on an appropriate discounting factor. If at the Balance Sheet date, there is an indication that previously recognised impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount, subject to a maximum of the depreciable historical cost and reversal of such impairment loss is recognised in the Statement of Profit and Loss, except in case of revalued assets.
J. EXPENSE UNDER EMPLOYEE STOCK OPTION SCHEMES
The Company has formulated Employee Stock Option Schemes (âthe ESOSâ) in accordance with the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 (âthe Guidelinesâ). The ESOS provides for grant of stock options to employees (including employees of subsidiary companies) to acquire equity shares of the Company that vest in a graded manner and that are to be exercised within a specified period. In accordance with the Guidelines and the Guidance Note on âAccounting for Employees Share-based Paymentsâ issued by the Institute of Chartered Accountants of India, the excess, if any, of the closing market price on the day prior to the date of grant of the stock options under the ESOS over the exercise price is amortised on a straight-line method over the vesting period and is charged to the Statement of Profit and Loss as employee benefits expense. In case the vested stock options expires unexercised, the balance in stock options outstanding is transferred to the general reserve. In case the unvested stock options get lapsed / cancelled, the balance in stock option outstanding account is transferred to Statement of Profit and Loss.
K. EMPLOYEE BENEFITS
- Defined contribution plans
The Companyâs contribution to provident fund, superannuation fund and pension fund are considered as defined contribution plans and are charged to the Statement of Profit and Loss as they fall due, based on the amount of contribution required to be made and when services are rendered by the employees.
- Defined benefit plan
The net present value of the Companyâs obligation towards gratuity to employees is funded and actuarially determined as at the Balance Sheet date based on the projected unit credit method. Actuarial gains and losses are recognised in the Statement of Profit and Loss for the year
- Compensated absences
Based on the leave rules of the Company, employees are not permitted to accumulate leave. Any unavailed privilege leave to the extent encashable is paid to the employees and charged to the Statement of Profit and Loss for the year.
L. BORROWING COSTS
Borrowing costs include interest, amortisation of ancillary costs incurred and exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost. Interest cost in connection with the borrowing of funds to the extent not directly related to the acquisition of qualifying assets are charged to the Statement of Profit and Loss over the tenure of the loan.
M. REVENUE RECOGNITION
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. In addition, the following criteria must also be met before revenue is recognised:
- Interest is accounted on accrual basis except in the case of non-performing loans and identified advances, where it is recognised upon realisation, as per the income recognition and asset classification norms prescribed by the RBI,
- Income on discounted instruments is recognised over the tenure of the instrument on a straight-line method.
- Dividend is accounted when the right to receive is established,
- All other fees and charges are recognised when reasonable right of recovery is established, revenue can be reliably measured and as and when they become due.
- Profit / loss on sale of investments is recognised on settlement date basis. Profit / loss on sale of investments is determined based on the weighted average cost.
- Revenue from power supply is accounted on accrual basis, unless there is any uncertainty relating to its recovery
N. SEGMENT REPORTING
The Companyâs primary business segments are reflected based on the principal business carried out, i.e. investing. The risk and returns of the business of the Company is not associated with geographical segmentation, hence there is no secondary segment,
O. LEASES Where the Company is lessee
Leases under which all the risks and benefits of ownership are effectively retained by the lessor are classified as operating leases. Amount due under the operating leases are charged to the Statement of Profit and Loss, on a straight - line method over the lease term in accordance with Accounting Standard 19 on âLeasesâ as specified under section 133 of the 2013 Act. Initial direct costs incurred specifically for operating leases are recognised as expense in the year in which they are incurred,
P. EARNINGS PER SHARE
The Company reports basic and diluted earnings per share in accordance with AS-20, âEarnings Per Shareâ, as notified under section 133 of the 2013 Act. Basic earnings per share are computed by dividing the net profit after tax by the weighted average number of equity shares outstanding for the year
Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue equity shares were exercised or converted during the year. Diluted earnings per share are computed using the weighted average number of equity shares and dilutive potential equity shares outstanding at the year end, except where the results are anti-dilutive.
Q. TAXES ON INCOME
Current tax is the amount of tax payable on the taxable income for the year as determined in accordance with the provisions of the Income - tax Act, 1961.
Deferred tax is recognised on timing differences, being the differences between the taxable income and the accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax is measured using the tax rates and the tax laws enacted or substantially enacted as at the Balance Sheet date. Deferred tax liabilities are recognised for all timing differences. Deferred tax assets in respect of unabsorbed depreciation and carry forward of losses are recognised only if there is virtual certainty that there will be sufficient future taxable income available to realise such assets. Deferred tax assets are recognised for timing differences of other items only to the extent that reasonable certainty exists that sufficient future taxable income will be available against which these can be realised. Deferred tax assets and liabilities are offset if such items relate to taxes on income levied by the same governing tax laws and the Company has a legally enforceable right for such set off. Deferred tax assets are reviewed at each Balance Sheet date for their realisability. Current and deferred tax relating to items directly recognised in reserves are recognised in reserves and not in the Statement of Profit and Loss,
Since the Company has passed a Board resolution that it has no intention to make withdrawal from the Special Reserve created and maintained under section 36(1)(viii) of the Income-tax Act, 1961, the special reserve created and maintained is not capable of being reversed and thus a permanent difference. Accordingly, no deferred tax liability has been created in books of account, towards the same.
R. FOREIGN CURRENCY TRANSACTIONS AND TRANSLATIONS
Foreign currency transactions are accounted at the exchange rate prevailing on the date of the transaction. Foreign currency monetary items outstanding as at the Balance Sheet date are reported using the closing rate. Gain or loss resulting from the settlement of such transactions and translation of monetary assets and liabilities denominated in foreign currencies are recognised in the Statement of Profit and Loss.
S. PROVISIONS AND CONTINGENCIES Provision against loans and advances
- Contingent provision against standard assets is made at 0.40% of the outstanding standard assets in accordance with the RBI guidelines.
- Provision against non performing advances are made as per RBI guidelines.
Other provisions and Contingent liabilities
- A provision is recognised when the Company has a present obligation as a result of past events and it is probable that an outflow of resources will be required to settle the obligation in respect of which a reliable estimate can be made. Provisions (excluding retirement benefits) are not discounted to their present value and are determined based on the best estimate required to settle the obligation as at the Balance Sheet date. These are reviewed at each Balance Sheet date and adjusted to reflect the current best estimates. Contingent liabilities are disclosed separately. Contingent assets are not recognised in the financial statements.
T. SECURITIES ISSUE EXPENSES
Issue expenses of certain securities and redemption premium are adjusted against the securities premium account as permissible under Section 52 of the 2013 Act, to the extent balance is available for utilisation in the securities premium account.
U. SERVICE TAX / GOODS AND SERVICE TAX INPUT CREDIT
Service tax input / GST credit is accounted in the period in which the underlying services are received and when there is no uncertainty in availing / utilising the credit.
Mar 31, 2017
01 CORPORATE INFORMATION
A. IDFC Limited (''the Company'') is a company incorporated in India and is a Non Banking Finance Company (''NBFC'') regulated by the Reserve Bank of India (''RBI''). It was operating as an Infrastructure Finance Company, i.e. financing infrastructure projects in sectors like energy, telecommunication, transportation, commercial and industrial projects including hospital, education, tourism and hotels upto September 30, 2015. The Company had received in principle approval from the RBI to set up a new private sector bank in April
2014. Since October 1, 2015 the company is operating as NBFC - Investment Company.
B. In addition, as required under the Guidelines for Licensing of New Banks in the Private Sector issued by RBI on February 22, 2013, the Non Operative Financial Holding Company shall hold investment in the Bank as well as all other Financial Services entities of the group regulated by RBI or other Financial Sector regulators. Accordingly, IDFC Limited had transferred its entire investments in all regulated subsidiaries, i.e. IDFC Alternatives Limited, IDFC Asset Management Company Limited, IDFC AMC Trustee Company Limited, IDFC Infrastructure Finance Limited (Formerly known as IDFC Infra Debt Fund Limited), IDFC Securities Limited & IDFC Trustee Company Limited to its wholly owned subsidiary, IDFC Financial Holding Company Limited (''IDFC FHCL'') for consideration received in cash.
C. DEMERGER OF FINANCING UNDERTAKING
Pursuant to the filing and approval of the Scheme of Arrangement u/s. 391-394 of the Companies Act, 1956 (''Scheme of Arrangement'') between IDFC Limited (''Transferor Company'') and IDFC Bank Limited (''Transferee Company'') and their respective Shareholders and creditors, by the Hon''ble Madras High Court vide its order dated June 25, 2015 and on fulfillment of all conditions specified under the Scheme of Arrangement and on receipt of final banking license from the Reserve Bank of India by IDFC Bank Limited, the Financing Undertaking of the Transferor Company was transferred at the book value to the Transferee Company with effect from October 1, 2015. Accordingly, assets aggregating to Rs, 66,237.46 crore and liabilities aggregating to Rs, 60,002.90 crore, resulting in net assets of Rs, 6,234.56 crore along with contingent liabilities of Rs, 285.63 crore, capital commitment of Rs, 840.05 crore and notional principal of derivative contracts of Rs, 13,903.57 crore pertaining to the Financing Undertaking were transferred from Transferor Company to Transferee Company
The Financing Undertaking as defined under the Scheme of Arrangement included all outstanding loans and deposits, borrowings, investments, current assets, sundry debtors, all debts, liabilities including contingent liabilities, licenses, approvals, tax credit, properties - movable and immovable, plant and machinery, furniture and fixtures, office equipment, software and licenses, insurance, policies, all contracts, agreements, collateral, all staff and employees employed in connection with Financing Undertaking etc.
In consideration, the Transferee Company issued equity shares of Face value Rs, 10 each in the ratio of 1:1 to the Shareholders of Transferor Company on the record date as determined by the Board of Directors. The Company through its wholly owned subsidiary, IDFC FHCL, had invested Rs, 7,030.07 crore resulting in effective equity holding of 53% in IDFC Bank Limited.
In accordance with the accounting treatment, as provided under the Scheme of Arrangement;
(i) The credit balance in the debenture redemption reserve was transferred and credited to general reserve.
(ii) The Company had reduced the book value of assets (net of diminution / depreciation, if any) and liabilities relating to the Financing Undertaking transferred to IDFC Bank Limited.
(iii) The excess of book value of the assets transferred (net of diminution / depreciation, if any) over the book value of the liabilities of the Financing Undertaking transferred to the transferee company, was debited proportionately to Reserves and Surplus (including the Securities Premium Account) other than statutory reserves created under Section 45IC of the Reserve Bank of India Act, 1934, under section 36(1)(viii) of the Income tax Act, 1961 and the stock option outstanding reserve as described in
(iv) below. Accordingly, adjustments were made in Securities Premium Account Rs, 3,701.31 crore, General Reserve Rs, 918.87 crore, Statement of Profit and Loss account of Rs, 1,607.80 crore and Stock Option Outstanding Account of Rs, 6.56 crore on demerger of Financing Undertaking of IDFC Limited into IDFC Bank Limited.
(iv) Stock option outstanding reserve was reduced in the proportion of the net book value of the Financing Undertaking to the net worth of Transferor Company
02 BASIS OF PREPARATION
The financial statements of the Company have been prepared in accordance with Generally Accepted Accounting Principles in India (''Indian GAAP'') to comply with the Accounting Standards specified Under Section 133 of the Companies Act, 2013 (âthe 2013 Actâ). The financial statements have been prepared on the accrual basis under the historical cost convention. The accounting policies adopted in the preparation of the financial statements are consistent with those followed in the previous year unless stated otherwise.
03 SIGNIFICANT ACCOUNTING POLICIES
A. USE OF ESTIMATES
The preparation of the financial statements in conformity with Indian GAAP requires the Management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) and the reported income and expenses during the year. The Management believes that the estimates used in preparation of the financial statements are prudent and reasonable. Future results could differ due to these estimates and the differences between the actual results and the estimates are recognized in the periods in which the results are known / materialized.
b. cash and cash equivalents
Cash and cash equivalents for the purpose of the Cash Flow Statement comprises cash on hand, cash in bank, fixed deposits and other short-term highly liquid investments with an original maturity of three months or less that are readily convertible into known amount of cash and which are subject to an insignificant risk of change in value.
C. CASH FLOW STATEMENT
Cash flows are reported using the indirect method whereby cash flows from operating, investing and financing activities of the Company are segregated and profit before tax is adjusted for the effects of transactions of non-cash nature and any deferrals or accruals of past or future cash receipts or payments.
D. INVESTMENTS
Investments which are readily realizable and intended to be held for not more than one year from the date on which such investments are made are classified as current investments in accordance with the RBI guidelines and Accounting Standards notified under Section 133 of the 2013 Act. Current investments also include current maturities of long-term investments and also current portion of long-term investments. All other investments are classified as long-term investments.
The Company follows trade date method of accounting for recording of purchase and sale of investments. All investments are initially recorded at cost. The cost of an investment includes purchase price, directly attributable acquisition charges and reduced by recovery of costs, if any. On disposal of an investment, the difference between its carrying amount and the net disposal proceeds is charged or credited to the Statement of Profit and Loss.
Current investments are valued scrip-wise and depreciation / appreciation is aggregated for each category. Net appreciation in each category, if any, being unrealized gain is ignored, while net depreciation is provided for. Commercial papers, certificate of deposits and treasury bills are valued at carrying cost. Long-term investments are carried at acquisition cost. A provision is made for diminution other than temporary on an individual basis against long-term investments. Premium paid over the face value of long-term investment is amortized over the life of the investment on straight line method.
Inter-class transfer of investments from one category to the other, if any, is done in accordance with the RBI guidelines at the lower of book value and fair value / market value on the date of transfer.
E. REPURCHASE AND RESALE TRANSACTIONS (REPO)
In accordance with the RBI guidelines Repo and Reverse Repo transactions in government securities and corporate debt securities, including transactions conducted under Liquidity Adjustment Facility (''LAF'') and Marginal Standby Facility (''MSF'') with RBI are reflected as borrowing and lending transactions respectively. Borrowing cost on repo transactions is accounted for as interest expense and revenue on reverse repo transactions are accounted for as interest income.
F. LOANS
In accordance with the RBI guidelines, all loans are classified under any of four categories i.e. (i) standard assets (ii) sub-standard assets (iii) doubtful assets and (iv) loss assets.
g. tangible fixed assets
Fixed assets are stated at cost of acquisition, including any cost attributable for bringing the asset to its working condition, less accumulated depreciation. Profit or loss arising from derecognition of fixed assets are measured as difference between the net disposal proceeds and the cost of the assets less accumulated depreciation up to the date of disposal and are recognized in the Statement of Profit and Loss.
