Notes to Accounts of Muthoot Capital Services Ltd.

Mar 31, 2025

6.7 Contingent Liabilities and Provisions other than impairment on Loan Portfolio

Provisions and liabilities are recognized in the period when it becomes probable that there will be a
future outflow of funds resulting from past operations or events and the amount of cash outflow can
be reliably estimated. The timing of recognition and quantification of the liability requires the
application of judgement to existing facts and circumstances, which can be subject to change. The
carrying amounts of provisions and liabilities are reviewed regularly and revised to take account of
changing facts and circumstances.

7. MATERIAL ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS

The preparation of Financial Statements in conformity with the Ind AS requires the management to make
judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets
and liabilities and the accompanying disclosure and the disclosure of contingent liabilities, at the end of
the reporting period. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions
to accounting estimates are recognized in the period in which the estimates are revised and future

periods are affected. Although these estimates are based on the management''s best knowledge of
current events and actions, uncertainty about these assumptions and estimates could result in the
outcomes requiring a material adjustment to the carrying amounts of assets or liabilities in future
periods. In particular, information about significant areas of estimation, uncertainty and critical
judgments in applying accounting policies that have the most significant effect on the amounts
recognized in the Financial Statements is included in the following notes:

7.1 Business Model Assessment

Classification and measurement of financial assets depends on the results of the Solely Payments of
Principal and Interests (SPPI) and the business model test. The Company determines the business
model at a level that reflects how groups of financial assets are managed together to achieve a
particular business objective. This assessment includes judgement redirecting all relevant evidence
including how the performance of the assets is evaluated and their performance measured, the risks
that affect the performance of the assets and how these are managed and how the managers of the
assets are compensated. The Company monitors financial assets measured at amortised cost or fair
value through Other Comprehensive Income that are derecognised prior to their maturity to
understand the reason for their disposal and whether the reasons are consistent with the objective of
the business for which the asset was held. Monitoring is part of the Company''s continuous
assessment of whether the business model for which the remaining financial assets are held
continues to be appropriate and if it is not appropriate whether there has been a change in business
model and so a prospective change to the classification of those assets.

7.2 Impairment of Loans Portfolio

The measurement of impairment losses across all categories of financial assets requires judgement,
in particular, the estimation of the amount and timing of future cash flows and collateral values
when determining impairment losses and the assessment of a significant increase in credit risk.
These estimates are driven by a number of factors, changes in which can result in different levels of
allowances. It has been the Company''s policy to periodically review its models at the end of each
reporting period in the context of actual loss experience, changes in macro economic variables etc.
and make necessary adjustments or incorporate overlays to its ECL model so as to be in line with its
estimate of the most likely loss allowance wherever considered necessary.

7.3 Effective Interest Rate (EIR) Method

The Company''s EIR methodology, recognizes interest income/expense using a rate of return that
represents the best estimate of a constant rate of return over the expected behavioural life of loans
given/taken. This estimation, by nature, requires an element of judgement regarding the expected
behaviour and life-cycle of the instruments.

7.4 Other Estimates

These include current /deferred taxes etc. In respect of current tax and deferred taxes, judgments /
estimates are used for the purpose of ascertaining the respective current/deferred tax asset/liability
in accordance with the income tax laws and ICDS framework. A deferred tax asset is recognised to
the extent that it is probable that future taxable profit will be available against which the deductible
temporary differences and tax losses can be utilized.

19.3 All the secured non-convertible debentures of the Company including those issued during the year
ended 31 March 2025 are fully secured by pari-passu charge on present and/or future receivables
under Loan contracts/Hire Purchase/Lease, owned Assets and book debts. Further, the Company in
respect of secured listed nonconvertible debt securities maintains 100% security cover or higher
security cover as per the terms of Term Sheet/Offer document/Information Memorandum and/or
Debenture Trust Deed, sufficient to discharge the principal amount and the interest thereon. The
asset cover available as on 31st March 2025 in respect of listed secured debt securities is 1.38 (March
2024 - 1.41).

28.1 Nature and purpose of Reserves

i) Statutory reserve: Every year the Company transfers a sum of not less than twenty per cent of
net profit of that year as disclosed in the Statement of Profit and Loss to its Statutory Reserve
pursuant to Section 45-IC of the RBI Act, 1934.

The conditions and restrictions for distribution attached to statutory reserves as specified in
Section 45-IC(1) in The Reserve Bank of India Act, 1934

(1) Every non-banking financial company (NBFC) shall create a reserve fund and transfer

therein a sum of not less than twenty per cent of its net profit every year, as disclosed in the
profit and loss account and before any dividend is declared.

(2) No appropriation of any sum from the reserve fund shall be made by the NBFC except for
the purpose as may be specified by the RBI from time to time and every such appropriation
shall be reported to the RBI within twenty-one days from the date of such withdrawal,
provided that the RBI may, in any particular case and for sufficient cause being shown,
extend the period of twenty one days by such further period as it thinks fit or condone any
delay in making such report.

(3) Notwithstanding anything contained in sub-section (1) the Central Government may, on the
recommendation of the RBI and having regard to the adequacy of the paid-up capital and
reserves of a NBFC in relation to its deposit liabilities, declare by order in writing that the
provisions of sub- section (1) shall not be applicable to the NBFC for such period as may be
specified in the order, provided that no such order shall be made unless the amount in the
reserve fund under sub-section (i) Together with the amount in the share premium account
is not less than the paid-up capital of the NBFC.

(ii) Securities Premium: The amount received in excess of face value of the equity shares on share
issue is recognized in Securities Premium Reserve. The reserve can be utilised only for limited
purposes such as issuance of bonus shares in accordance with the provisions of the Companies Act,
2013.

(iii) General Reserve: Under the erstwhile Companies Act 1956, general reserve was created through an
annual transfer of net income at a specified percentage in accordance with applicable regulations.
Consequent to introduction of Companies Act 2013, the requirement to mandatorily transfer a
specified percentage of the net profit to general reserve has been withdrawn. However, the
amount previously transferred to the general reserve can be utilised only in accordance with the
specific requirements of Companies Act, 2013.

(iv) Retained Earnings: Retained earnings or accumulated surplus represent total of all the profits
retained since company''s inception. Retained earnings are credited with current year profits,
reduced by losses if any, dividend pay-outs, transfers to General Reserve or any such other
appropriation to specific reserves. The company is entitled to declare dividends only to the extent
permitted under RBI guidelines

42. CHANGE IN ESTIMATE W.R.T ’EXPECTED CREDIT LOSS MODEL (ECL)’ DURING PREVIOUS YEAR:

Company has reviewed its Expected credit loss model and the same was adopted from 1st April 2023.