H. DEPRECIATION ON TANGIBLE FIXED ASSETS
Depreciation on tangible fixed assets is provided on the straight line method, as per the useful life prescribed in Schedule II to the Companies Act, 2013 except in respect of following categories of assets, in which case life of asset has been assessed based on the technical advice.
a) Mobile phones b) Motor Cars.
Depreciation on additions during the year is provided on a pro-rata basis. Assets costing less than '' 5,000 each are fully depreciated in the year of capitalization. Depreciation in respect of leasehold improvements is provided on a straight - line method over the extended period of the lease.
I. INTANGIBLE ASSETS AND AMORTISATION
Intangible assets comprising of computer software are stated at cost of acquisition, including any cost attributable for bringing the asset to its working condition, less accumulated amortization. Any technology support cost or annual maintenance cost for such software is charged annually to the Statement of Profit and Loss. Intangible assets are being amortized over the estimated useful life of the asset on a straight-line method. The estimated useful life of the intangible assets and amortization period are reviewed at the end of each financial year
J. IMPAIRMENT OF ASSETS
The carrying amount of assets at each Balance Sheet date are reviewed for impairment. If any indication of impairment based on internal / external factors exists, the recoverable amount of such assets is estimated and impairment is recognized wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the net selling price and its value in use, which is arrived at by discounting the future cash flows to their present value, based on an appropriate discounting factor. If at the Balance Sheet date, there is an indication that previously recognized impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount, subject to a maximum of the depreciable historical cost and reversal of such impairment loss is recognized in the Statement of Profit and Loss, except in case of revalued assets.
K. EXPENSE UNDER EMPLOYEE STOCK OPTION SCHEMES
The Company has formulated Employee Stock Option Schemes (''the ESOS'') in accordance with the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 (''the Guidelines''). The ESOS provides for grant of stock options to employees (including employees of subsidiary companies) to acquire equity shares of the Company that vest in a graded manner and that are to be exercised within a specified period. In accordance with the Guidelines and the Guidance Note on ''Accounting for Employees Share-based Payments'' issued by the Institute of Chartered Accountants of India, the excess, if any, of the closing market price on the day prior to the date of grant of the stock options under the ESOS over the exercise price is amortized on a straight-line method over the vesting period and is charged to the Statement of Profit and Loss as employee benefits expense. In case the vested stock options expires unexercised, the balance in stock options outstanding is transferred to the general reserve. In case the unvested stock options get lapsed / cancelled, the balance in stock option outstanding account is transferred to Statement of Profit and Loss.
In addition, against each outstanding employee stock options granted by IDFC Limited to its employees, equivalent options of IDFC Bank Limited were granted under the Scheme of Arrangement. The price of these options are determined by multiplying the existing grant price of the options granted by IDFC Limited to its employees under the IDFC Limited Employee Stock Option Scheme by the proportion that the net worth of the Financing Undertaking bears to the total net book value of IDFC Limited, immediately prior to the effectiveness of the Scheme of Arrangement.
L. EMPLOYEE BENEFITS
- Defined contribution plans
The Company''s contribution to provident fund, superannuation fund and pension fund are considered as defined contribution plans and are charged to the Statement of Profit and Loss as they fall due, based on the amount of contribution required to be made and when services are rendered by the employees.
- Defined benefit plan
The net present value of the Company''s obligation towards gratuity to employees is funded and actuarially determined as at the Balance Sheet date based on the projected unit credit method. Actuarial gains and losses are recognized in the Statement of Profit and Loss for the year
- Compensated absences
Based on the leave rules of the Company, employees are not permitted to accumulate leave. Any unveiled privilege leave to the extent encashable is paid to the employees and charged to the Statement of Profit and Loss for the year
M. BORROWING COSTS
Borrowing costs include interest, amortization of ancillary costs incurred and exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost. Interest cost in connection with the borrowing of funds to the extent not directly related to the acquisition of qualifying assets are charged to the Statement of Profit and Loss over the tenure of the loan. Ancillary costs in connection with long-term external commercial borrowings are amortized to the Statement of Profit and Loss over the tenure of the loan.
N. REVENUE RECOGNITION
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. In addition, the following criteria must also be met before revenue is recognized:
- Interest is accounted on accrual basis except in the case of non-performing loans and identified advances*, where it is recognized upon realization, as per the income recognition and asset classification norms prescribed by the RBI.
- Income on discounted instruments is recognized over the tenure of the instrument on a straight-line method.
- Dividend is accounted when the right to receive is established.
- Front end fees on processing of loans are recognized upfront as income.
- Underwriting commission earned to the extent not reduced from the cost of acquisition of securities is recognized as fees on closure of issue.
- All other fees and charges are recognized when reasonable right of recovery is established, revenue can be reliably measured and as and when they become due except guarantee commission which is recognized pro-rata over the period of the guarantee.
- Premium on interest rate reduction is accounted on accrual basis over the residual life of the loan.
- Profit / loss on sale of investments is recognized on trade date basis. Profit / loss on sale of investments is determined based on the ''first in first out'' cost for current investments and weighted average cost for long-term investments.
- Profit on sale of loan assets through direct assignment / securitization is recognized over the residual life of the loan / pass through certificate in terms of the RBI guidelines. Loss arising on account of direct assignment / securitization is recognized upfront on sale in the Statement of Profit and Loss.
- Revenue from power supply is recognized when reasonable right of recovery is established.
- Income from trading in derivatives is recognized on final settlement or squaring up of the contracts.
* Identified advances are specific advances in infrastructure sector that are not NPAs but has possible risk of slippage.
O. SEGMENT REPORTING
The Company''s primary business segments are reflected based on the principal business carried out, i.e. financing. The risk and returns of the business of the Company is not associated with geographical segmentation, hence there is no secondary segment reporting based on geographical segment.
p. LEASES Where the Company is lessee
Leases under which all the risks and benefits of ownership are effectively retained by the less or are classified as operating leases. Amount due under the operating leases are charged to the Statement of Profit and Loss, on a straight - line method over the lease term in accordance with Accounting Standard 19 on ''Leases'' as specified under section 133 of the 2013 Act. Initial direct costs incurred specifically for operating leases are recognized as expense in the year in which they are incurred.
Where the Company is less or
Leases under which the Company does not transfer substantially all the risks and benefits of ownership of the asset are classified as operating leases. Assets subject to operating leases are included in fixed assets. Lease income in respect of operating leases is recognized in the Statement of Profit and Loss on a straight-line method over the lease term in accordance with Accounting Standard 19 on ''Leases'' as specified under section 133 of the 2013 Act. Maintenance costs including depreciation are recognized as an expense in the Statement of Profit and Loss.
Q. EARNINGS PER SHARE
The Company reports basic and diluted earnings per share in accordance with Accounting Standard 20 on ''Earnings Per Share'', as notified under section 133 of the 2013 Act. Basic earnings per share are computed by dividing the net profit after tax by the weighted average number of equity shares outstanding for the year.
Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue equity shares were exercised or converted during the year. Diluted earnings per share are computed using the weighted average number of equity shares and dilutive potential equity shares outstanding at the year end, except where the results are anti-dilutive.
R. TAXES ON INCOME
Current tax is the amount of tax payable on the taxable income for the year as determined in accordance with the provisions of the Income - tax Act, 1961.
Deferred tax is recognized on timing differences, being the differences between the taxable income and the accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax is measured using the tax rates and the tax laws enacted or substantially enacted as at the Balance Sheet date. Deferred tax liabilities are recognized for all timing differences. Deferred tax assets in respect of unabsorbed depreciation and carry forward of losses are recognized only if there is virtual certainty that there will be sufficient future taxable income available to realize such assets. Deferred tax assets are recognized for timing differences of other items only to the extent that reasonable certainty exists that sufficient future taxable income will be available against which these can be realized. Deferred tax assets and liabilities are offset if such items relate to taxes on income levied by the same governing tax laws and the Company has a legally enforceable right for such set off. Deferred tax assets are reviewed at each Balance Sheet date for their reliability. Current and deferred tax relating to items directly recognized in reserves are recognized in reserves and not in the Statement of Profit and Loss.
Since the Company has passed a Board resolution that it has no intention to make withdrawal from the Special Reserve created and maintained under section 36(1)(viii) of the Income-tax Act, 1961, the special reserve created and maintained is not capable of being reversed and thus a permanent difference. Accordingly, no deferred tax liability has been created in books of account, towards the same.
s. DERIVATIVE CONTRACTS Interest rate swaps
Interest rate swaps are booked with the objective of managing the interest rate risk on liabilities. Interest rate swaps in the nature of hedge are recorded on accrual basis and these transactions are not marked-to-market. Any resultant profit or loss on termination of the hedge swaps is amortized over the life of the swap or underlying liability, whichever is shorter.
Currency Interest rate swaps
Currency interest rate swaps in the nature of hedge, booked with the objective of managing the currency and interest rate risk on foreign currency liabilities are recorded on accrual basis and these transactions are not marked-to-market. Any resultant profit or loss on termination of hedge swaps is amortized over the life of swap or underlying liability, whichever is shorter. The foreign currency balances on account of principal of currency interest rate swaps outstanding as at the Balance Sheet date are revalued using the closing rate.
Stock Futures
- Stock Futures are marked-to-market on a daily basis. The debit or credit balance in the ''Mark-to-market margin - stock futures account'' disclosed under loans and advances or current liabilities represents the net amount paid or received on the basis of the movement in the prices of stock futures till the Balance Sheet date.
- Credit balance in the ''Mark-to-market margin - stock futures account'' in the nature of anticipated profit is ignored and no credit is taken to the Statement of Profit and Loss. However, the debit balance in the ''Mark-to-market margin - stock futures account'' in the nature of anticipated loss is recognized in the Statement of Profit and Loss.
- On final settlement or squaring-up of contracts for stock futures, the profit or loss is calculated as the difference between the settlement / squaring-up price and the contract price. Accordingly, debit or credit balance pertaining to the settled / squared-up contract in ''Mark-to-market margin - stock futures account'' is recognized in the Statement of Profit and Loss upon expiry of the contracts. When more than one contract in respect of the relevant series of stock futures contract, to which the squared-up contract pertains is outstanding at the time of the squaring-up of the contract, the contract price of such contract is determined using the weighted average method for calculating profit / loss on squaring-up.
- ''Initial margin account - stock futures'' representing initial margin paid is disclosed under loans and advances.
T. FOREIGN CURRENCY TRANSACTIONS AND TRANSLATIONS
Foreign currency transactions are accounted at the exchange rate prevailing on the date of the transaction. Foreign currency monetary items outstanding as at the Balance Sheet date are reported using the closing rate. Gain or loss resulting from the settlement of such transactions and translation of monetary assets and liabilities denominated in foreign currencies are recognized in the Statement of Profit and Loss. Premium in respect of forward contracts is accounted over the period of the contract. Forward contracts outstanding as at the Balance Sheet date are revalued at the closing rate.
u. PROVISIONS AND CONTINGENCIES Provision against loans and advances
- Contingent provision against standard assets is made at 0.40% of the outstanding standard assets in accordance with the RBI guidelines.
- In addition to above, the Company maintains a general provision as Provision for Contingencies in accordance with the provisioning policy of the Company and additional provision based on the assessment of portfolio including provision against identified advances that qualifies for deduction under Section 36(1)(viia) of the Income-tax Act, 1961.
- In addition to the minimum provisioning level prescribed by RBI, IDFC Limited on a prudent basis made provisions on specific advances that are not NPAs (''Identified advances'') but had reason to believe risk of possible slippages on the basis of the extant environment or specific information or current pattern of servicing. These provisions being specific in nature are netted off from gross advances.
- In January 2014, the RBI has issued guidelines on Restructuring of Advances applicable to Non Banking Finance Companies. As per the guidelines, a provision is required on standard accounts restructured prior to January 24, 2014 at 2.75 % from March 31, 2014, and would further increase to 3.50% from March 31, 2015, 4.25% from March 31, 2016 and 5.00% from March 31, 2017. Restructuring of standard accounts subsequent to January 23, 2014 would attract a provision at 5.00%. The Company has complied with the aforesaid guidelines and on prudent basis a provision at 5.00% has been made on all outstanding restructured accounts in addition to the provision against diminution in fair value of restructured advances. Unrealized income represented by Funded Interest Term Loan (''FITL'') on standard accounts restructured after January 23, 2014 are fully provided and such provision against FITL will be reversed on repayment of FITL.
Other provisions
- A provision is recognized when the Company has a present obligation as a result of past events and it is probable that an outflow of resources will be required to settle the obligation in respect of which a reliable estimate can be made. Provisions (excluding retirement benefits) are not discounted to their present value and are determined based on the best estimate required to settle the obligation as at the Balance Sheet date. These are reviewed at each Balance Sheet date and adjusted to reflect the current best estimates. Contingent liabilities are disclosed separately. Contingent assets are not recognized in the financial statements.
V. SECURITIES ISSUE EXPENSES
Issue expenses of certain securities and redemption premium are adjusted against the securities premium account as permissible under Section 52 of the 2013 Act, to the extent balance is available for utilization in the securities premium account.
w. SERVICE TAX INPUT CREDIT
Service tax input credit is accounted in the period in which the underlying services are received and when there is no uncertainty in availing / utilizing the credit.
x. OPERATING CYCLE
Based on the nature of activities of the Company and the normal time between acquisition of assets and their realization in cash or cash equivalents, the Company has determined its operating cycle as 12 months for the purpose of classification of its assets and liabilities as current and non-current.
(b) Terms / rights attached to equity shares
- The Company has only one class of equity shares having a par value of '' 10 per share. Each holder of equity shares is entitled to one vote per share and ranks pari passu. The dividend proposed by the Board of Directors is subject to approval of the Shareholders at the ensuing Annual General Meeting. During the year, the Board of Directors proposed dividend of '' 0.25 per share (2.50%) [Previous Year '' Nil].
- In the event of liquidation of the Company, the holders of equity shares will be entitled to receive any of the remaining assets of the Company after distribution of all preferential amounts. However, no such preferential amounts exists currently. The distribution will be in proportion to the number of equity shares held by the Shareholders.
(i) In respect of equity shares issued pursuant to exercise of stock options under the ESOS, the Company paid dividend of '' Nil for the year 2015-16 (Previous Year Rs, 0.25 crore for the year 2014-15) as approved by the Shareholders at the respective Annual General Meetings and tax on dividend of Rs, Nil (Previous Year Rs, 0.05 crore) as approved by the Shareholders at the respective Annual General Meetings.
(ii) Appropriation of Rs, 11.20 crore (Previous year Rs, Nil) was made under section 45-IC of the RBI Act for the year ended March 31, 2017.
06 share application money pending allotment
Share application money pending allotment represents applications received from employees on exercise of stock options granted and vested under the ESOS.