Key changes are as follows:

Probability of default (''PD'')

For Stage 1 Accounts - the PD has been arrived at based on % of likely defaults in next 12 months.

For accounts with significant increase in credit risk - the PD is the % of loan becoming credit impaired
i.e. 90 days past due.

For credit impaired accounts - the PD considered is 100%.

Exposure at default (''EAD'')

As per Ind AS 109, EAD is estimation of the extent to which the financial entity may be exposed to
counterparty in the event of default and at the time of counterparty''s default.The EAD comprises of
principal component, accrued interest for the outstanding exposure.

Loss given default (''LCD'')

Loss given default LGD is an estimate of the loss from a transaction given that a default occurs. Various
approaches are available to compute the LGD. The Company has considered the workout LGD approach
by considering historical losses and recoveries. The following steps are performed to calculate the LGD:

1) Analysis of historical accounts

2) The computation consists of following components, which are:

a) Outstanding balance on the day of default

b) Recovery amount (discounted yearly) by initial contractual rate.

The formula for the computation is as below:

Recovery rate % = (Discounted recovery amount / Total exposure on the day of default)

LGD % = 1 - recovery rate

The company reviewed the model in first quarter by roll forwarding the data for one more year . As a
result of improved collections, PD% and LGD% got reduced and an amount of 389.79 lakhs reversed
from the provision.

The company had created an additional provision in March 22 for the stressed assets to keep the NNPA
below 6% to comply with the PCA norms as prescribed by RBI. Since the majority of the stressed assets
have since been recovered or have been sold to Asset reconstruction companies and considering the
better asset quality of the current portfolio, in the Quarter 3 of the current financial year the company
has decided to bring down its Provision Coverage ratio from 75% to 60% and released an amount of
'' 1,810 lakhs from the provision.

43. RETIREMENT BENEFIT PLAN

43.1 Defined Benefit Plan- Gratuity

"The Company has a Defined Benefit Gratuity Plan. The gratuity plan is governed by the Payment
of Gratuity Act, 1972. The Company has entered into an arrangement with the LIC of India to cover
the liability payable to the employees towards the gratuity under a Gratuity Trust Scheme based on
Group Gratuity Cum Assurance Scheme of the LIC of India which is a defined benefit scheme and
the company has to make contributions under such scheme".

The following tables summarises the components of net benefit expense recognized in the
Statement of Profit and loss and the funded status and amounts recognized in the Balance Sheet
for the gratuity plan."

48. CAPITAL

The Company maintains an actively managed capital base to cover risks inherent in the business which
includes issued equity capital, share premium and all other equity reserves attributable to equity holders
of the Company. As an NBFC, the RBI requires the company to maintain a minimum capital to risk
weighted assets ratio (“CRAR”) consisting of Tier 1 and Tier 2 capital of 15% of our aggregate risk weighted
assets. Further, the total of our Tier 2 capital cannot exceed 100% of our Tier 1 capital at any point of time.
The capital management process of the Company ensures to maintain a healthy CRAR at all the times.

Capital Management

The primary objectives of the Company''s capital management policy is to ensure that the Company
complies with externally imposed capital requirements and maintains strong credit ratings and healthy
capital ratios in order to support its business and to maximize shareholder value

The Company manages its capital structure and makes adjustments to it according to changes in
economic conditions and the risk characteristics of its activities. In order to maintain or adjust the capital
structure, the Company may adjust the amount of dividend payment to shareholders, return capital to
shareholders or issue capital securities. No changes have been made to the objectives, policies and
processes from the previous years. However, they are under constant review by the Board.

Regulatory capital consists of Tier 1 capital, which comprises of share capital, statutory reserves, general
reserve, share premium and retained earnings including current year profit. The other component of
regulatory capital is Tier 2 Capital, which subject to statutory limit includes subordinated debt and
general provisions.

The Company is meeting the capital adequacy requirements of Reserve Bank of India (RBI)

49. FAIR VALUE MEASUREMENT

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction in the principal (or most advantageous) market at the measurement date under current
market conditions (i.e., an exit price), regardless of whether that price is directly observable or estimated
using a valuation technique. In order to show how fair values have been derived, financial instruments
are classified based on a hierarchy of valuation techniques.

ii. Fair value of debt funds/ alternate investment funds are derived based on the latest
available valuation report/ NAV/ statement communicated by the fund house and is
classified as Level 2.

49.2.2 Investments at Fair Value Through Other Comprehensive Income

For Investment at fair value through Other Comprehensive Income, valuation are done
using quoted price from active markets at the measurement date. The equity instruments
which are actively traded in public stock exchanges with readily available active prices on a
regular basis are classified as Level 1.

49.3 Fair value of Financial Instruments not measured at fair value

Set out below is a comparison, by class, of the carrying amounts and fair values of the Company''s
financial instruments that are initially measured at fair value and subsequently carried at
amortised cost in the financial statements (Not measured at Fair value)

49.2 Fair Value Technique

49.2.1 Investments at Fair Value Through Profit or Loss

i. Investment in security receipts has been classified as Level 3. Since the investment value
approximates the net asset value as at March 31, 2025 as confirmed by the Asset
Reconstruction Company (ARC), disclosure of sensitivity of fair value measurement in
unobservable inputs is not considered relevant.

49.4 Valuation techniques

Below are the methodologies and assumptions used to determine fair values for the above
financial instruments which are not recorded and measured at fair value in the company''s
financial statements. These fair values were calculated for disclosure purpose only.

49.4.1 Short-term financial assets and liabilities

For financial assets and financial liabilities that have a short-term maturity (less than twelve
months), the carrying amounts, which are net of impairment, are a reasonable
approximation of their fair value. Such instruments include cash and cash equivalents,
balances other than cash and cash equivalents and trade payables without a specific
maturity. Such amounts have been classified as Level 1/Level 3 on the basis that no
adjustments have been made to the balances in the Balance Sheet.

49.4.2 Loans and advances to customers

The fair value of loans and advances are calculated using a portfolio based approach,
grouping loans as far as possible into homogeneous groups based on similar
characteristics. The fair value is then extrapolated to the portfolio using discounted cash
flow models that incorporate interest rates estimates considering all significant
characteristics of the loan. The fair value is then reduced by impairment allowance which is
already calculated in computing probability of default and loss given default to arrive at fair
value net of risk.

49.4.3 Financial assets at amortised cost

The fair values of held-to-maturity investments are estimated using a discounted cash flow
model based on contractual cash flows using actual or estimated yields and discounting by
yields incorporating the counterparties credit risk.

49.4.4 Financial liability at amortised cost

The fair values of financial liability held-to-maturity are estimated using effective interest
rate model based on contractual cash flows using actual yields.