In compliance with Accounting Standard 22 on ''Accounting for Taxes on Income'' as specified under Section 133 of the Companies Act, 2013, the Company has taken charge of Rs, 0.08 crore in the Statement of Profit and Loss towards deferred tax liability on account of timing differences (Previous year credit of Rs, 1,036.70 crore towards deferred tax assets (net)).
(a) No amount of unclaimed dividend was due for transfer to the Investor Education and Protection Fund under Section 25 of the Companies Act, 2013 as at the Balance Sheet date.
(b) Previous Year payable to gratuity fund is net of amount receivable from gratuity fund of Rs, 0.01 crore.
Note: Exceptional Items
Previous year
Pursuant to the approval granted by the Reserve Bank of India (âRBIâ) vide letter no. DNBR.CO.PD.No. 295/03.10.001/2014-15 dated August 11, 2015 to utilize the balance in Statutory Reserves to create specific provision against identified advances, the Company has created specific provisions of '' 2,500.00 crore on such assets. This one time provision along with reversal of unrealized interest of Rs, 138.72 crore on identified advances have been charged to the Statement of Profit and Loss and classified as exceptional item. In accordance with the RBI approval, an amount equivalent to Rs, 1,634.80 crore (provisions of Rs, 2,500.00 crore net of deferred tax asset of Rs, 865.20 crore) is transferred from Special Reserve u/s 45IC of RBI Act, 1934 to the balance of the surplus in Statement of Profit and Loss in Reserves and Surplus.
Mar 31, 2015
(a) Use of estimates
The preparation of the financial statements in conformity with Indian
GAAP requires the Management to make estimates and assumptions
considered in the reported amounts of assets and liabilities (including
contingent liabilities) and the reported income and expenses during the
year. The Management believes that the estimates used in preparation
of the financial statements are prudent and reasonable. Future results
could differ due to these estimates and the differences between the
actual results and the estimates are recognised in the periods in which
the results are known / materialised.
(b) Cash and cash equivalents
Cash and cash equivalents for the purpose of the Cash Flow Statement
comprises cash on hand, cash in bank, fixed deposits and other short-
term highly liquid investments with an original maturity of three
months or less that are readily convertible into known amount of cash
and which are subject to an insignificant risk of change in value.
(c) Cash flow statement
Cash flows are reported using the indirect method whereby cash flows
from operating, investing and financing activities of the Company are
segregated and profit before tax is adjusted for the effects of
transactions of non-cash nature and any deferrals or accruals of past
or future cash receipts or payments.
(d) Investments
- Investments which are readily realisable and intended to be held
for not more than one year from the date on which such investments are
made are classified as current investments in accordance with the RBI
guidelines and Accounting Standards specified under Section 133 of the
2013 Act read with Rule 7 of the Companies (Accounts) Rules, 2014 and
the relevant provisions of the 2013 Act / Companies Act, 1956. Current
investments also include current maturities of long-term investments
and also current portion of long-term investments. All other
investments are classified as long-term investments.
- The Company follows trade date method of accounting for recording
of purchase and sale of investments. All investments are initially
recorded at cost. The cost of an investment includes purchase price,
directly attributable acquisition charges and reduced by recovery of
costs, if any. On disposal of an investment, the difference between its
carrying amount and the net disposal proceeds is charged or credited to
the Statement of Profit and Loss.
- Current investments are valued scrip-wise and depreciation /
appreciation is aggregated for each category. Net appreciation in each
category, if any, being unrealised gain is ignored, while net
depreciation is provided for. Commercial papers, certificate of
deposits and treasury bills are valued at carrying cost. Long-term
investments are carried at acquisition cost. A provision is made for
diminution other than temporary on an individual basis against
long-term investments. Premium paid over the face value of long-term
investment is amortised over the life of the investment on straight
line method.
- Inter-class transfer of investments from one category to the other,
if any, is done in accordance with the RBI guidelines at the lower of
book value and fair value / market value on the date of transfer.
(e) Repurchase and Resale Transactions (Repo)
Repo transactions are treated as collateralised lending and borrowing
transactions, with an agreement to repurchase, on the agreed terms, as
per the RBI guidelines and accordingly disclosed in the financial
statements. The difference between consideration amounts of the first
leg and second leg of the repo are reckoned as repo interest. As
regards repo / reverse repo transactions outstanding on the balance
sheet date, only the accrued expenditure / income till the Balance
Sheet date is taken to the Statement of Profit and Loss. Any repo
expenditure / income for the remaining period is reckoned in the next
accounting period. The securities sold under repo transactions are
continued to be marked-to-market as per the investment classification
of the security.
(f) Loans
In accordance with the RBI guidelines, all loans are classified under
any of four categories i.e. (i) standard assets (ii) sub-standard
assets (iii) doubtful assets and (iv) loss assets.
(g) Tangible fixed assets
Fixed assets are stated at cost of acquisition, including any cost
attributable for bringing the asset to its working condition, less
accumulated depreciation. Profit or loss arising from de-recognition of
fixed assets are measured as difference between the net disposal
proceeds and the cost of the assets less accumulated depreciation upto
the date of disposal and are recognised in the Statement of Profit and
Loss.
(h) Depreciation on tangible fixed assets
Having regard to the Part C of Schedule II of the 2013 Act, during the
year ended March 31,2015 the Company has reviewed its policy of
providing for depreciation on its tangible fixed assets and also
reassessed their useful lives. On and from April 1,2014, the straight
line method is being used to depreciate all classes of tangible fixed
assets except in respect of following categories of assets, in which
case life of asset has been assessed based on the management estimate
[see note 14(c)].
i) Moblie phones
ii) Motor Cars.
Depreciation on additions during the year is provided on a pro-rata
basis. Assets costing less than Rs. 5,000 each are fully depreciated in
the year of capitalisation. Depreciation in respect of leasehold
improvements is provided on a straight-line method over the extended
period of the lease.
A comparative table with respect to deprecation rates based on old and
new method is produced below:
(i) Intangible assets and amortisation
Intangible assets comprising of computer software are stated at cost of
acquisition, including any cost attributable for bringing the asset to
its working condition, less accumulated amortisation. Any technology
support cost or annual maintenance cost for such software is charged
annually to the Statement of Profit and Loss. Intangible assets are
being amortised over the estimated useful life of the asset on a
straight-line method. The estimated useful life of the intangible
assets and amortisation period are reviewed at the end of each
financial year. Present estimate of useful life of intangible assets
are determined as three years.
(j) Impairment of assets
The carrying amount of assets at each Balance Sheet date are reviewed
for impairment. If any indication of impairment based on internal /
external factors exists, the recoverable amount of such assets is
estimated and impairment is recognised in the Statement of Profit and
Loss wherever the carrying amount of an asset exceeds its recoverable
amount. The recoverable amount is the greater of the net selling price
and its value in use, which is arrived at by discounting the future
cash flows to their present value, based on an appropriate discounting
factor. If at the Balance sheet date, there is a indication that
previously recognised impairment loss no longer exists, the recoverable
amount is reassessed and the asset is reflected at the recoverable
amount, subject to a maximum of the depreciable historical cost and
reversal of such impairment loss is recognised in the Statement of
Profit and Loss, except in case of revalued assets.
(k) Expense under employee stock option schemes
The Company has formulated Employee Stock Option Schemes (''the
ESOS'') in accordance with the SEBI (Employee Stock Option Scheme and
Employee Stock Purchase Scheme) Guidelines, 1999 (''the
Guidelines''). The ESOS provides for grant of stock options to
employees (including employees of subsidiary companies) to acquire
equity shares of the Company that vest in a graded manner and that are
to be exercised within a specified period. In accordance with the
Guidelines and the Guidance Note on ''Accounting for Employees
Share-based Payments'' issued by the Institute of Chartered
Accountants of India, the excess, if any, of the closing market price
on the day prior to the date of grant of the stock options under the
ESOS over the exercise price is amortised on a straight-line method
over the vesting period and is charged to the Statement of Profit and
Loss as employee benefits expense. In case the vested stock options
expires unexercised, the balance in stock options outstanding is
transferred to the general reserve. In case the univested stock options
get lapsed / cancelled, the balance in stock option outstanding account
is transferred to Statement of Profit and Loss.
(l) Employee benefits Defined contribution plans
The Company''s contribution to provident fund, superannuation fund and
pension fund are considered as defined contribution plans and are
charged to the Statement of Profit and Loss as they fall due, based on
the amount of contribution required to be made and when services are
rendered by the employees.
Defined benefit plan
The net present value of the Company''s obligation towards gratuity to
employees is funded and actuarially determined as at the Balance Sheet
date based on the projected unit credit method. Actuarial gains and
losses are recognised in the Statement of Profit and Loss for the year.
Compensated absences
Based on the leave rules of the Company, employees are not permitted to
accumulate leave. Any unavailed privilege leave to the extent
encashable is paid to the employees and charged to the Statement of
Profit and Loss for the year.
(m) Borrowing costs
Borrowing costs include interest, amortisation of ancillary costs
incurred and exchange differences arising from foreign currency
borrowings to the extent they are regarded as an adjustment to the
interest cost. Interest cost in connection with the borrowing of funds
to the extent not directly related to the acquisition of qualifying
assets are charged to the Statement of Profit and Loss over the tenure
of the loan. Ancillary costs in connection with long-term external
commercial borrowings are amortised to the Statement of Profit and Loss
over the tenure of the loan.
(n) Revenue recognition
Revenue is recognised to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured. In addition, the following criteria must also be met
before revenue is recognised:
- Interest is accounted on accrual basis except in the case of
non-performing loans where it is recognised upon realisation, as per
the income recognition and asset classification norms prescribed by the
RBI.
- Income on discounted instruments is recognised over the tenure of
the instrument on a straight-line method.
- Dividend is accounted when the right to receive is established.
- Front end fees on processing of loans are recognised upfront as
income.
- Underwriting commission earned to the extent not reduced from the
cost of acquisition of securities is recognised as fees on closure of
issue.
- All other fees and charges are recognised when reasonable right of
recovery is established, revenue can be reliably measured and as and
when they become due except guarantee commission which is recognised
pro-rata over the period of the guarantee.
- Premium on interest rate reduction is accounted on accrual basis
over the residual life of the loan.
- Profit / loss on sale of investments is recognised on trade date
basis. Profit / loss on sale of investments is determined based on the
''first in first out'' cost for current investments and weighted
average cost for long-term investments.
- Profit on sale of loan assets through direct assignment /
securitisation is recognised over the residual life of the loan / pass
through certificate in terms of the RBI guidelines. Loss arising on
account of direct assignment / securitisation is recognised upfront on
sale in the Statement of Profit and Loss.
- Revenue from power supply is accounted on accrual basis.
- Income from trading in derivatives is recognised on final
settlement or squaring up of the contracts.
(o) Segment Reporting
The Company''s primary business segments are reflected based on the
principal business carried out, i.e. financing. The risk and returns of
the business of the Company is not associated with geographical
segmentation, hence there is no secondary segment reporting based on
geographical segment. During the current year, these activities also
involved steps taken towards transitioning into the proposed bank. In
view of the transitional nature of activities, these are not considered
as reportable segments.
(p) Leases
Where the Company is lessee
Leases under which all the risks and benefits of ownership are
effectively retained by the lessor are classified as operating leases.
Amount due under the operating leases are charged to the Statement of
Profit and Loss, on a straight-line method over the lease term in
accordance with Accounting Standard 19 on ''Leases'' as specified
under Section 133 of the 2013 Act read with Rule 7 of the Companies
(Accounts) Rules, 2014. Initial direct costs incurred specifically for
operating leases are recognised as expense in the year in which they
are incurred.
Where the Company is lessor
Leases under which the Company does not transfer substantially all the
risks and benefits of ownership of the asset are classified as
operating leases. Assets subject to operating leases are included in
fixed assets. Lease income in respect of operating leases is recognised
in the Statement of Profit and Loss on a straight-line method over the
lease term in accordance with Accounting Standard 19 on ''Leases'' as
specified under Section 133 of the 2013 Act read with Rule 7 of the
Companies (Accounts) Rules, 2014. Maintenance costs including
depreciation are recognised as an expense in the Statement of Profit
and Loss.
(q) Earnings per share
Basic earnings per share is computed by dividing the profit after tax
by the weighted average number of equity shares outstanding during the
year. Diluted earnings per share is computed by dividing the profit
after tax as adjusted for dividend, interest and other charges to
expense or income relating to the dilutive potential equity shares, by
the weighted average number of equity shares considered for deriving
basic earnings per share and the weighted average number of equity
shares which could have been issued on the conversion of all dilutive
potential equity shares. Potential equity shares are deemed to be
dilutive only if their conversion to equity shares would decrease the
net profit per share from continuing ordinary operations. Potential
dilutive equity shares are deemed to be converted as at the beginning
of the year, unless they have been issued at a later date. The
dilutive potential equity shares are adjusted for the proceeds
receivable had the shares been actually issued at fair value (i.e.
average market value of the outstanding shares). Dilutive potential
equity shares are determined independently for each year.
(r) Taxes on income
- Current tax is the amount of tax payable on the taxable income for
the year as determined in accordance with applicable tax rates and the
provisions of the Income-tax Act, 1961.
- Deferred tax is recognised on timing differences, being the
differences between the taxable income and the accounting income that
originate in one period and are capable of reversal in one or more
subsequent periods. Deferred tax is measured using the tax rates and
the tax laws enacted or substantially enacted as at the Balance Sheet
date. Deferred tax liabilities are recognised for all timing
differences. Deferred tax assets in respect of unabsorbed depreciation
and carry forward of losses are recognised only if there is virtual
certainty that there will be sufficient future taxable income available
to realise such assets. Deferred tax assets are recognised for timing
differences of other items only to the extent that reasonable certainty
exists that sufficient future taxable income will be available against
which these can be realised. Deferred tax assets and liabilities are
offset if such items relate to taxes on income levied by the same
governing tax laws and the Company has a legally enforceable right for
such set off. Deferred tax assets are reviewed at each Balance Sheet
date for their readability. Current and deferred tax relating to items
directly recognised in reserves are recognised in reserves and not in
the Statement of Profit and Loss.
- Since the Company has passed a Board resolution that it has no
intention to make withdrawal from the Special Reserve created and
maintained under Section 36(1)(viii) of the Income-tax Act, 1961, the
special reserve created and maintained is not capable of being reversed
and thus a permanent difference. Accordingly, no deferred tax liability
has been created in books of account.
(s) Derivative contracts
Interest rate swaps
Interest rate swaps are booked with the objective of managing the
interest rate risk on liabilities. Interest rate swaps in the nature of
hedge are recorded on accrual basis and these transactions are not
marked-to-market. Any resultant profit or loss on termination of the
hedge swaps is amortised over the life of the swap or underlying
liability, whichever is shorter.