50. RISK MANAGEMENT

Risk is inherent to any Company, more so to a NBFC, and MCSL is no exception. At MCSL we have a
proper framework on Risk Management, in order to ensure that effective management of risks is an
integral part of every employee''s job. The process is designed in such a way that the work of one is
effectively monitored by another and therefore ensures that any risk that the process can have is clearly
verified and nullified by the team member handling the next process.

The main objective is to create and protect shareholder value by minimizing threats or losses and
identifying and maximizing opportunities and thereby ensuring sustainable business growth with
stability. The Risk Management systems also promote a proactive approach in reporting, evaluating and
resolving risks associated with the business.

The Company is exposed to credit risk, liquidity risk and market risk. It is also subject to various operating
and business risks such as compliance risk, reputational risk and strategy risk.

Through continuous enhancement of risk controls and governance structures, the Company is
positioned to thrive amid challenges, ensuring long-term financial stability and resilience

50.1 Risk Management Framework

The Board of Directors are responsible for the overall risk management approach and for
approving the risk management strategies and principles. The Board has constituted the Risk
Management Committee (RMCB) which is responsible for monitoring the overall risk process
within the Company. The RMCB has the overall responsibility for the development of the risk
strategy and implementing principles, frameworks, policies and limits. It is responsible for
managing risk decisions and monitoring risk levels. The Chief Risk Officer is responsible for
implementing and maintaining risk related procedures to ensure an independent control process
is maintained. The risk owners are responsible for monitoring compliance with risk principles,
policies and limits across the Company. Each department has its risk owner who is responsible for
the control of risks, including monitoring the actual risk of exposures against authorised limits and
the assessment of risks. The Company''s treasury is responsible for managing its assets and
liabilities and the overall financial structure. It is also primarily responsible for the funding and
liquidity risks of the Company. The Company''s policy is that risk management processes
throughout the Company are audited annually by the internal audit function, which examines
both the adequacy of the procedures and the Company''s compliance with the procedures. Internal
audit discusses the results of all assessments with management and reports its findings and
recommendations to ACB.

• Risk Identification: Conducting in-depth analyses to identify the root cause of potential risks and
assess their possible ramifications, thereby facilitating the development of precise and robust
mitigation strategies.

• Risk Assessment: Undertaking a thorough evaluation of risks across various contingencies,
ensuring a comprehensive understanding of their scope and potential consequences.

• Risk Response: Deploying tailored strategies to either mitigate, accept, transfer, or entirely
eliminate risks based on their assessed severity and probability of occurrence.

• Ongoing Monitoring: Continuously tracking the risk landscape to identify emerging threats and
ensure the prompt application of corrective measures.

• Process Evaluation & Improvement: Engaging in continuous review and refinement of risk
management methodologies to increase their effectiveness and responsiveness to dynamic
conditions.

50.2 Identification of Risk and Analysis

The Company has identified the following potential risks that could have an adverse impact on the
Company:

1. Credit Risk

2. Liquidity Risk

3. Operational Risk

4. Compliance Risk

5. Reputational Risk

6. Strategic Risk

7. Fraud risk

8. Cyber security risk

While each of the risk has significance, all except the Credit Risk can be managed and controlled
through internal processes. It is the Credit Risk management which needs both internal and
external factors in equal measure to be effective and controlled.

The scope of the Internal Audit shall cover risk management (including fraud risk) and control
monitoring review and advisory services, reviews of operational and financial processes and
controls, documentation of various important processes and events, information technology
reviews, governance and assurance reviews, operational compliance audits, verification on
adherence to regulatory requirements and other ad hoc advisory or consulting services. Internal
Auditors discusses the results of all assessments with management and reports its findings and
recommendations to Audit Committee.

50.2.1 Credit Risk

This is the major risk anticipated in connection with the nature of operations of the
company. While a lot would need to be done internally to monitor it and control it, the
external factors also plays its role in the final impact of the credit risk. Credit risk is the risk of
default or non-repayment of loan by a borrower, which involves monitory loss to the
company, both in terms of principal and interest. In the portfolio of an NBFC, the losses
stem from outright default due to the inability or unwillingness of a customer or
counterparty to meet commitments in relation to repayment, trading, settlement and
other financial transactions. Alternatively, losses result from reduction in portfolio value
arising from actual or perceived deterioration in due to any event affecting the borrower/ a
group of borrowers. The effective management and reporting of credit risk is a critical
component of comprehensive risk management and is essential for the long-term success
of any banking and financial services organization. It ensures that risks are identified in

advance and corrective action taken. Credit risk management encompasses identification,
measurement, monitoring, control and reporting of the credit risk exposures.

The major risk that the Company faces is the default and / or delay in payment of EMIs
(principal and interest) by the customers within the due time. To mitigate the said risk, the
Company measures the credit history, capacity to repay, loan amount and loan conditions
and associated collateral, if any, of the customer before sanctioning/ disbursing loan and
has an efficient post disbursal monitoring mechanism to take corrective and timely action
whenever required to minimise the probability of default/loss.

50.2.2 Methodology for assessment of Expected Credit loss on loan asset - Refer Note 6.1.(vii) of
Material accounting policies

50.2.3 Credit quality of financial asset based on Stage 1 (No significant increase in the credit risk),
Stage 2 (Significant increase in the credit risk but no impairment), and Stage 3 (Credit
impaired asset) - Refer Note 10.1 of Financial Statements.

50.2.4 Reconciliation of expected credit loss balance - Refer Note 10.3 of Financial Statement

50.2.5 RBI disclosures requirement for restructured assets - Refer Note 76 of Financial Statement

50.2.6 Concentration of Credit Risk - Retail and Corporate Loans
The Company''s portfolio can be broadly classified as following:

50.2.6.1 Vehicle Loan (predominantly backed up by 2-wheeler and used 4-wheeler assets)

50.2.6.2 Vehicle Loan (Securitised)

50.2.6.3 Secured Loans

50.2.6.4 Unsecured Loans

50.2.7 Maximum Exposure to Credit Risk

The maximum exposure to credit risk of loans is their carrying amount after considering
effect of mitigation through collateral recovery and credit enhancements

50.2.8 Narrative Description of Collateral

Collateral primarily includes vehicles purchased by retail loan customers and in respect of
other secured loans they represent specific/pari-passu charge on the receivables of the
borrowers.

50.2.9 Quantitative Information of collateral

Gross Value of total secured loans to value of collateral (Before adjustment on account of
ECL and EIR).

The above is based on the asset cost of vehicle loans at origination as reduced by 20% p.a.
on straight line method. The derived value is for disclosure purpose only and may not be
representative of the recoverable value as the same is depended on the condition of the
vehicle at the point of repossession. However the company has assessed LGD for ECL
purpose based on actual loss incurred as per historical information on repossession/sale of
collateral asset.