Currency Interest rate swaps
Currency interest rate swaps in the nature of hedge, booked with the
objective of managing the currency and interest rate risk on foreign
currency liabilities are recorded on accrual basis and these
transactions are not marked-to-market. Any resultant profit or loss on
termination of hedge swaps is amortised over the life of swap or
underlying liability, whichever is shorter. The foreign currency
balances on account of principal of currency interest rate swaps
outstanding as at the Balance Sheet date are revalued using the closing
rate.
Stock Futures
- Stock Futures are marked-to-market on a daily basis. The debit or
credit balance in the ''Mark-to-market margin - stock futures
account'' disclosed under loans and advances or current liabilities
represents the net amount paid or received on the basis of the movement
in the prices of stock futures till the Balance Sheet date.
- Credit balance in the ''Mark-to-market margin - stock futures
account'' in the nature of anticipated profit is ignored and no credit
is taken to the Statement of Profit and Loss. However, the debit
balance in the ''Mark-to-market margin - stock futures account'' in
the nature of anticipated loss is recognised in the Statement of Profit
and Loss.
- On final settlement or squaring-up of contracts for stock futures,
the profit or loss is calculated as the difference between the
settlement / squaring-up price and the contract price. Accordingly,
debit or credit balance pertaining to the settled / squared-up contract
in ''Mark-to-market margin - stock futures account'' is recognised in
the Statement of Profit and Loss upon expiry of the contracts. When
more than one contract in respect of the relevant series of stock
futures contract, to which the squared-up contract pertains is
outstanding at the time of the squaring-up of the contract, the
contract price of such contract is determined using the weighted
average method for calculating profit/loss on squaring-up.
- ''Initial margin account - stock futures'' representing initial
margin paid is disclosed under loans and advances.
(t) Foreign currency transactions and translations
Foreign currency transactions are accounted at the exchange rate
prevailing on the date of the transaction. Foreign currency monetary
items outstanding as at the Balance Sheet date are reported using the
closing rate. Gain or loss resulting from the settlement of such
transactions and translation of monetary assets and liabilities
denominated in foreign currencies are recognised in the Statement of
Profit and Loss. Premium in respect of forward contracts is accounted
over the period of the contract. Forward contracts outstanding as at
the Balance Sheet date are revalued at the closing rate.
(u) Provisions and contingencies
Provision against loans and advances
- Contingent provision against standard assets is made at 0.25% of
the outstanding standard assets in accordance with the RBI guidelines.
- In addition, the Company maintains a general provision as Provision
for Contingencies in accordance with the provisioning policy of the
Company and additional provision based on the assessment of portfolio
including provision against stressed assets that qualifies for
deduction under Section 36(1)(viia) of the Income-tax Act, 1961.
- The policy of provisioning against non performing loans and
advances has been decided by the Management considering norms
prescribed by the RBI under Non Banking Financial Companies Prudential
Norms (Reserve Bank) Directions, 2007. As per the policy adopted, the
provision against non performing loans and advances are created on a
conservative basis, taking into account Management''s perception of
the higher risk associated with the business of the Company. Certain
non performing loans and advances may be considered as loss assets and
full provision has been made against such assets.
- In January 2014, the RBI has issued guidelines on Restructuring of
Advances applicable to Non Banking Finance Companies. As per the
guidelines, a provision is required on standard accounts restructured
prior to January 24, 2014 at 2.75 % from March 31,2014, and would
further increase to 3.50% from March 31, 2015, 4.25% from March 31,2016
and 5.00% from March 31,2017. Restructuring of standard accounts
subsequent to January 23, 2014 would attract a provision at 5.00%. The
Company has complied with the aforesaid guidelines and on prudent basis
a provision at 5.00% has been made on all outstanding restructured
accounts in addition to the provision against diminution in fair value
of restructured advances. Unrealised income represented by Funded
Interest Term Loan (''FITL'') on standard accounts restructured after
January 23, 2014 are fully provided and such provision against FITL
will be reversed on repayment of FITL.
- In March 2014, the RBI has issued a Circular for the purpose of
early recognition of financial distress, prompt steps for resolution
and fair recovery for lenders. As per the Circular, the Company is
required to categorize its exposure as Special Mention Account (SMA)
based on the past due status, initiate the process for formation of
Joint Lender Forum (JLF) and arrive at Corrective Action Plan (CAP) and
prescribes accelerated provision for non-compliance of the above. Based
on the above Circular, the Company has initiated the required action
for formation of JLF and finalization of CAP which are within the
control of the Company. The Company has complied with the requirements
of the said Circular and hence not required to create accelerated
provision.
Other provisions
- A provision is recognised when the Company has a present obligation
as a result of past events and it is probable that an outflow of
resources will be required to settle the obligation in respect of which
a reliable estimate can be made. Provisions (excluding retirement
benefits) are not discounted to their present value and are determined
based on the best estimate required to settle the obligation as at the
Balance Sheet date. These are reviewed at each Balance Sheet date and
adjusted to reflect the current best estimates. Contingent liabilities
are disclosed separately. Contingent assets are not recognised in the
financial statements.
(v) Securities issue expenses
Issue expenses of certain securities and redemption premium are
adjusted against the securities premium account as permissible under
Section 52 of the 2013 Act to the extent balance is available for
utilisation in the securities premium account.
(w) Service tax input credit
Service tax input credit is accounted in the period in which the
underlying services are received and when there is no uncertainty in
availing / utilising the credit.
(x) Operating cycle
Based on the nature of products / activities of the Company and the
normal time between acquisition of assets and their realisation in cash
or cash equivalents, the Company has determined its operating cycle as
12 months for the purpose of classification of its assets and
liabilities as current and non-current.
Mar 31, 2014
(a) Use of estimates
The preparation of the financial statements in conformity with Indian
GAAP requires the Management to make estimates and assumptions
considered in the reported amounts of assets and liabilities (including
contingent liabilities) and the reported income and expenses during the
year. The Management believes that the estimates used in preparation
of the financial statements are prudent and reasonable. Future results
could differ due to these estimates and the differences between the
actual results and the estimates are recognised in the periods in which
the results are known / materialised.
(b) Cash and cash equivalents
Cash and cash equivalents for the purpose of the Cash Flow Statement
comprises cash on hand, cash in bank, fixed deposits and other
short-term highly liquid investments with an original maturity of three
months or less that are readily convertible into known amount of cash
and which are subject to an insignificant risk of change in value.
(c) Cash flow statement
Cash flows are reported using the indirect method whereby cash flows
from operating, investing and financing activities of the Company are
segregated and profit before tax is adjusted for the effects of
transactions of non-cash nature and any deferrals or accruals of past
or future cash receipts or payments.
(d) Investments
Investments which are readily realisable and intended to be held for
not more than one year from the date on which such investments are made
are classified as current investments in accordance with the RBI
guidelines and Accounting Standard 13 on Accounting for investments'' as
notified under the Companies (Accounting Standards) Rules, 2006.
Current investments also include current maturities of long-term
investments. All other investments are classified as long-term
investments.
The Company follows trade date method of accounting for recording of
purchase and sale of investments. All investments are initially
recorded at cost. The cost of an investment includes purchase price,
directly attributable acquisition charges and reduced by recovery of
costs, if any. On disposal of an investment, the difference between its
carrying amount and the net disposal proceeds is charged or credited to
the Statement of Profit and Loss.
Current investments are valued scrip-wise and depreciation /
appreciation is aggregated for each category. Net appreciation in each
category, if any, being unrealised gain is ignored, while net
depreciation is provided for. Commercial papers, certificate of
deposits and treasury bills are valued at carrying cost. Long-term
investments are carried at acquisition cost. A provision is made for
diminution other than temporary on an individual basis against
long-term investments. Premium paid over the face value of long-term
investment is amortised over the life of the investment.
Inter-class transfer of investments from one category to the other, if
any, is done in accordance with the RBI guidelines at the lower of book
value and fair value / market value on the date of transfer.
(e) Repurchase and Resale Transactions (Repo)
Repo transactions are treated as collateralised lending and borrowing
transactions, with an agreement to repurchase, on the agreed terms, as
per the RBI guidelines and accordingly disclosed in the financial
statements. The difference between consideration amounts of the first
leg and second leg of the repo are reckoned as repo interest. As
regards repo / reverse repo transactions outstanding on the balance
sheet date, only the accrued expenditure / income till the Balance
Sheet date is taken to the Statement of Profit and Loss. Any repo
expenditure / income for the remaining period is reckoned in the next
accounting period. The securities sold under repo transactions are
continued to be marked-to-market as per the investment classification
of the security.
(f) Loans
In accordance with the RBI guidelines, all loans are classified under
any of four categories i.e. (i) standard assets (ii) sub-standard
assets (iii) doubtful assets and (iv) loss assets.
(g) Tangible fixed assets
Fixed assets are stated at cost of acquisition, including any cost
attributable for bringing the asset to its working condition, less
accumulated depreciation. Profit or loss arising from derecognition of
fixed assets are measured as difference between the net disposal
proceeds and the cost of the assets less accumulated depreciation upto
the date of disposal and are recognised in the Statement of Profit and
Loss.
(h) Depreciation on tangible fixed assets
Depreciation on tangible fixed assets, excluding certain electronic
items and leasehold improvements, is provided on the written down value
method, at the rates prescribed in Schedule XIV to the Companies Act,
1956. Certain electronic items are depreciated over a period of two
years on a straight-line method based on the Management''s estimate of
the useful life of these assets. Depreciation on additions during the
year is provided on a pro-rata basis. Assets costing less than Rs. 5,000
each are fully depreciated in the year of capitalisation. Depreciation
in respect of leasehold mprovements is provided on a straight-line
method over the primary period of the lease.
(i) Intangible assets and amortisation
Intangible assets comprising of computer software are stated at cost of
acquisition, including any cost attributable for bringing the asset to
its working condition, less accumulated amortisation. Any technology
support cost or annual maintenance cost for such software is charged
annually to the Statement of Profit and Loss. Intangible assets are
being amortised over a period of three years on a straight-line method.
(j) Impairment of assets
The carrying amount of assets at each Balance Sheet date are reviewed
for impairment. If any indication of impairment based on internal /
external factors exists, the recoverable amount of such assets is
estimated and impairment is recognised wherever the carrying amount of
an asset exceeds its recoverable amount. The recoverable amount is the
greater of the net selling price and its value in use, which is arrived
at by discounting the future cash flows to their present value, based
on an appropriate discounting factor. If at the Balance sheet date,
there is a indication that previously recognised impairment loss no
longer exists, the recoverable amount is reassessed and the asset is
reflected at the recoverable amount, subject to a maximum of the
depreciable historical cost and reversal of such impairment loss is
recognised in the Statement of Profit and Loss, except in case of
revalued assets.
(k) Expense under employee stock option schemes
The Company has formulated Employee Stock Option Schemes (''the ESOS'')
in accordance with the SEBI (Employee Stock Option Scheme and Employee
Stock Purchase Scheme) Guidelines, 1999 (the Guidelines''). The ESOS
provides for grant of stock options to employees (including employees
of subsidiary companies) to acquire equity shares of the Company that
vest in a graded manner and that are to be exercised within a specified
period. In accordance with the Guidelines and the Guidance Note on
Accounting for Employees Share-based Payments'' issued by the Institute
of Chartered Accountants of India, the excess, if any, of the closing
market price on the day prior to the date of grant of the stock options
under the ESOS over the exercise price is amortised on a straight-line
method over the vesting period and is charged to the Statement of
Profit and Loss as employee benefits expense. In case the vested stock
options expires unexercised, the balance in stock options outstanding
is transferred to the general reserve. In case the unvested stock
options get lapsed / cancelled, the balance in stock option outstanding
account is transferred to Statement of Profit and Loss.
(l) Employee benefits
Defined contribution plans
The Company''s contribution to provident fund, superannuation fund and
pension fund are considered as defined contribution plans and are
charged to the Statement of Profit and Loss as they fall due, based on
the amount of contribution required to be made and when services are
rendered by the employees.
Defined benefit plan
The net present value of the Company''s obligation towards gratuity to
employees is funded and actuarially determined as at the Balance Sheet
date based on the projected unit credit method. Actuarial gains and
losses are recognised in the Statement of Profit and Loss for the year.
Compensated absences
Based on the leave rules of the Company, employees are not permitted to
accumulate leave. Any unavailed privilege leave to the extent
encashable is paid to the employees and charged to the Statement of
Profit and Loss for the year.
(m) Borrowing costs
Borrowing costs include interest, amortisation of ancillary costs
incurred and exchange differences arising from foreign currency
borrowings to the extent they are regarded as an adjustment to the
interest cost. Interest cost in connection with the borrowing of funds
to the extent not directly related to the acquisition of qualifying
assets are charged to the Statement of Profit and Loss over the tenure
of the loan. Ancillary costs in connection with long-term external
commercial borrowings are amortised to the Statement of Profit and Loss
over the tenure of the loan.
(n) Revenue recognition
Revenue is recognised to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured. In addition, the following criteria must also be met
before revenue is recognised Interest is accounted on accrual basis
except in the case of non-performing loans where it is recognised upon
realisation, as per the income recognition and asset classification
norms prescribed by the RBI.
Income on discounted instruments is recognised over the tenure of the
instrument on a straight-line method.
Dividend is accounted when the right to receive is established.
Front end fees on processing of loans are recognised upfront as income.
Underwriting commission earned to the extent not reduced from the cost
of acquisition of securities is recognised as fees on closure of issue.
All other fees and charges are recognised when reasonable right of
recovery is established, revenue can be reliably measured and as and
when they become due except guarantee commission which is recognised
pro-rata over the period of the guarantee.
Premium on interest rate reduction is accounted on accrual basis over
the residual life of the loan.
Profit / loss on sale of investments is recognised on trade date basis.
Profit / loss on sale of investments is determined based on the ''first
in first out'' cost for current investments and weighted average cost
for long-term investments.
Profit on sale of loan assets through direct assignment /
securitisation is recognised over the residual life of the loan / pass
through certificate in terms of the RBI guidelines. Loss arising on
account of direct assignment / securitisation is recognised upfront on
sale in the Statement of Profit and Loss.
Revenue from power supply is accounted on accrual basis.
Income from trading in derivatives is recognised on final settlement or
squaring up of the contracts.
(o) Segment Reporting
The Company''s primary business segments are reflected based on the
principal business carried out i.e. financing. The risk and returns of
the business of the Company is not associated with geographical
segmentation, hence there is no secondary segment reporting based on
geographical segment.
(p) Leases
Where the Company is lessee
Leases under which all the risks and benefits of ownership are
effectively retained by the lessor are classified as operating leases.
Amount due under the operating leases are charged to the Statement of
Profit and Loss, on a straight-line method over the lease term in
accordance with Accounting Standard 19 on ''Leases'' as notified under
the Companies (Accounting Standards) Rules, 2006. Initial direct costs
incurred specifically for operating leases are recognised as expense in
the year in which they are incurred.
Where the Company is lessor
Leases under which the Company does not transfer substantially all the
risks and benefits of ownership of the asset are classified as
operating leases. Assets subject to operating leases are included in
fixed assets. Lease income in respect of operating leases is recognised
in the Statement of Profit and Loss on a straight-line method over the
lease term in accordance with Accounting Standard 19 on ''Leases'' as
notified under the Companies (Accounting Standards) Rules, 2006.
Maintenance costs including depreciation are recognised as an expense
in the Statement of Profit and Loss.
(q) Earnings per share
Basic earnings per share is computed by dividing the profit after tax
by the weighted average number of equity shares outstanding during the
year. Diluted earnings per share is computed by dividing the profit
after tax as adjusted for dividend, interest and other charges to
expense or income relating to the dilutive potential equity shares, by
the weighted average number of equity shares considered for deriving
basic earnings per share and the weighted average number of equity
shares which could have been issued on the conversion of all dilutive
potential equity shares. Potential equity shares are deemed to be
dilutive only if their conversion to equity shares would decrease the
net profit per share from continuing ordinary operations. Potential
dilutive equity shares are deemed to be converted as at the beginning
of the year, unless they have been issued at a later date. The
dilutive potential equity shares are adjusted for the proceeds
receivable had the shares been actually issued at fair value (i.e.
average market value of the outstanding shares). Dilutive potential
equity shares are determined independently for each year.
(r) Taxes on income
Current tax is the amount of tax payable on the taxable income for the
year as determined in accordance with the provisions of the ncome-tax
Act, 1961.
Deferred tax is recognised on timing differences, being the differences
between the taxable income and the accounting income that originate in
one period and are capable of reversal in one or more subsequent
periods. Deferred tax is measured using the tax rates and the tax laws
enacted or substantially enacted as at the Balance Sheet date. Deferred
tax liabilities are recognised for all timing differences. Deferred
tax assets in respect of unabsorbed depreciation and carry forward of
losses are recognised only if there is virtual certainty that there
will be sufficient future taxable income available to realise such
assets. Deferred tax assets are recognised for timing differences of
other items only to the extent that reasonable certainty exists that
sufficient future taxable income will be available against which these
can be realised. Deferred tax assets and liabilities are offset if such
items relate to taxes on income levied by the same governing tax laws
and the Company has a legally enforceable right for such set off.
Deferred tax assets are reviewed at each Balance Sheet date for their
realisability. Current and deferred tax relating to items directly
recognised in reserves are recognised in reserves and not in the
Statement of Profit and Loss.
Since the Company has passed a Board resolution that it has no
intention to make withdrawal from the Special Reserve created and
maintained under Section 36(1)(viii) of the Income-tax Act, 1961, the
special reserve created and maintained is not capable of being reversed
and thus a permanent difference. Accordingly, no deferred tax liability
has been created in books of account.
(s) Derivative contracts
Interest rate swaps
Interest rate swaps are booked with the objective of managing the
interest rate risk on liabilities. Interest rate swaps in the nature of
hedge are recorded on accrual basis and these transactions are not
marked-to-market. Any resultant profit or loss on termination of the
hedge swaps is amortised over the life of the swap or underlying
liability, whichever is shorter.
Currency Interest rate swaps
Currency interest rate swaps in the nature of hedge, booked with the
objective of managing the currency and interest rate risk on foreign
currency liabilities are recorded on accrual basis and these
transactions are not marked-to-market. Any resultant profit or loss on
termination of hedge swaps is amortised over the life of swap or
underlying liability, whichever is shorter. The foreign currency
balances on account of principal of currency interest rate swaps
outstanding as at the Balance Sheet date are revalued using the closing
rate.
Stock Futures
Stock Futures are marked-to-market on a daily basis. The debit or
credit balance in the ''Mark-to-market margin - stock futures account
disclosed under loans and advances or current liabilities represents
the net amount paid or received on the basis of the movement in the
prices of stock futures till the Balance Sheet date.
Credit balance in the ''Mark-to-market margin - stock futures account''
in the nature of anticipated profit is ignored and no credit is taken
to the Statement of Profit and Loss. However, the debit balance in the
''Mark-to-market margin - stock futures account'' in the nature of
anticipated loss is recognised in the Statement of Profit and Loss. On
final settlement or squaring-up of contracts for stock futures, the
profit or loss is calculated as the difference between the settlement /
squaring-up price and the contract price. Accordingly, debit or credit
balance pertaining to the settled / squared-up contract in
''Mark-to-market margin - stock futures account'' is recognised in the
Statement of Profit and Loss upon expiry of the contracts. When more
than one contract in respect of the relevant series of stock futures
contract, to which the squared-up contract pertains is outstanding at
the time of the squaring-up of the contract, the contract price of such
contract is determined using the weighted average method for
calculating profit / loss on squaring-up.
Initial margin account - stock futures'' representing initial margin
paid is disclosed under loans and advances.
(t) Foreign currency transactions and translations
Foreign currency transactions are accounted at the exchange rate
prevailing on the date of the transaction. Foreign currency monetary
items outstanding as at the Balance Sheet date are reported using the
closing rate. Gain or loss resulting from the settlement of such
transactions and translation of monetary assets and liabilities
denominated in foreign currencies are recognised in the Statement of
Profit and Loss. Premium in respect of forward contracts is accounted
over the period of the contract. Forward contracts outstanding as at
the Balance Sheet date are revalued at the closing rate.
(u) Provisions and contingencies
Provision against loans and advances
Contingent provision against standard assets is made at 0.25% of the
outstanding standard assets in accordance with the RBI guidelines. In
addition to above, the Company maintains a general provision as
Provision for Contingencies in accordance with the provisioning policy
of the Company and additional provision based on the assessment of
portfolio including provision against stressed assets that qualifies
for deduction under Section 36(1)(viia) of the Income-tax Act, 1961.
The policy of provisioning against non-performing loans and advances
has been decided by the Management considering norms prescribed by the
RBI under Non-Banking Financial Companies Prudential Norms (Reserve
Bank) Directions, 2007. As per the policy adopted, the provision
against non-performing loans and advances are created on a conservative
basis, taking into account Management''s perception of the higher risk
associated with the business of the Company. Certain non-performing
loans and advances are considered as loss assets and full provision has
been made against such assets.
In January 2014, the RBI has issued guidelines on Restructuring of
Advances applicable to Non-Banking Finance Companies. As per the
guidelines, a provision is required on standard accounts restructured
prior to January 24, 2014 at 2.75% from March 31, 2014, and would
further increase to 3.50% from March 31, 2015, 4.25% from March 31,
2016 and 5.00% from March 31, 2017. Restructuring of standard accounts
subsequent to January 23, 2014 would attract a provision at 5.00%. The
Company has complied with the aforesaid guidelines and on prudent basis
a provision at 5.00% has been made on all outstanding restructured
accounts in addition to the provision against diminution in fair value
of restructured advances. Unrealised income represented by Funded
Interest Term Loan ("FITL") on standard accounts restructured after
January 23, 2014 are fully provided and such provision against FITL
will be reversed on repayment of FITL.
Other provisions
A provision is recognised when the Company has a present obligation as
a result of past events and it is probable that an outflow of resources
will be required to settle the obligation in respect of which a
reliable estimate can be made. Provisions (excluding retirement
benefits) are not discounted to their present value and are determined
based on the best estimate required to settle the obligation as at the
Balance Sheet date. These are reviewed at each Balance Sheet date and
adjusted to reflect the current best estimates. Contingent liabilities
are disclosed separately. Contingent assets are not recognised in the
financial statements.
(v) Securities issue expenses
Issue expenses of certain securities and redemption premium are
adjusted against the securities premium account as permissible under
Section 78(2) of the Companies Act, 1956, to the extent balance is
available for utilisation in the securities premium account.
(w) Service tax input credit
Service tax input credit is accounted in the period in which the
underlying services are received and when there is no uncertainty in
availing / utilising the credit.
(x) Operating cycle
Based on the nature of products / activities of the Company and the
normal time between acquisition of assets and their realisation in cash
or cash equivalents, the Company has determined its operating cycle as
12 months for the purpose of classification of its assets and
liabilities as current and non-current.
Mar 31, 2013
A) Use of estimates
The preparation of the financial statements in conformity with Indian
GAAP requires the Management to make estimates and assumptions
considered in the reported amounts of assets and liabilities (including
contingent liabilities) and the reported income and expenses during the
year. The Management believes that the estimates used in preparation
of the financial statements are prudent and reasonable. Future results
could differ due to these estimates and the differences between the
actual results and the estimates are recognised in the periods in which
the results are known / materialised.
b) Cash and cash equivalents
Cash and cash equivalents for the purpose of the Cash Flow Statement
comprises cash on hand, cash in bank, fixed deposits and other short-
term highly liquid investments with an original maturity of three
months or less that are readily convertible into known amount of cash
and which are subject to an insignificant risk of change in value.
c) Cash flow statement
Cash flows are reported using the indirect method whereby cash flows
from operating, investing and financing activities of the Company are
segregated and profit before tax is adjusted for the effects of
transactions of non-cash nature and any deferrals or accruals of past
or future cash receipts or payments.
d) Investments
- Investments which are readily realisable and intended to be held
for not more than one year from the date on which such investments are
made are classified as current investments in accordance with the RBI
guidelines and Accounting Standard 13 on ''Accounting for
Investments'' as notified under the Companies (Accounting Standards)
Rules, 2006. Current investments also include current maturities of
long-term investments. All other investments are classified as
long-term investments.
- All investments are initially recorded at cost. The cost of an
investment includes purchase price, directly attributable acquisition
charges and reduced by recovery of costs, if any. On disposal of an
investment, the difference between its carrying amount and the net
disposal proceeds is charged or credited to the Statement of Profit and
Loss.
- Current investments are individually carried at the lower of cost
and fair value / market value. Commercial papers, certificate of
deposits and treasury bills are valued at carrying cost. Long-term
investments are carried at acquisition cost. A provision is made for
diminution other than temporary on an individual basis against
long-term investments. Premium paid over the face value of long-term
investment is amortised over the life of the investment.
- Inter-class transfer of investments from one category to the other,
if any, is done in accordance with the RBI guidelines at the lower of
book value and fair value / market value on the date of transfer
e) Repurchase and resale transactions (Repo)
Repo transactions are treated as collateralised lending and borrowing
transactions, with an agreement to repurchase, on the agreed terms, as
per the RBI guidelines and accordingly disclosed in the financial
statements. The difference between consideration amounts of the first
leg and second leg of the repo are reckoned as Repo Interest. As
regards repo / reverse repo transactions outstanding on the balance
sheet date, only the accrued income / expenditure till the balance
sheet date is taken to the Statement of Profit and Loss. Any repo
income / expenditure for the remaining period is reckoned for the next
accounting period. The securities sold under repo transactions are
continued to marked-to-market as per the investment classification of
the security
f) Loans
In accordance with the RBI guidelines, all loans are classified under
any of four categories i.e. (i) standard assets (ii) sub-standard
assets (iii) doubtful assets and (iv) loss assets.
g) Tangible fixed assets
Fixed assets are stated at cost of acquisition, including any cost
attributable for bringing the asset to its working condition, less
accumulated depreciation. Profit or loss arising from derecognition of
fixed assets are measured as difference between the net disposal
proceeds and the cost of the assets less accumulated depreciation upto
the date of disposal and are recognised in the Statement of Profit and
Loss.
h) Depreciation on tangible fixed assets
Depreciation on tangible fixed assets, excluding certain electronic
items and leasehold improvements, is provided on the written down value
method, at the rates prescribed in Schedule XIV to the Companies Act,
1956. Certain electronic items are depreciated over a period of two
years on a straight-line method based on the Management''s estimate of
the useful life of these assets. Depreciation on additions during the
year is provided on a pro-rata basis. Assets costing less than Rs.
5,000 each are fully depreciated in the year of capitalisation.
Depreciation in respect of leasehold improvements is provided on a
straight-line method over the primary period of the lease.
i) Intangible assets and amortisation
Intangible assets comprising of computer software are stated at cost of
acquisition, including any cost attributable for bringing the asset to
its working condition, less accumulated amortisation. Any technology
support cost or annual maintenance cost for such software is charged
annually to the Statement of Profit and Loss. Intangible assets are
being amortised over a period of three years on a straight-line method.
j) Impairment of assets
The carrying amount of assets at each Balance Sheet date are reviewed
for impairment. If any indication of impairment based on internal /
external factors exists, the recoverable amount of such assets is
estimated and impairment is recognised wherever the carrying amount of
an asset exceeds its recoverable amount. The recoverable amount is the
greater of the net selling price and its value in use, which is arrived
at by discounting the future cash flows to their present value, based
on an appropriate discounting factor. If at the Balance sheet date,
there is indication that previously recognised impairment loss no
longer exists, the recoverable amount is reassessed and the asset is
reflected at the recoverable amount, subject to a maximum of the
depreciable historical cost and reversal of such impairment loss is
recognised in the Statement of Profit and Loss, except in case of
revalued assets.
k) Revenue recognition
Revenue is recognised to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured. In addition, the following criteria must also be met
before revenue is recognised:
- Interest and other dues are accounted on accrual basis except in
the case of non-performing loans where it is recognised upon
realisation, as per the income recognition and asset classification
norms prescribed by the RBI.
- Income on discounted instruments is recognised over the tenure of
the instrument on a straight-line method.
- Dividend is accounted when the right to receive is established.
- Front end fees on processing of loans are recognised upfront as
income.
- Underwriting commission earned to the extent not reduced from the
cost of acquisition of securities is recognised as fees on closure of
issue.
- All other fees are recognised when reasonable right of recovery is
established, revenue can be reliably measured and as and when they
become due except commission income on guarantees which is recognised
pro-rata over the period of the guarantee.
- Premium on interest rate reduction is accounted on accrual basis
over the residual life of the loan.
- Profit / loss on sale of investments is recognised on trade date
basis. Profit / loss on sale of investments is determined based on the
''first in first out'' cost for current investments and weighted
average cost for long-term investments.
- Profit on sale of loan assets through direct assignment /
securitisation is recognised over the residual life of the loan / pass
through certificate in terms of the RBI guidelines. Loss arising on
account of direct assignment / securitisation is recognised on sale.
- Revenue from power supply is accounted on accrual basis.