50.2.10 Liquidity Risk

Liquidity Risk arises largely due to maturity mismatch associated with assets and liabilities
of the Company. Liquidity risk stems from the inability of the Company to fund increase in
assets, manage unplanned changes in funding sources and meet financial commitments
when required. The Asset Liability Committee (ALCO) meets regularly to review the
liquidity portion based on future cash flows. The company also maintain adequate liquid
assets and has access to funding the hedge against unexpected requirement.

50.2.10.1 Analysis of Financial Assets and Liabilities by Remaining Contractual Maturities

The below table shows as analysis of assets / liabilities and analysed accordingly to
when they are expected to be recovered or settled and considering contract
terms. For loans/ advances to customers maturity analysis is based on original
contractual terms.

50.2.11 Market Risk

Market Risk is the risk that the fair value or the future cash flows of a financial instrument
will fluctuate because of changes in market factor. Such changes in the values of financial
instruments may result from changes in the interest rates, credit, liquidity, and other
market changes. The objective of market risk management is to avoid excessive exposure
of our earnings and equity to loss and reduce our exposure to the volatility inherent in
financial instruments. The Company is primarily exposed to Interest rate risk as under:

Interest rate risk

Interest rate risk is the risk that the fair value of future cash flows of a financial instrument
will fluctuate because of changes in market interest rates. The company is subject to
interest rate risk, primarily since it lends to customers at fixed rates and for maturity periods
different from the funding sources. Further, majority of company''s borrowings are in the
form of WCDL/ Cash Credit, on which company is exposed to Interest rate risk either during
the tenure of the loan or at the time of renewal which is ordinarily within a period of 12

51. SEGMENT REPORTING

The Company is primarily engaged in the business of financing and there are no separate reportable
segments identified as per the Ind AS 108 - Segment Reporting.

52. TRANSFERRED FINANCIAL ASSETS THAT ARE NOT DERECOGNISED IN THEIR ENTIRETY

52.1 The Company has transferred certain pools of fixed rate loan receivables backed by underlying
assets by entering into securitisation transactions through Special Purpose Vehicle Trusts (“SPV
Trust”).

The Company, being Originator of these loan receivables, also acts as Servicer with a responsibility
of collection of receivables from its borrowers and depositing the same in Collection and Payout
Account maintained by the SPV Trust for making scheduled payouts to the investors in Pass
Though Certificates (PTCs) issued by the SPV Trust. These securitisation transactions also require
the Company to provide for first loss credit enhancement in various forms, such as corporate
guarantee, cash collateral, subscription to subordinated PTCs as credit support in the event of
shortfall in collections from underlying loan contracts. By virtue of existence of credit
enhancement, the Company is exposed to credit risk, being the expected losses that will be
incurred on the transferred loan receivables to the extent of the credit enhancement provided.

In view of the above, the Company has retained substantially all the risks and rewards of ownership
of the financial asset and thereby does not meet the derecognition criteria as set out in Ind AS 109.
The consideration received under this securitisation arrangements are accounted as Financial
Liability and the balance outstanding as at the end of the reporting date is disclosed as “Secured
term loan from securitisation transaction” under Note 19.

The following table provides a summary of financial assets that have been transferred in such a
way that part or all of the transferred financial assets do not qualify for derecognition, together
with the associated liabilities.

75.2 Qualitative Disclosure

The Reserve Bank of India has prescribed Guidelines on Maintenance of Liquidity Coverage Ratio (LCR).
All Non-Deposit taking NBFCs with asset size of Rs. 10,000 crore and above, and all deposit taking
NBFCs irrespective of their asset size, is required to maintain a liquidity buffer in terms of LCR which
will promote resilience of NBFCs to potential liquidity disruptions by ensuring that they have sufficient
High Quality Liquid Asset (HQLA) to survive any acute liquidity stress scenario lasting for 30 days. The
stock of HQLA to be maintained by the NBFCs shall be minimum of 100% of total net cash outflows
over the next 30 calendar days.

The LCR requirement was applicable from December 1, 2020 with the minimum HQLAs to be held
being 50% of the LCR, progressively reaching a level upto 60%, 70%, 85% and 100% by December 1, 2021,
December 1, 2022, December 1, 2023, December 1, 2024 respectively.

Liquidity Coverage Ratio (LCR) comprises of High Quality Liquid Assets (HQLAs) as numerator and net
cash outflows in 30 days as denominator. The average LCR is computed at as simple averages of daily
observations over the previous quarter.

Major source of borrowing for the Company are Non-Convertible Debentures, Working Capital and
Term loans from Banks, Commercial paper and Public deposits. Details of funding concentration from
Significant counter party are given above under public disclosure.

The company has maintained LCR well above the regulatory requirement for all the quarters. The
average LCR for the quarter ended 31st March 2025 is 177.61% (for the quarter ended 31st March 2024 -
191.74%), as against the regulatory requirement of 100% (85% for the corresponding period last year).

79. AUDIT TRAIL

The Company uses accounting software for maintaining its books of account which have a feature of
audit trail (edit log) facility at the application level for each change made in the books of account along
with such changes made. This feature of audit trail (edit log) facility was operated throughout the year
for all the transactions recorded in such software.

However, Company has not enabled audit trail for direct database layer changes as access to the
database of all accounting software is available only to database administrators for the limited purpose
of its maintenance for which access and monitoring controls are enabled. Also, no changes have been
made to any transaction recorded in the books of account, directly at the database level during the year.
The audit trail (edit log) feature has not been tampered with during the year.

80. OTHER STATUTORY INFORMATION

80.1 No Benami Property are held by the Company and or no proceedings have been initiated or are
pending against the company for holding any benami property under the Benami Transactions
(Prohibition) Act, 1988 (45 of 1988) and rules made thereunder.

80.2 The company has searched transactions with Struck-off companies by comparing company''s
counter parties with publicly available database of struck of companies through a manual name
search. Based on such a manual search, no party identified to be reported in the financial
statements.

80.3 There is no charges or satisfaction in relation to any debt / borrowings yet to be registered with
ROC beyond the statutory period.

80.4 The Company has complied with the number of layers prescribed under clause (87) of section 2 of
the Act read with Companies (Restriction on number of Layers) Rules, 2017.