- Income from trading in derivatives is recognised on final
settlement or squaring up of the contracts.
l) Expense under employee stock option schemes
The Company has formulated Employee Stock Option Schemes (''the
ESOS'') in accordance with the SEBI (Employee Stock Option Scheme and
Employee Stock Purchase Scheme) Guidelines, 1999 (''the
Guidelines''). The ESOS provides for grant of stock options to
employees (including employees of subsidiary companies) to acquire
equity shares of the Company that vest in a graded manner and that are
to be exercised within a specified period. In accordance with the
Guidelines and the Guidance Note on ''Accounting for Employees
Share-based Payments'' issued by the Institute of Chartered
Accountants of India, the excess, if any, of the closing market price
on the day prior to the date of grant of the stock options under the
ESOS over the exercise price is amortised on a straight-line method
over the vesting period and is charged to the Statement of Profit and
Loss as employee benefits expense. In case the vested stock options
expires unexercised, the balance in stock options outstanding is
transferred to the general reserve.
m) Employee benefits
Defined contribution plans
The Company''s contribution to provident fund, superannuation fund and
pension fund are considered as defined contribution plans and are
charged to the Statement of Profit and Loss as they fall due, based on
the amount of contribution required to be made.
Defined benefit plan
The net present value of the Company''s obligation towards gratuity to
employees is funded and actuarially determined as at the Balance Sheet
date based on the projected unit credit method. Actuarial gains and
losses are recognised in the Statement of Profit and Loss for the year.
Compensated absences
Based on the leave rules of the Company, employees are not permitted to
accumulate leave. Any unavailed privilege leave to the extent
encashable is paid to the employees and charged to the Statement of
Profit and Loss for the year,
n) Borrowing costs
Borrowing costs include interest, amortisation of ancillary costs
incurred and exchange differences arising from foreign currency
borrowings to the extent they are regarded as an adjustment to the
interest cost. Interest cost in connection with the borrowing of funds
to the extent not directly related to the acquisition of qualifying
assets are charged to the Statement of Profit and Loss over the tenure
of the loan. Ancillary costs in connection with long-term external
commercial borrowings are amortised to the Statement of Profit and Loss
over the tenure of the loan. Issue expenses of certain securities are
charged to the securities premium account as stated in note 3(v).
o) Segment reporting
The Company''s primary business segments are reflected based on the
principal business carried out, i.e. financing. The risk and returns of
the business of the Company is not associated with geographical
segmentation, hence there is no secondary segment reporting based on
geographical segment.
p) Leases
Where the Company is lessee
Leases under which all the risks and benefits of ownership are
effectively retained by the lessor are classified as operating leases.
Amount due under the operating leases are charged to the Statement of
Profit and Loss, on a straight-line method over the lease term in
accordance with Accounting Standard 19 on ''Leases'' as notified
under the Companies (Accounting Standards) Rules, 2006. Initial direct
costs incurred specifically for operating leases are recognised as
expense in the year in which they are incurred.
Where the Company is lessor
Leases under which the Company does not transfer substantially all the
risks and benefits of ownership of the asset are classified as
operating leases. Assets subject to operating leases are included in
fixed assets. Lease income in respect of operating leases is recognised
in the Statement of Profit and Loss on a straight-line method over the
lease term in accordance with Accounting Standard 19 on ''Leases'' as
notified under the Companies (Accounting Standards) Rules, 2006.
Maintenance costs including depreciation are recognised as an expense
in the Statement of Profit and Loss.
q) Earnings per share
Basic earnings per share is computed by dividing the profit after tax
by the weighted average number of equity shares outstanding during the
year. Diluted earnings per share is computed by dividing the profit
after tax as adjusted for dividend, interest and other charges to
expense or income relating to the dilutive potential equity shares, by
the weighted average number of equity shares considered for deriving
basic earnings per share and the weighted average number of equity
shares which could have been issued on the conversion of all dilutive
potential equity shares. Potential equity shares are deemed to be
dilutive only if their conversion to equity shares would decrease the
net profit per share from continuing ordinary operations. Potential
dilutive equity shares are deemed to be converted as at the beginning
of the year, unless they have been issued at a later date. The
dilutive potential equity shares are adjusted for the proceeds
receivable had the shares been actually issued at fair value (i.e.
average market value of the outstanding shares). Dilutive potential
equity shares are determined independently for each year,
r) Taxes on income
- Current tax is the amount of tax payable on the taxable income for
the year as determined in accordance with the provisions of the Income-
tax Act, 1961.
- Deferred tax is recognised on timing differences, being the
differences between the taxable income and the accounting income that
originate in one period and are capable of reversal in one or more
subsequent periods. Deferred tax is measured using the tax rates and
the tax laws enacted or substantively enacted as at the Balance Sheet
date. Deferred tax liabilities are recognised for all timing
differences. Deferred tax assets in respect of unabsorbed depreciation
and carry forward of losses are recognised only if there is virtual
certainty that there will be sufficient future taxable income available
to realise such assets. Deferred tax assets are recognised for timing
differences of other items only to the extent that reasonable certainty
exists that sufficient future taxable income will be available against
which these can be realised. Deferred tax assets and liabilities are
offset if such items relate to taxes on income levied by the same
governing tax laws and the Company has a legally enforceable right for
such set off. Deferred tax assets are reviewed at each Balance Sheet
date for their realisability. Current and deferred tax relating to
items directly recognised in reserves are recognised in reserves and
not in the Statement of Profit and Loss.
- Since the Company has passed a Board resolution that it has no
intention to make withdrawal from the Special Reserve created and
maintained under section 36(1)(viii) of the Income-tax Act, 1961, the
Special Reserve created and maintained is not capable of being reversed
and thus it becomes a permanent difference. The Company does not create
any deferred tax liability on the said reserve in accordance with the
clarification of the Accounting Standard Board of the Institute of
Chartered Accountants of India.
s) Derivative contracts Interest rate swaps
Interest rate swaps are booked with the objective of managing the
interest rate risk on liabilities. Interest rate swaps in the nature of
hedge are recorded on accrual basis and these transactions are not
marked-to-market. Any resultant profit or loss on termination of the
hedge swaps is amortised over the life of the swap or underlying asset
/ liability, whichever is shorter.
Currency interest rate swaps
Currency interest rate swaps in the nature of hedge, booked with the
objective of managing the currency and interest rate risk on foreign
currency liabilities are recorded on accrual basis and these
transactions are not marked-to-market. Any resultant profit or loss on
termination of hedge swaps is amortised over the life of swap or
underlying asset / liability, whichever is shorter. The foreign
currency balances on account of principal of currency interest rate
swaps outstanding as at the Balance Sheet date are revalued using the
closing rate.
Stock futures
- Stock futures are marked-to-market on a daily basis. The debit or
credit balance in the ''Mark-to-market margin - stock futures
account'' disclosed under loans and advances or current liabilities
represents the net amount paid or received on the basis of the movement
in the prices of stock futures till the Balance Sheet date.
- Credit balance in the ''Mark-to-market margin - stock futures
account'' in the nature of anticipated profit is ignored and no credit
is taken to the Statement of Profit and Loss. However, the debit
balance in the ''Mark-to-market margin - stock futures account'' in
the nature of anticipated loss is recognised in the Statement of Profit
and Loss.
- On final settlement or squaring-up of contracts for stock futures,
the profit / loss is calculated as the difference between the
settlement / squaring-up price and the contract price. Accordingly,
debit or credit balance pertaining to the settled / squared-up contract
in ''Mark-to- market margin - stock futures account'' is recognised
in the Statement of Profit and Loss upon expiry of the contracts. When
more than one contract in respect of the relevant series of stock
futures contract, to which the squared-up contract pertains is
outstanding at the time of the squaring-up of the contract, the
contract price of such contract is determined using the weighted
average method for calculating profit / loss on squaring-up.
- Initial margin account - stock futures'' representing initial
margin paid is disclosed under loans and advances.
t) Foreign currency transactions and translations
Foreign currency transactions are accounted at the exchange rate
prevailing on the date of the transaction. Foreign currency monetary
items outstanding as at the Balance Sheet date are reported using the
closing rate. Gain or loss resulting from the settlement of such
transactions and translation of monetary assets and liabilities
denominated in foreign currencies are recognised in the Statement of
Profit and Loss. Premium in respect of forward contracts is accounted
over the period of the contract. Forward contracts outstanding as at
the Balance Sheet date are revalued at the closing rate.
u) Provisions and contingencies Provision against loans and advances
- The policy of provisioning against non performing loans and
advances has been decided by the Management considering norms
prescribed by the RBI under Non Banking Financial Companies Prudential
Norms (Reserve Bank) Directions, 2007. As per the policy adopted, the
provision against sub standard assets are created on a conservative
basis, taking into account Management''s perception of the higher risk
associated with the business of the Company. Certain non performing
loans and advances are considered as loss assets and full provision has
been made against such assets.
- Provision against restructured loans is computed in accordance with
the RBI guidelines.
- In addition to the specific provision on non performing loans and
advances, the Company maintains a general provision on performing loans
as provision for contingencies. Provision for contingencies is made as
per the provisioning policy of the Company which also includes
provision under Section 36(1)(viia) of the Income-tax Act, 1961.
- Contingent provision against standard assets is made at 0.25% of
the outstanding standard assets in accordance with the RBI guidelines.
Other provisions
- A provision is recognised when the Company has a present obligation
as a result of past events and it is probable that an outflow of
resources will be required to settle the obligation in respect of which
a reliable estimate can be made. Provisions (excluding retirement
benefits) are not discounted to their present value and are determined
based on the best estimate required to settle the obligation as at the
Balance Sheet date. These are reviewed at each Balance Sheet date and
adjusted to reflect the current best estimates. Contingent liabilities
are disclosed separately.
v) Securities issue expenses
Securities issue expenses and redemption premium on certain bonds are
adjusted against the securities premium account as permissible under
Section 78(2) of the Companies Act, 1956, to the extent balance is
available for utilisation in the securities premium account.
W) Service tax input credit
Service tax input credit is accounted in the period in which the
underlying services are received and when there is no uncertainty in
availing / utilising the credit.
Mar 31, 2012
A. USE OF ESTIMATES
The preparation of the financial statements in conformity with Indian
GAAP requires the Management to make estimates and assumptions
considered in the reported amounts of assets and liabilities (including
contingent liabilities) and the reported income and expenses during the
year. The Management believes that the estimates used in preparation of
the financial statements are prudent and reasonable. Future results
could differ due to these estimates and the differences between the
actual results and the estimates are recognised in the periods in which
the results are known / materialise.
b. CASH AND CASH EQUIVALENTS
Cash and cash equivalents for the purpose of the Cash Flow Statement
comprises cash on hand, cash in bank, fixed deposits and other short-
term highly liquid investments with an original maturity of three
months or less that are readily convertible into known amount of cash
and which are subject to an insignificant risk of change in value.
c. CASH FLOW STATEMENT
Cash flows are reported using the indirect method whereby cash flows
from operating, investing and financing activities of the Company are
segregated and profit before tax is adjusted for the effects of
transactions of non-cash nature and any deferrals or accruals of past
or future cash receipts or payments.
d. INVESTMENTS
Investments which are readily realisable and intended to be held for
not more than one year from the date on which such investments are made
are classified as current investments in accordance with the RBI
guidelines and Accounting Standard 13 on 'Accounting for Investments'
as notified under the Companies (Accounting Standards) Rules, 2006.
Current investments also include current maturities of long-term
investments. All other investments are classified as long-term
investments.
All investments are initially recorded at cost. The cost of an
investment includes purchase price, directly attributable acquisition
charges and reduced by recovery of costs, if any. On disposal of an
investment, the difference between its carrying amount and the net
disposal proceeds is charged or credited to the Statement of Profit and
Loss.
Current investments are individually carried at the lower of cost and
fair value / market value. Commercial papers, certificate of deposits
and treasury bills are valued at carrying cost. Long-term investments
are carried at acquisition cost. A provision is made for diminution
other than temporary on an individual basis against long-term
investments. Premium paid over the face value of a long-term investment
is amortised over the life of the investment.
Inter-class transfer of investments from one category to the other, if
any, is done in accordance with the RBI guidelines at the lower of book
value and fair value / market value on the date of transfer.
e. LOANS
In accordance with the RBI guidelines, all loans are classified under
any of four categories i.e. (i) standard assets (ii) sub-standard
assets
(iii) doubtful assets and (iv) loss assets.
f. TANGIBLE FIXED ASSETS
Fixed assets are stated at cost of acquisition, including any cost
attributable for bringing the asset to its working condition, less
accumulated depreciation. Profit or loss arising from derecognition of
fixed assets are measured as difference between the net disposal
proceeds and the cost of the assets less accumulated depreciation upto
the date of disposal and are recognised in the Statement of Profit and
Loss.
g. DEPRECIATION ON TANGIBLE FIXED ASSETS
Depreciation on tangible fixed assets, excluding certain electronic
items and leasehold improvements, is provided on the written down value
method, at the rates prescribed in Schedule XIV to the Companies Act,
1956. Certain electronic items are depreciated over a period of two
years on a straight-line method based on the Management's estimate of
the useful life of these assets. Depreciation on additions during the
year is provided on a pro-rata basis. Assets costing less than Rs 5,000
each are fully depreciated in the year of capitalisation. Depreciation
in respect of leasehold improvements is provided on a straight-line
method over the primary period of the lease.
h. INTANGIBLE ASSETS AND AMORTISATION
Intangible assets comprising of computer software are stated at cost of
acquisition, including any cost attributable for bringing the asset to
its working condition, less accumulated amortisation. Any technology
support cost or annual maintenance cost for such software is charged
annually to the Statement of Profit and Loss. Intangible assets are
being amortised over a period of three years on a straight-line method.
i. IMPAIRMENT OF ASSETS
The carrying amount of assets at each Balance Sheet date are reviewed
for impairment. If any indication of impairment based on internal /
external factors exists, the recoverable amount of such assets is
estimated and impairment is recognised wherever the carrying amount of
an asset exceeds its recoverable amount. The recoverable amount is the
greater of the net selling price and its value in use, which is arrived
at by discounting the future cash flows to their present value, based
on an appropriate discounting factor. If at the Balance Sheet date,
there is an indication that previously recognised impairment loss no
longer exists, the recoverable amount is reassessed and the asset is
reflected at the recoverable amount subject to a maximum of the
depreciable historical cost and reversal of such impairment loss is
recognised in the Statement of Profit and Loss, except in case of
revalued assets.
j. EXPENSE UNDER EMPLOYEE STOCK OPTION SCHEMES
The Company has formulated Employee Stock Option Schemes ('the ESOS')
in accordance with the SEBI (Employee Stock Option Scheme and Employee
Stock Purchase Scheme) Guidelines, 1999 ('the Guidelines'). The ESOS
provides for grant of stock options to employees (including employees
of subsidiary companies) to acquire equity shares of the Company that
vest in a graded manner and that are to be exercised within a specified
period. In accordance with the Guidelines and the Guidance Note on
'Accounting for Employees Share-based Payments' issued by the Institute
of Chartered Accountants of India, the excess, if any, of the closing
market price on the day prior to the date of grant of the stock options
under the ESOS over the exercise price is amortised on a straight-line
method over the vesting period and is charged to the Statement of
Profit and Loss as employee benefits expense.
k. EMPLOYEE BENEFITS
i Defined contribution plans
The Company's contribution to provident fund, superannuation fund and
pension fund are considered as defined contribution plans and are
charged to the Statement of Profit and Loss as they fall due, based on
the amount of contribution required to be made.
i Defined benefit plan
The net present value of the Company's obligation towards gratuity to
employees is funded and actuarially determined as at the Balance Sheet
date based on the projected unit credit method. Actuarial gains and
losses are recognised in the Statement of Profit and Loss for the year.
i Compensated absences
Based on the leave rules of the Company, employees are not permitted to
accumulate leave. Any unavailed privilege leave to the extent
encashable is paid to the employees and charged to the Statement of
Profit and Loss for the year.
l. BORROWING COSTS
Borrowing costs include interest, amortisation of ancillary costs
incurred and exchange differences arising from foreign currency
borrowings to the extent they are regarded as an adjustment to the
interest cost. Interest cost in connection with the borrowing of funds
to the extent not directly related to the acquisition of qualifying
assets are charged to the Statement of Profit and Loss over the tenure
of the loan. Ancillary costs in connection with long-term external
commercial borrowings are amortised to the Statement of Profit and Loss
over the tenure of the loan. Issue expenses of certain securities are
charged to the securities premium account as stated in note 3(t).
m. REVENUE RECOGNITION
Revenue is recognised to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured. In addition, the following criteria must also be met
before revenue is recognised:
i Interest and other dues are accounted on accrual basis except in the
case of non-performing loans where it is recognised upon realisation,
as per the income recognition and asset classification norms prescribed
by the RBI.