80.5 Other than the transactions that are carried out as part of Company'' normal lending business:

A) The Company has not advanced or loaned or invested funds (either borrowed funds or share
premium or any other sources or kind of funds) to any other person(s) or entity(ies), including
foreign entities (Intermediaries) with the understanding (whether recorded in writing or
otherwise) that the Intermediary shall -

(a) directly or indirectly lend or invest in other persons or entities identified in any manner
whatsoever by or on behalf of the company (Ultimate Beneficiaries) or

(b) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries;

B) The Company has not received any fund from any person(s) or entity(ies), including foreign
entities (Funding Party) with the understanding (whether recorded in writing or otherwise) that
the company shall -

(a) directly or indirectly lend or invest in other persons or entities identified in any manner
whatsoever by or on behalf of the Funding Party (Ultimate Beneficiaries) or

(b) provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.

80.6 The Company has not traded or invested in Crypto currency or Virtual Currency during the
financial year

80.7 There are no transactions which have not been recorded in the books of accounts and has been
surrendered or disclosed as income during the year in the tax assessments under the Income Tax
Act, 1961. Also, there are no previously unrecorded income and related assets.

80.8 The Company has in respect of the investments made, complied with no of layers as defined
under section 2(87) of the Companies Act, 2013.

80.9 The Company has nothing to report on compliance with approved Scheme(s) of Arrangements.

80.10 There are no differences between the quarterly returns of assets given as security submitted to the
banks and the books of account.

81. EVENTS AFTER THE REPORTING DATE/ OTHER DEVELOPMENTS

81.1 Material events occurring after the balance sheet date are taken into cognizance and there are no
other events after the reporting date that require disclosure in the financial statements.

81.2 The Code on Social Security, 2020 (the Code) has been enacted, which would impact contribution
by the Company towards Provident Fund and Gratuity. The impact of changes if any arising on
enactment of the Code will be assessed by the company after the effective date of the same and
the rules thereunder are notified

82. Previous year figures, unless otherwise stated, are given within brackets and have been reworked,

regrouped, re-arranged and re-classified to conform to the current year presentation.

Note: The accompanying notes form an integral part of the financial statements (Note No: 1-82)

As per our separate report of even date attached

For M/s. Sundaram & Srinivasan For and on behalf of the Board of Directors of

Chartered Accountants Muthoot Capital Servcies Limited

FRN No.: 004207S

Sd/- Sd/- Sd/-

S. Usha Tina Suzanne George Ritu Elizabeth George

Partner Whole-Time Director Director

Membership No.: 211785 DIN: 09775050 DIN: 10766726

Sd/- Sd/- Sd/-

Place: Kochi Mathews Markose Ramandeep Singh Deepa Gopalakrishnan

Date: 14^th May 2025 Chief Executive Officer Chief Financial Officer Company Secretary &

Compliance Officer

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Mar 31, 2024

6.7 Contingent Liabilities and Provisions other than Impairment on Loan Portfolio

Provisions and liabilities are recognized in the period when it becomes probable that there will be a future outflow of funds resulting from past operations or events and the amount of cash outflow can be reliably estimated. The timing of recognition and quantification of the liability requires the application of judgement to existing facts and circumstances, which can be subject to change. The carrying amounts of provisions and liabilities are reviewed regularly and revised to take account of changing facts and circumstances.

7. MATERIAL ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS

The preparation of Financial Statements in conformity with the Ind AS requires the management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the accompanying disclosure and the disclosure of contingent liabilities, at the end of the reporting period. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and future periods are affected. Although these estimates are based on the management’s best knowledge of current events and actions, uncertainty about these assumptions and estimates could result in the outcomes requiring a material adjustment to the carrying amounts of assets or liabilities in future periods. In particular, information about significant areas of estimation, uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the Financial Statements is included in the following notes:

7.1 Business Model Assessment

Classification and measurement of financial assets depends on the results of the Solely Payments of Principal and Interests (SPPI) and the business model test. The Company determines the business model at a level that reflects how groups of financial assets are managed together to achieve a particular business objective. This assessment includes judgement redirecting all relevant evidence including how the performance of the assets is evaluated and their performance measured, the risks that affect the performance of the assets and how these are managed and how the managers of the assets are compensated. The Company monitors financial assets measured at amortised cost or fair value through Other Comprehensive Income that are derecognised prior to their maturity to understand the reason for their disposal and whether the reasons are consistent with the objective of the business for which the asset was held. Monitoring is part of the Company’s continuous assessment of whether the business model for which the remaining financial assets are held continues to be appropriate and if it is not appropriate whether there has been a change in business model and so a prospective change to the classification of those assets.

7.2 Impairment of Loans Portfolio

The measurement of impairment losses across all categories of financial assets requires judgement, in particular, the estimation of the amount and timing of future cash flows and collateral values when determining impairment losses and the assessment of a significant increase in credit risk. These estimates are driven by a number of factors, changes in which can result in different levels of allowances. It has been the Company’s policy to periodically review its models at the end of each reporting period in the context of actual loss experience, changes in macro economic variables etc. and make necessary adjustments or incorporate overlays to its ECL model so as to be in line with its estimate of the most likely loss allowance wherever considered necessary.

7.3 Effective Interest Rate (EIR) Method

The Company’s EIR methodology, recognizes interest income/expense using a rate of return that represents the best estimate of a constant rate of return over the expected behavioural life of loans given/taken. This estimation, by nature, requires an element of judgement regarding the expected behaviour and life-cycle of the instruments.

7.4 Other Estimates

These include current /deferred taxes etc. In respect of current tax and deferred taxes, judgments / estimates are used for the purpose of ascertaining the respective current/deferred tax asset/liability in accordance with the income tax laws and ICDS framework. A deferred tax asset is recognised to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences and tax losses can be utilized.

39. CHANGE IN ESTIMATE w.r.t ''EXPECTED CREDIT LOSS MODEL (ECL)'' DURING PREVIOUS YEAR:

Company has reviewed its Expected credit loss model and the same was adopted from 1st April 2022.

Key changes are as follows:

Probability of default (‘PD'')

For Good accounts - the PD has been arrived at based on % of likely defaults in next 12 months.

For accounts with significant increase in credit risk - the PD is the % of loan becoming credit impaired i.e. 90 days past due.

For credit impaired accounts - the PD considered is 100%.

Exposure at default (‘EAD'')

As per Ind AS 109, EAD is estimation of the extent to which the financial entity may be exposed to counterparty in the event of default and at the time of counterparty’s default. The Company has modelled EAD based on actual exposure on the day of default. The EAD comprises of principal component, accrued interest for the outstanding exposure.

Loss given default (‘LGD'')

Loss given default LGD is an estimate of the loss from a transaction given that a default occurs. Various approaches are available to compute the LGD. The Company has considered the workout LGD approach by considering historical losses and recoveries. The following steps are performed to calculate the LGD:

1) Analysis of historical accounts

2) The computation consists of following components, which are:

a) Outstanding balance on the day of default

b) Recovery amount (discounted yearly) by initial contractual rate.