- Income on discounted instruments is recognised over the tenure of
the instrument on a straight-line method.
- Dividend is accounted when the right to receive is established.
- Front end fees on processing of loans are recognised upfront as
income.
- Underwriting commission earned to the extent not reduced from the
cost of acquisition of securities is recognised as fees on closure of
issue.
- All other fees are recognised when reasonable right of recovery is
established, revenue can be reliably measured and as and when they
become due except commission income on guarantees which is recognised
pro-rata over the period of the guarantee.
- Premium on interest rate reduction is accounted on accrual basis
over the residual life of the loan.
- Profit / loss on sale of investments is recognised on trade date
basis. Profit / loss on sale of investments is determined based on the
'first in first out' cost for current investments and weighted average
cost for long-term investments.
- Profit / loss on sale of loan assets through direct assignment,
without any recourse obligation, is recognised at the time of sale.
Profit on securitisation is recognised over the residual life of the
pass through certificate in terms of the RBI guidelines. Loss arising
on account of securitisation is recognised at the time of sale.
- Revenue from power supply is accounted on accrual basis.
- Income from trading in derivatives is recognised on final
settlement or squaring-up of the contracts.
n. LEASES
Where the Company is lessee
Leases under which all the risks and benefits of ownership are
effectively retained by the lessor are classified as operating leases.
Amount due under the operating leases are charged to the Statement of
Profit and Loss, on a straight-line method over the lease term in
accordance with Accounting Standard 19 on 'Leases' as notified under
the Companies (Accounting Standards) Rules, 2006. Initial direct costs
incurred specifically for operating leases are recognised as expense in
the year in which they are incurred.
Where the Company is lessor
Leases under which the Company does not transfer substantially all the
risks and benefits of ownership of the asset are classified as
operating leases. Assets subject to operating leases are included in
fixed assets. Lease income in respect of operating leases is recognised
in the Statement of Profit and Loss on a straight-line method over the
lease term in accordance with Accounting Standard 19 on 'Leases' as
notified under the Companies (Accounting Standards) Rules, 2006.
Maintenance costs including depreciation are recognised as an expense
in the Statement of Profit and Loss. o. EARNINGS PER SHARE
Basic earnings per share is computed by dividing the profit after tax
by the weighted average number of equity shares outstanding during the
year. Diluted earnings per share is computed by dividing the profit
after tax as adjusted for dividend, interest and other charges to
expense or income relating to the dilutive potential equity shares, by
the weighted average number of equity shares considered for deriving
basic earnings per share and the weighted average number of equity
shares which could have been issued on the conversion of all dilutive
potential equity shares. Potential equity shares are deemed to be
dilutive only if their conversion to equity shares would decrease the
net profit per share from continuing ordinary operations. Potential
dilutive equity shares are deemed to be converted as at the beginning
of the year, unless they have been issued at a later date. The dilutive
potential equity shares are adjusted for the proceeds receivable had
the shares been actually issued at fair value (i.e. average market
value of the outstanding shares). Dilutive potential equity shares are
determined independently for each year. p. TAXES ON INCOME Current tax
is the amount of tax payable on the taxable income for the year as
determined in accordance with the provisions of the Income-tax Act,
1961.
Deferred tax is recognised on timing differences, being the differences
between the taxable income and the accounting income that originate in
one period and are capable of reversal in one or more subsequent
periods. Deferred tax is measured using the tax rates and the tax laws
enacted or substantially enacted as at the Balance Sheet date. Deferred
tax liabilities are recognised for all timing differences. Deferred tax
assets in respect of unabsorbed depreciation and carry forward of
losses are recognised only if there is virtual certainty that there
will be sufficient future taxable income available to realise such
assets. Deferred tax assets are recognised for timing differences of
other items only to the extent that reasonable certainty exists that
sufficient future taxable income will be available against which these
can be realised. Deferred tax assets and liabilities are offset if such
items relate to taxes on income levied by the same governing tax laws
and the Company has a legally enforceable right for such set off.
Deferred tax assets are reviewed at each Balance Sheet date for their
realisability. Current and deferred tax relating to items directly
recognised in reserves are recognised in reserves and not in the
Statement of Profit and Loss.
q. DERIVATIVE CONTRACTS
Interest rate swaps
Interest rate swaps are booked with the objective of managing the
interest rate risk on liabilities. Interest rate swaps in the nature of
hedge are recorded on accrual basis and these transactions are not
marked-to-market. Any resultant profit or loss on termination of the
hedge swaps is amortised over the life of the swap or underlying asset
/ liability, whichever is shorter.
- Currency Interest rate swaps
Currency interest rate swaps in the nature of hedge, booked with the
objective of managing the currency and interest rate risk on foreign
currency liabilities are recorded on accrual basis and these
transactions are not marked-to-market. Any resultant profit or loss on
termination of hedge swaps is amortised over the life of swap or
underlying asset / liability, whichever is shorter. The foreign
currency balances on account of principal of currency interest rate
swaps outstanding as at the Balance Sheet date are revalued using the
closing rate.
- Stock Futures
Stock Futures are marked-to-market on a daily basis. The debit or
credit balance in the 'Mark-to-market margin - stock futures account'
disclosed under loans and advances or current liabilities represents
the net amount paid or received on the basis of the movement in the
prices of stock futures till the Balance Sheet date.
Credit balance in the 'Mark-to-market margin - stock futures account'
in the nature of anticipated profit is ignored and no credit is taken
to the Statement of Profit and Loss. However, the debit balance in the
'Mark-to-market margin - stock futures account' in the nature of
anticipated loss is recognised in the Statement of Profit and Loss.
On final settlement or squaring-up of contracts for stock futures, the
profit or loss is calculated as the difference between the settlement /
squaring-up price and the contract price. Accordingly, debit or credit
balance pertaining to the settled / squared-up contract in 'Mark-to-
market margin - stock futures account' is recognised in the Statement
of Profit and Loss upon expiry of the contracts. When more than one
contract in respect of the relevant series of stock futures contract,
to which the squared-up contract pertains is outstanding at the time of
the squaring-up of the contract, the contract price of such contract is
determined using the weighted average method for calculating profit /
loss on squaring-up.
'Initial margin account - stock futures' representing initial margin
paid is disclosed under loans and advances. r. FOREIGN CURRENCY
TRANSACTIONS AND TRANSLATIONS Foreign currency transactions are
accounted at the exchange rates prevailing on the date of the
transaction. Foreign currency monetary items outstanding as at the
Balance Sheet date are reported using the closing rate. Gain or loss
resulting from the settlement of such transactions and translation of
monetary assets and liabilities denominated in foreign currencies are
recognised in the Statement of Profit and Loss. Premium in respect of
forward contracts is accounted over the period of the contract. Forward
contracts outstanding as at the Balance Sheet date are revalued at the
closing rate.
s. PROVISIONS AND CONTINGENCIES
Provision against loans
- Provision is made in accordance with the RBI guidelines applicable
to non-performing loans. In addition, provision is made in accordance
with the provisioning policy of the Company against non-performing
loans.
- Provision on restructured loans is computed in accordance with the
RBI guidelines.
- Provision for contingencies is made as per the provisioning policy
of the Company which includes provision under Section 36(1)(viia) of
the Income-tax Act, 1961.
- A general provision is made at 0.25% of the outstanding standard
assets in accordance with the RBI guidelines.
Other provisions
- A provision is recognised when the Company has a present obligation
as a result of past events and it is probable that an outflow of
resources will be required to settle the obligation in respect of which
a reliable estimate can be made. Provisions (excluding retirement
benefits) are not discounted to their present value and are determined
based on the best estimate required to settle the obligation as at the
Balance Sheet date. These are reviewed at each Balance Sheet date and
adjusted to reflect the current best estimates. Contingent liabilities
are disclosed separately.
t. SECURITIES ISSUE EXPENSES
Issue expenses of certain securities and redemption premium are
adjusted against the securities premium account as permissible under
Section 78(2) of the Companies Act, 1956, to the extent balance is
available for utilisation in the securities premium account.
u. SERVICE TAX INPUT CREDIT
Service tax input credit is accounted in the period in which the
underlying services are received and when there is no uncertainty in
availing / utilising the credits.
Mar 31, 2011
A. Accounting Convention
These accounts have been prepared in accordance with historical cost
convention, applicable Accounting Standards notified by the Companies
(Accounting Standards) Rules, 2006, relevant provisions of the
Companies Act, 1956 and the applicable guidelines issued by the Reserve
Bank of India (RBI).
B. System of Accounting
The Group adopts accrual concept in the preparation of the accounts.
The preparation of the financial statements requires the Management to
make estimates and assumptions considered in the reported amounts of
assets and liabilities (including contingent liabilities) as of the
date of the financial statements and the reported income and expenses
during the reporting period. The Management believes that the estimates
used in preparation of the financial statements are prudent and
reasonable. Future results could differ from these estimates.
C.Investments
(i) Non Banking Financial Company (NBFC)
The Holding Company is regulated as NBFC Ã IFC (Infrastructure Finance
Company) and a subsidiary company is regulated as NBFC by the Reserve
Bank of India (RBI). Accordingly, Investments are classified under two
categories i.e. Current and Long-Term, and are valued in accordance
with the RBI guidelines and Accounting Standard 13 on ÃAccounting for
Investments as notified by the Companies (Accounting Standards) Rules,
2006.
- ÃLong-Term Investments are carried at acquisition cost. A provision
is made for diminution other than temporary on an individual basis.
ÃCurrent Investments are carried at the lower of cost and fair value
on an individual basis. Commercial Papers, Certificate of Deposits and
Treasury Bills are valued at carrying cost.
(ii) Other than NBFC
ÃLong-Term Investments are valued at cost except where there is a
diminution in value other than temporary in which case the carrying
value is reduced to recognise the decline. ÃCurrent Investments are
valued at lower of cost and market value.
D. Infrastructure Loans and Advances
In accordance with the RBI guidelines, all loans and advances are
classified under any of four categories i.e. (i) Standard Assets, (ii)
Sub-standard Assets, (iii) Doubtful Assets and (iv) Loss Assets.
E. Fixed Assets
Fixed assets are stated at cost of acquisition, including any cost
attributable for bringing the asset to its working condition, less
accumulated depreciation.
F. Intangible Assets
Intangible Assets comprising of system software are stated at cost of
acquisition, including any cost attributable for bringing the asset to
its working condition, less accumulated amortisation. Any technology
support cost or annual maintenance cost for such software is charged
annually to the Profit and Loss Account. Consideration paid by a
subsidiary for transfer of Tenancy Rights is capitalised as an
Intangible Asset.
G.Impairment
The Group assesses at each Balance Sheet date whether there is any
indication that an asset may be impaired based on internal/external
factors. If any such indication exists, the Group estimates the
recoverable amount of the asset. If such recoverable amount of the
asset or the recoverable amount of the cash generating unit to which
the asset belongs, is less than its carrying amount, the carrying
amount is reduced to its recoverable amount. The reduction is treated
as an impairment loss and is recognised in the Profit and Loss Account.
If at the Balance Sheet date there is an indication that a previously
assessed impairment loss no longer exists, the recoverable amount is
reassessed and the asset is reflected at the recoverable amount subject
to a maximum of the depreciable historical cost. H. Provisions and
Contingencies
Adequate provision for diminution is made as per the regulatory
guidelines applicable to Non-Performing Advances and the provisioning
policy of the Holding Company in respect of Loans and Debentures in the
nature of advances.
- Provision on restructured advances is arrived at in accordance with
the RBI guidelines.
Provision for Contingencies is made as per the provisioning policy of
the Holding Company, which includes a general provision at 0.25% of the
outstanding standard assets in accordance with the RBI guidelines and
provision under Section 36(1)(viia) of the Income-tax Act, 1961. I.
Depreciation and Amortisation - Tangible Assets
Depreciation on Fixed Assets, excluding certain electronic items, is
provided on the written down value method, at the rates prescribed by
Schedule XIV of the Companies Act, 1956. Certain electronic items are
depreciated over a period of two years on straight line method based on
the Managements estimate of the useful life of assets. Depreciation on
additions during the year is provided on a pro-rata basis. Assets
costing
less than Rs. 5,000 each are written off in the year of capitalisation.
Leasehold improvements are amortised on straight line method over the
primary period of the lease, except in case of a subsidiary where
leasehold improvements are amortised on straight line method over
period of extended lease or five years whichever is shorter.
- Intangible Assets
Intangible assets consisting of computer software are being amortised
over a period of three years on straight line method. Tenancy Rights
are amortised over a period of ten years on straight line method.
J. Operating Leases
Leases of assets under which all the risks and benefits of ownership
are effectively retained by the lessor are classified as operating
leases. Payments made under operating leases are charged to the Profit
and Loss Account on a straight line basis over the lease term. Lease
rental income is recognised in accordance with Accounting Standard 19
on ÃLeases as notified by the Companies (Accounting Standards) Rules,
2006. Initial direct costs incurred specifically for operating leases
are recognised as expenses in the year in which they are incurred.
K. Employee Benefits
- Defined Contribution Plans
The Groups contribution paid/payable during the year towards Provident
Fund and Superannuation Fund is charged to the Profit and Loss Account.