The formula for the computation is as below:

Recovery rate % = (Discounted recovery amount / Total exposure on the day of default)

LGD % = 1 - recovery rate

The change in parameters as above has caused increase in ECL provision by Rs. 1,931 Lakhs during the previous year.

40. CHANGE IN ACCOUNTING POLICY w.r.t ''ACCOUNTING OF INTEREST INCOME ON CREDIT IMPAIRED ASSETS’ DURING PREVIOUS YEAR

In accordance with Ind AS 8 Accounting Policies, Changes in Accounting Estimates and Errors, company has changed its accounting policy with respect to accounting of income on credit impaired assets based on the requirement of Ind AS 109 Financial Instruments which reads as "financial assets that are not purchased or originated credit impaired financial assets but subsequently have become credit impaired financial assets, the entity shall apply the effective interest rate to the amortised cost of the financial asset in subsequent reporting periods.”

The change as above during this financial year is effected in the books of accounts of the company considering refinements in accounting estimate with regards to computation of Loss given default (‘LGD’) rates as part of ECL model i.e. consideration of discounted collections vis-a-vis undiscounted collections in the erstwhile computation. The computation of ECL parameters are briefly explained in Note 39.

The adjustment required in view of the accounting policy change in the books for the same is given below:

41. RETIREMENT BENEFIT PLAN

41.1 Defined Benefit Plan- Gratuity

"The Company has a Defined Benefit Gratuity Plan. The gratuity plan is governed by the Payment of Gratuity Act, 1972. The Company has entered into an arrangement with the LIC of India to cover the liability payable to the employees towards the gratuity under a Gratuity Trust Scheme based on Group Gratuity Cum Assurance Scheme of the LIC of India which is a defined benefit scheme and the company has to make contributions under such scheme.”

The following tables summarises the components of net benefit expense recognized in the Statement of Profit and loss and the funded status and amounts recognized in the Balance Sheet for the gratuity plan."

46. CAPITAL

The Company maintains an actively managed capital base to cover risks inherent in the business which includes issued equity capital, share premium and all other equity reserves attributable to equity holders of the Company. As an NBFC, the RBI requires the company to maintain a minimum capital to risk weighted assets ratio (“CRAR”) consisting of Tier 1 and Tier 2 capital of 15% of our aggregate risk weighted assets. Further, the total of our Tier 2 capital cannot exceed 100% of our Tier 1 capital at any point of time. The capital management process of the Company ensures to maintain a healthy CRAR at all the times.

Capital Management

The primary objectives of the Company’s capital management policy is to ensure that the Company complies with externally imposed capital requirements and maintains strong credit ratings and healthy capital ratios in order to support its business and to maximize shareholder value.

The Company manages its capital structure and makes adjustments to it according to changes in economic conditions and the risk characteristics of its activities. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividend payment to shareholders, return capital to shareholders or issue capital securities. No changes have been made to the objectives, policies and processes from the previous years. However, they are under constant review by the Board.

. FAIR VALUE MEASUREMENT

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction in the principal (or most advantageous) market at the measurement date under current market conditions (i.e., an exit price), regardless of whether that price is directly observable or estimated using a valuation technique. In order to show how fair values have been derived, financial instruments are classified based on a hierarchy of valuation techniques.

47.2 Fair Value Technique

47.2.1 Investments at Fair Value Through Profit or Loss

i. Investment in security receipts has been classified as Level 3. Since the investment value approximates the net asset value as at March 31, 2024 as confirmed by the Asset Reconstruction Company (ARC), disclosure of sensitivity of fair value measurement in unobservable inputs is not considered relevant.

ii. Fair value of debt funds/ alternate investment funds are derived based on the latest available valuation report/ NAV/ statement communicated by the fund house and is classified as Level 2.

47.2.2 Investments at Fair Value Through Other Comprehensive Income

For Investment at fair value through Other Comprehensive Income, valuation are done using

quoted price from active markets at the measurement date. The equity instruments which are actively traded in public stock exchanges with readily available active prices on a regular basis are classified as Level 1.

47.3 Fair value of Financial Instruments not measured at fair value

Set out below is a comparison, by class, of the carrying amounts and fair values of the Company’s financial instruments that are initially measured at fair value and subsequently carried at amortised cost in the financial statements

47.4 Valuation techniques

Below are the methodologies and assumptions used to determine fair values for the above financial instruments which are not recorded and measured at fair value in the company’s financial statements. These fair values were calculated for disclosure purpose only.

47.4.1 Short-term financial assets and liabilities

For financial assets and financial liabilities that have a short-term maturity (less than twelve months), the carrying amounts, which are net of impairment, are a reasonable approximation of their fair value. Such instruments include cash and cash equivalents, balances other than cash and cash equivalents and trade payables without a specific maturity. Such amounts have been classified as Level 1/Level 3 on the basis that no adjustments have been made to the balances in the Balance Sheet.

47.4.2 Loans and advances to customers

The fair value of loans and advances are calculated using a portfolio based approach, grouping loans as far as possible into homogeneous groups based on similar characteristics. The fair value is then extrapolated to the portfolio using discounted cash flow models that

incorporate interest rates estimates considering all significant characteristics of the loan. The fair value is then reduced by impairment allowance which is already calculated in computing probability of default and loss given default to arrive at fair value net of risk.

47.4.3 Financial assets at amortised cost

The fair values of held-to-maturity investments are estimated using a discounted cash flow model based on contractual cash flows using actual or estimated yields and discounting by yields incorporating the counterparties credit risk.

47.4.4 Financial liability at amortised cost

The fair values of financial liability held-to-maturity are estimated using effective interest rate model based on contractual cash flows using actual yields.

48. RISK MANAGEMENT

Risk is inherent to any Company, more so to a NBFC, and MCSL is no exception. At MCSL we have a proper framework on Risk Management, in order to ensure that effective management of risks is an integral part of every employee’s job. The process is designed in such a way that the work of one is effectively monitored by another and therefore ensures that any risk that the process can have is clearly verified and nullified by the team member handling the next process.

The main objective is to create and protect shareholder value by minimizing threats or losses and identifying and maximizing opportunities and thereby ensuring sustainable business growth with stability. The Risk Management systems also promote a proactive approach in reporting, evaluating and resolving risks associated with the business.

The Company is exposed to credit risk, liquidity risk and market risk. It is also subject to various operating and business risks such as compliance risk, reputational risk and strategy risk.

48.1 Risk management Framework

The Board of Directors and the Audit Committee are responsible for the overall risk management and for approving the risk management policies, strategies and principles so that the management controls the risks through properly defined processes.