- Defined Benefit Plan
The net present value of the Groups obligation towards gratuity to
employees is actuarially determined as at the Balance Sheet date based
on the projected unit credit method. Actuarial gains and losses are
recognised in the Profit and Loss Account.
L.Income-Tax
The accounting treatment for income-tax is based on Accounting Standard
22 on ÃAccounting for Taxes on Income as notified by the Companies
(Accounting Standards) Rules, 2006. The provision made for income-tax
in the accounts comprises both, the current tax and the deferred tax.
The deferred tax assets and liabilities for the year arising on account
of timing differences are recognised in the Profit and Loss Account and
the cumulative effect thereof is reflected in the Balance Sheet.
Deferred tax is measured based on the tax rates and the tax laws
enacted or substantively enacted at the Balance Sheet date. Deferred
tax assets, other than on carry forward losses and unabsorbed
depreciation, are recognised only to the extent that there is
reasonable certainty that sufficient future taxable income will be
available against which such deferred tax assets can be realised.
Deferred tax assets on carry forward losses and unabsorbed depreciation
is recognised only to the extent there is virtual certainty supported
by convincing evidence that there will be sufficient future taxable
income.
M. Revenue Recognition
(a) Interest and other dues are accounted on accrual basis except in
the case of non-performing assets ("NPAs") where it is recognised upon
realisation, as per the income recognition and asset classification
norms prescribed by the RBI.
(b) Income on discounted instruments is recognised over the tenure of
the instrument on straight line basis.
(c) Dividend is accounted on accrual basis when the right to receive is
established.
(d) Front end fees on processing of loans are recognised upfront as
income.
(e) Brokerage is recognised on trade date basis and is net of statutory
payments.
(f) Management Fees are recognised on accrual basis.
(g) Performance Fees relating to Investment Advisory are recognised on
an annual basis.
(h) All fees are recognised when reasonable right of recovery is
established, revenue can be reliably measured and as and when they
become due except commission income on guarantees, is recognised
pro-rata over the period of the guarantee.
(i) Premium on interest rate reduction is accounted on accrual basis
over the residual life of the loan.
(j) Profit/loss earned on sale of investments is recognised on trade
date basis. Profit/loss on sale of investments is determined based on
the FIFO cost for current investments and weighted average cost for
long-term investments.
(k) Profit on securitisation is recognised over the residual life of
the loan in terms of the RBI guidelines. Profit on sale of loan assets
through direct assignment, without any recourse obligation, is
recognised at the time of sale. Net loss arising on account of
securitisation and direct assignment of loan assets is recognised at
the time of sale.
(l) Revenue from Power Supply is accounted on accrual basis.
(m) Income from trading in derivatives is recognised on final
settlement or squaring up of the contracts.
N. Foreign Currency Transactions
Foreign currency transactions are accounted at the exchange rates
prevailing on the dates of the transactions. Foreign currency monetary
items outstanding as at the Balance Sheet date are reported using the
closing rates of exchange. Gains and losses resulting from the
settlement of such transactions and translation of monetary assets and
liabilities denominated in foreign currencies are recognised in the
Profit and Loss Account. Premium in respect of forward contracts is
accounted over the period of the contract. Forward contracts
outstanding as at the Balance Sheet date are revalued at the closing
rate.
[See Note 2 (I)(viii)]
0. Derivatives
- Interest Rate Swaps
Interest rate swaps are booked with the objective of managing the
interest rate risk on liabilities. Interest rate swaps in the nature of
hedge are recorded on an accrual basis and these transactions are not
marked to market. Any resultant gain or loss on termination of hedge
swaps is amortised over the life of swap or underlying asset/liability
whichever is shorter.
- Currency Interest Rate Swaps
Currency interest rate swaps in the nature of hedge are recorded on an
accrual basis and these transactions are not marked to market. Any
resultant gain or loss on termination of hedge swaps is amortised over
the life of swap or underlying asset/liability whichever is shorter.
The foreign currency balances on account of principal of cross currency
swaps outstanding as at the Balance Sheet date are revalued using the
closing rate.
- Stock Futures
Stock Futures are marked-to-market on a daily basis. Debit or credit
balance disclosed under Loans and Advances or Current Liabilities,
respectively, in the "Mark-to-Market Margin à Stock Futures Account",
represents the net amount paid or received on the basis of movement in
the prices of Stock Futures till the Balance Sheet date.
As on the Balance Sheet date, the profit/loss on open positions in
Stock Futures are accounted for as follows:
(a) Credit balance in the "Mark-to-Market Margin à Stock Futures
Account", being anticipated profit, is ignored and no credit is taken
in the Profit and Loss Account.
(b) Debit balance in the "Mark-to-Market Margin à Stock Futures
Account", being anticipated loss, is recognised in the Profit and Loss
Account.
On final settlement or squaring-up of contracts for Stock Futures, the
profit or loss is calculated as the difference between the settlement/
squaring-up price and the contract price. Accordingly, debit or credit
balance pertaining to the settled/squared-up contract in
"Mark-to-Market Margin à Stock Futures Account" is recognised in the
Profit and Loss Account upon expiry of the contracts. When more than
one contract in respect of the relevant series of Stock Futures
contract to which the squared-up contract pertains is outstanding at
the time of the squaring-up of the contract, the contract price of the
contract so squared-up is determined using the weighted average method
for calculating profit/loss on squaring-up.
"Initial Margin Account à Stock Futures", representing initial margin
paid is disclosed under Loans and Advances.
P. Employee Stock Option Scheme
The Holding Company has formulated Employee Stock Option Schemes (ESOS)
in accordance with the SEBI (Employee Stock Option Scheme and Employee
Stock Purchase Scheme) Guidelines, 1999. The Schemes provides for grant
of options to employees of the Holding Company and its Subsidiaries to
acquire equity shares of the Holding Company that vest in a graded
manner and that are to be exercised within a specified period. In
accordance with the SEBI Guidelines, the excess, if any, of the closing
market price on the day prior to the grant of the options under ESOS
over the exercise price is amortised on a straight line basis over the
vesting period.
Mar 31, 2010
A. Accounting Convention
These accounts have been prepared in accordance with historical cost
convention, applicable Accounting Standards notified by the Companies
(Accounting Standards) Rules, 2006 and the relevant provisions of the
Companies Act, 1956.
B. System of Accounting
The Group adopts the accrual concept in the preparation of the
accounts. The preparation of financial statements requires the
Management to make estimates and assumptions considered in the reported
amounts of assets and liabilities (including contingent liabilities) as
of the date of the financial statements and the reported income and
expenses during the period. The Management believes that the estimates
used in preparation of the financial statements are prudent and
reasonable. Future results could differ from these estimates.
C. Inflation
Assets and liabilities are recorded at historical cost. These costs are
not adjusted to refect the changing value in the purchasing power of
money.
D. Investments
(i) Non Banking Financial Company (NBFC)
The Holding Company, a subsidiary company and a jointly controlled
entity are regulated as NBFCs by the Reserve Bank of India (RBI).
Accordingly, Investments are classified under two categories i.e.
Current and Long Term and are valued in accordance with the RBI
guidelines and Accounting Standard 13 on ÃAccounting for InvestmentsÃ
as notified by the Companies (Accounting Standards) Rules, 2006.
- ÃLong Term Investmentsà are carried at acquisition cost. A provision
is made for diminution other than temporary on an individual basis.
- ÃCurrent Investmentsà are carried at the lower of cost and fair value
on an individual basis.
(ii) Other than NBFC
ÃLong Term Investmentsà are valued at cost except where there is a
diminution in value other than temporary in which case the carrying
value is reduced to recognise the decline. ÃCurrent Investmentsà are
valued at lower of cost and market value.
E. Infrastructure Loans and Advances
In accordance with the RBI guidelines, all loans and advances are
classified under any of four categories i.e. (i) Standard Assets, (ii)
Sub-standard Assets, (iii) Doubtful Assets and (iv) Loss Assets.
F. Fixed Assets
Fixed assets are stated at cost of acquisition, including any cost
attributable for bringing the asset to its working condition, less
accumulated depreciation.
G. Intangible Assets
Intangible Assets comprising of system software are stated at cost of
acquisition, including any cost attributable for bringing the asset to
its working condition, less accumulated amortisation. Any technology
support cost or annual maintenance cost for such software is charged
annually to the Profit and Loss Account. Consideration paid by a
subsidiary for transfer of Tenancy Rights is capitalised as an
Intangible Asset.
H. Provisions and Contingencies
Adequate provision for diminution is made as per the regulatory
guidelines applicable to Non-Performing Advances and the provisioning
policy of the Holding Company in respect of Loans, Debentures and Pass
Through Certificates in the nature of advances.
- Provision on restructured advances is arrived at in accordance with
the regulatory guidelines.
Provision for Contingencies is made as per the provisioning policy of
the Holding Company, which includes provision under Section 36(1)(viia)
of the Income-tax Act, 1961.
I. Depreciation and Amortisation
- Tangible Assets
Depreciation on Fixed Assets, excluding certain electronic items, is
provided on the written down value method, at the rates prescribed by
Schedule XIV of the Companies Act, 1956. Certain electronic items are
depreciated over a period of two years on straight line method based on
the ManagementÃs estimate of the useful life of assets. Depreciation on
additions during the year is provided on a pro-rata basis. Assets
costing less than Rs. 5,000 each are written off in the year of
capitalisation. Leasehold improvements are amortised on straight line
method over the primary period of the lease, except in case of a
subsidiary where leasehold improvements are amortised on straight line
method over period of extended lease or five years whichever is
shorter.
- Intangible Assets
Intangible assets consisting of computer software are being amortised
over a period of three years on straight line method. Tenancy Rights
are amortised over a period of ten years on straight line method.
J. Operating Leases
Leases of assets under which all the risks and benefits of ownership
are effectively retained by the lessor are classified as operating
leases. Payments made under operating leases are charged to the Profit
and Loss Account on a straight line basis over the lease term. Lease
rental income is recognised in accordance with the Accounting Standard
19 on ÃLeasesà as notified by the Companies (Accounting Standards)
Rules, 2006. Initial direct costs incurred specifically for operating
lease are recognised as expenses in the year in which they are
incurred.
K. Employee Benefits
- Defined Contribution Plans
The GroupÃs contribution paid / payable during the year towards
Provident Fund and Superannuation Fund is charged to the Profit and
Loss Account.
- Defined Benefit Plan
The net present value of the GroupÃs obligation towards Gratuity to
employees is actuarially determined as at the Balance Sheet date based
on the projected unit credit method. Actuarial gains and losses are
recognised in the Profit and Loss Account.
- Other Long Term Employee Benefit
The GroupÃs Liability for compensated absences in respect of leave
which is of a long term nature is actuarially determined as at the
Balance Sheet date based on the projected unit credit method.
L. Income-Tax
The accounting treatment for income-tax is based on Accounting Standard
22 on ÃAccounting for Taxes on Incomeà as notified by the Companies
(Accounting Standards) Rules, 2006. The provision made for income-tax
in the accounts comprises both, the current tax and deferred tax. The
deferred tax assets and liabilities for the year, arising on account of
timing differences, are recognised in the Profit and Loss Account and
the cumulative effect thereof is refected in the Balance Sheet.
Deferred tax is measured based on the tax rates and the tax laws
enacted or substantively enacted at the Balance Sheet date. Deferred
tax asset, other than on carry forward losses and unabsorbed
depreciation, is recognised only to the extent that there is reasonable
certainty that sufficient future taxable income will be available
against which such deferred tax asset can be realised. Deferred tax
asset on carry forward losses and unabsorbed depreciation is recognised
only to the extent there is virtual certainty supported by convincing
evidence that there will be sufficient future taxable income.
M. Revenue Recognition
(a) Interest and other dues are accounted on accrual basis except in
the case of non-performing assets (ÃNPAsÃ) where they are recognised
upon realisation, as per the income recognition and asset
classification norms prescribed by the RBI.
(b) Income on discounted instruments is recognised over the tenure of
the instrument on straight line method.
(c) Dividend is accounted on accrual basis when the right to receive is
established.
(d) Front end fees on processing of loans are recognised upfront as
income.
(e) Brokerage is recognised on trade date basis and is net of statutory
payments.
(f) Management Fees are recognised on accrual basis.
(g) Performance Fees relating to Investment Advisory are recognised on
an annual basis.
(h) All fees are recognised when reasonable right of recovery is
established, revenue can be reliably measured and as and when they
become due except commission income on guarantees, which is recognised
pro-rata over the period of the guarantee.
(i) Premium on interest rate reduction is accounted on accrual basis
over the residual life of the loan.
(j) Profit on securitisation is recognised over the residual life of
the loan in terms of the RBI guidelines. Profit on sale of loan assets
through direct assignment, without any recourse obligation, is
recognised at the time of sale. Net loss arising on account of
securitisation and direct assignment of loan assets is recognised at
the time of sale.
(k) Revenue from Power Supply is accounted on accrual basis.
(l) Grants are recognised on accrual basis.
N. Foreign Currency Transactions
Foreign currency transactions are accounted at the exchange rates
prevailing on the dates of the transactions. Foreign currency monetary
items outstanding as at the Balance Sheet date are reported using the
closing rates of exchange. Gains and losses resulting from the
settlement of such transactions and translation of monetary assets and
liabilities denominated in foreign currencies are recognised in the
Profit and Loss Account. Premium in respect of forward contracts is
accounted over the period of the contract. Forward contracts
outstanding as at the Balance Sheet date are revalued at the closing
rate.
[See also Note 2 (I)(viii)]
0. Derivatives
- Interest Rate Swaps
Interest rate swaps in the nature of hedge are recorded on an accrual
basis and these transactions are not marked to market. Any resultant
gain or loss on termination of hedge swaps is amortised over the life
of swap or underlying asset / liability whichever is shorter.
- Currency Interest Rate Swaps
Currency interest rate swaps in the nature of hedge are recorded on an
accrual basis and these transactions are not marked to market. Any
resultant gain or loss on termination of hedge swaps is amortised over
the life of swap or underlying asset / liability whichever is shorter.
The foreign currency balances on account of principal of cross currency
swaps outstanding as at the Balance Sheet date are revalued using the
closing rate.
P. Employee Stock Option Scheme
The Holding Company has formulated Employee Stock Option Schemes (ESOS)
in accordance with the SEBI (Employee Stock Option Scheme and Employee
Stock Purchase Scheme) Guidelines, 1999. The Schemes provide for grant
of options to employees of the Holding Company and its Subsidiaries to
acquire equity shares of the Holding Company that vest in a graded
manner and that are to be exercised within a specified period. In
accordance with the SEBI Guidelines, the excess, if any, of the closing
market price on the day prior to the grant of the options under ESOS
over the exercise price is amortised on a straight line basis over the
vesting period.
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