The Board plays a pivotal role in the effective management of the risk mitigation process within the Company. The Board is responsible for framing, implementing and monitoring the risk management plan and to ensure that appropriate systems for risk management are in place. The Audit Committee evaluates the internal financial controls and efficacy of the risk management systems, reviews all hedging strategies/risk treatment methodologies vis a vis compliance with the Risk Management Policy and relevant regulatory guidelines and ensures periodic review of operations and contingency plans and reports to Board in order to counter possibilities of adverse factors having a bearing on the risk management systems. The Board also reviews the reports generated by the, Internal Auditors and concurrent auditors on a periodic basis.

The Board has constituted the Risk Management Committee, which is responsible for monitoring the overall risk process within the Company. The Risk Management Committee has the responsibility to oversee the development, implementation and maintenance of the Company’s overall risk management framework and its appetite, strategy, principles and policies, to ensure they are in line with emerging regulatory, corporate governance and industry best practice. The Risk Management Committee is responsible for managing risk decisions and monitoring risk levels.

The Risk Department of the Company is responsible for monitoring and maintaining risk related procedures to ensure an independent control process is maintained. Schemes that are rolled out in the market and the products that are offered to the customers are tested against the parameters determined as mandatory for the purpose by the Risk Department. The Heads of Department shall be responsible for the implementation of the risk management system as may be applicable to their respective areas of functioning and report to the Risk Management Committee.

The Committee reviews the new risk principles and policy and material amendments to risk principles and policy and oversees adherence to Company’s risk principles, policies and standards and any action taken resulting from material policy breaches.

It also periodically reviews and updates its own terms of reference to reflect best practices, at appropriate intervals, evaluate its own performance against the terms of reference."

48.2 Identification of Risk and Analysis

Risk identification and mitigation is obligatory on all verticals and functional heads who, with the inputs from their team members, are required to report the material risks to the concerned levels of the Company along with their considered views and recommendations for risk mitigation.

The Company has identified the following potential risks that could have an adverse impact on the Company:

1. Credit Risk

2. Operational Risk

3. Compliance Risk

4. Reputational Risk

5. Strategic Risk

6. Liquidity Risk & Interest Rate Risk

While each of the risk has significance, all except the Credit Risk can be managed and controlled through internal processes. It is the Credit Risk management which needs both internal and external factors in equal measure to be effective and controlled.

The scope of the Internal Audit shall cover risk management (including fraud risk) and control monitoring review and advisory services, reviews of operational and financial processes and controls, documentation of various important processes and events, information technology reviews, governance and assurance reviews, operational compliance audits, verification on adherence to regulatory requirements and other ad hoc advisory or consulting services. Internal Auditors discusses the results of all assessments with management and reports its findings and recommendations to Audit Committee.

48.2.1 Credit Risk

This is the major risk anticipated in connection with the nature of operations of the company. While a lot would need to be done internally to monitor it and control it, the external factors also plays its role in the final impact of the credit risk. Credit risk is the risk of default or non-repayment of loan by a borrower, which involves monitory loss to the company, both in terms of principal and interest. In the portfolio of an NBFC, the losses stem from outright default due to the inability or unwillingness of a customer or counterparty to meet commitments in relation to repayment, trading, settlement and other financial transactions. Alternatively, losses result from reduction in portfolio value arising from actual or perceived deterioration in due to any event affecting the borrower/ a group of borrowers. The effective management and reporting of credit risk is a critical component of comprehensive risk management and is essential for the long-term success of any banking and financial services organization. It ensures that risks are identified in advance and corrective action taken. Credit risk management encompasses identification, measurement, monitoring, control and reporting of the credit risk exposures.

The major risk that the Company faces is the default and / or delay in payment of EMIs (principal and interest) by the customers within the due time. To mitigate the said risk, the Company measures the credit history, capacity to repay, loan amount and loan conditions and associated collateral, if any, of the customer before sanctioning/ disbursing loan and has an efficient post disbursal monitoring mechanism to take corrective and timely action whenever required to minimise the probability of default/loss.

48.2.2 Methodology for assessment of Expected Credit loss on loan asset - Refer Note 6.1.(vii) of Material accounting policies

48.2.3 Credit quality of financial asset based on Stage 1 (No significant increase in the credit risk), Stage 2 (Significant increase in the credit risk but no impairment), and Stage 3 (Credit impaired asset) - Refer Note 10.1 of Financial Statements.

48.2.4 Reconciliation of expected credit loss balance - Refer Note 10.3 of Financial Statement

48.2.5 RBI disclosures requirement for restructured assets - Refer Note 74 of Financial Statement

48.2.6 Concentration of Credit Risk - Retail and Residential Loans The Company’s portfolio can be broadly classified as following:

48.2.6.1 Vehicle Loan (predominantly backed up by 2-wheeler and used 4-wheeler assets)

48.2.6.2 Vehicle Loan (Securitised)

48.2.6.3 Secured Loans

48.2.6.4 Unsecured Loans

48.2.7 Maximum Exposure to Credit Risk

The maximum exposure to credit risk of loans is their carrying amount without considering effect of mitigation through collateral recovery and credit enhancements

48.2.8 Narrative Description of Collateral

Collateral primarily includes vehicles purchased by retail loan customers and in respect of other secured loans they represent specific/pari-passu charge on the receivables of the borrowers.

48.2.9 Quantitative Information of collateral

Gross Value of total secured loans to value of collateral (Before adjustment on account of

PIDl

48.2.10 Liquidity Risk

Liquidity Risk arises largely due to maturity mismatch associated with assets and liabilities of the Company. Liquidity risk stems from the inability of the Company to fund increase in assets, manage unplanned changes in funding sources and meet financial commitments when required. The Asset Liability Committee (ALCO) of the Board of directors meets regularly to review the liquidity position based on future cash flows. The company also maintain adequate liquid assets and has access to funding the hedge against unexpected requirement.

48.2.10.1 Analysis of Financial Assets and Liabilities by Remaining Contractual Maturities

The below table shows as analysis of assets / liabilities and analysed accordingly to when they are expected to be recovered or settled and considering contract terms. For loans/ advances to customers maturity analysis is based on original contractual terms.

48.2.10.1 (i) Represents adjustments on account of ECL /EIR

48.2.10.1 (ii) While above table shows short fall in the assets compared to the liabilities in

certain buckets, in actual practice, the loan accounts which are considered as being paid off in those buckets are normally renewed / rolled over within a day or two and the shortfall gets covered within the same bucket. This renewal / roll over is not considered in the above table.

48.2.10.2 (i) Represents adjustments on account of ECL / EIR

48.2.10.2 (ii) While the above table shows shortfall in the Assets compared to the Liabilities

in certain buckets, in actual practice, the loan accounts which are considered as being paid off in those buckets are normally renewed / rolled over within a day or two and the shortfall gets covered within the same bucket. This renewal / roll over is not considered in the above table.

48.2.10.2. (iii) Refer Note 40 for Change in accounting policy w.r.t ‘Accounting of Interest income on credit impaired assets’ during previous year

48.2.11 Market Risk

Market Risk is the risk that the fair value or the future cash flows of a financial instrument will fluctuate because of changes in market factor. Such changes in the values of financial instruments may result from changes in the interest rates, credit, liquidity, and other market changes. The objective of market risk management is to avoid excessive exposure of our earnings and equity to loss and reduce our exposure to the volatility inherent in financial instruments. The Company is primarily exposed to Interest rate risk as under:

Interest rate risk

Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The company is subject to interest rate risk, primarily since it lends to customers at fixed rates and for maturity periods different from the funding sources. Further, majority of company’s borrowings are in the

form of WCDL/ Cash Credit, on which company is exposed to Interest rate risk either during the tenure of the loan or at the time of renewal which is ordinarily within a period of 12 months. Interest rates are highly sensitive to many factors beyond control, including the monetary policies of the Reserve Bank of India, deregulation of the financial sector in India, domestic and international economic and political conditions, inflation and other factors. In order to manage interest rate risk, the company seek to optimize borrowing profile between shortterm and long-term loans. The company adopts funding strategies to ensure diversified resource-raising options to minimize cost and maximize stability of funds. Assets and liabilities are categorized into various time buckets based on their maturities and Asset Liability Management Committee supervises an interest rate sensitivity report periodically for assessment of interest rate risks. The Interest Rate Risk is mitigated by availing funds at very competitive rates through diversified borrowings and for different tenures.

The table below discloses the sensitivity impact analysis of changes in floating interest rates to the Company’s pre tax profit

49. SEGMENT REPORTING

The Company is primarily engaged in the business of financing and there are no separate reportable segments identified as per the Ind AS 108 - Segment Reporting.

50. TRANSFERRED FINANCIAL ASSETS THAT ARE NOT DERECOGNISED IN THEIR ENTIRETY

50.1 The Company has transferred certain pools of fixed rate loan receivables backed by underlying assets by entering into securitisation transactions through Special Purpose Vehicle Trusts ("SPV Trust”).

The Company, being Originator of these loan receivables, also acts as Servicer with a responsibility of collection of receivables from its borrowers and depositing the same in Collection and Payout Account maintained by the SPV Trust for making scheduled payouts to the investors in Pass Though Certificates (PTCs) issued by the SPV Trust. These securitisation transactions also require the Company to provide for first loss credit enhancement in various forms, such as corporate guarantee, cash collateral, subscription to subordinated PTCs as credit support in the event of shortfall in collections from underlying loan contracts. By virtue of existence of credit enhancement, the Company is exposed to credit risk, being the expected losses that will be incurred on the transferred loan receivables to the extent of the credit enhancement provided.

In view of the above, the Company has retained substantially all the risks and rewards of ownership of the financial asset and thereby does not meet the derecognition criteria as set out in Ind AS 109. The consideration received under this securitisation arrangements are accounted as Financial Liability and the balance outstanding as at the end of the reporting date is disclosed as "Secured term loan from securitisation transaction” under Note 19.

The following table provides a summary of financial assets that have been transferred in such a way that part or all of the transferred financial assets do not qualify for derecognition, together with the associated liabilities.

52. UPDATE ON COMPLIANCE MATTERS

The Company had in the earlier year, Considering the macroeconomic environment arising from the Covid-19 pandemic and its implication such as poorer collections, the restructuring permitted during the Covid-19 period etc. as well as the RBI’s framework on staging of Loans and PCA (Prompt Corrective Action), created an additional management overlay amounting to '' 22,610 Lakhs.

During Q2 FY 24, Board of Directors has approved a comprehensive policy for creation, retention and withdrawal of management overlay for provision for NPA. The policy stipulates minimum provision coverage ratio on credit impaired assets at 75% and NNPA being below 6%.

In accordance with the policy, company has written back a sum of '' 13,871.62 Lakhs retaining '' 6,150 lakhs as of 30th September 2023. The said management overlay has remained unchanged as on 31st March 2024. The reversal of said provision has been shown as exceptional item in the financial statements.

53. FLOATING CHARGE

In accordance with the Master direction - Non-Banking Financial Companies Acceptance of Public deposits (Reserve Bank) directions, 2016 dated 25th August, 2016, the Company has created a floating charge on the Statutory Liquid Assets comprising of investment in Government Securities (face value) to the extent of '' 1,127.06 lakhs on 31st March 2024 (31st March 2023: '' 1,127.06 lakhs) in favour of trustees representing the public deposit holders of the Company.

73.1. (i) Unweighted values are calculated as outstanding balances maturing or callable within 30 days

(for Cash inflows and Cash outflows).

73.1. (ii) Weighted values are calculated after the application of respective haircuts and stress factor

(on Cash Inflow / Cash Outflow).

73.1. (iii) The average LCR for all the quarters are computed as simple average of daily observations over

the previous quarters.

73.1. (iv) The figures of the respective months are used for the quantitative disclosure are based on the

estimates assumptions and contractual terms of the management, which has been relied upon by the auditors

73.2 Qualitative Disclosure

The Reserve Bank of India has prescribed Guidelines on Maintenance of Liquidity Coverage Ratio (LCR). All Non-Deposit taking NBFCs with asset size of '' 10,000 crore and above, and all deposit taking NBFCs irrespective of their asset size, is required to maintain a liquidity buffer in terms of LCR which will promote resilience of NBFCs to potential liquidity disruptions by ensuring that they have sufficient High Quality Liquid Asset (HQLA) to survive any acute liquidity stress scenario lasting for 30 days. The stock of HQLA to be maintained by the NBFCs shall be minimum of 100% of total net cash outflows over the next 30 calendar days.

The LCR requirement was applicable from December 1, 2020 with the minimum HQLAs to be held being 50% of the LCR, progressively reaching a level upto 60%, 70%, 85% and 100% by December 1, 2021, December 1, 2022, December 1, 2023, December 1, 2024 respectively.

Liquidity Coverage Ratio (LCR) comprises of High Quality Liquid Assets (HQLAs) as numerator and net cash outflows in 30 days as denominator. The average LCR is computed at as simple averages of daily observations over the previous quarter except for the quarter ended 31st March 2022 wherein monthly observations are used.

The company, during the quarter ended March 31, 2024, had maintained average HQLA of '' 21,186.43 lakhs against '' 26,504.69 lakhs for the quarter ended March 31, 2023. HQLA primarily includes cash on hand, bank balances in current account and demand deposits with Scheduled commercial Banks, and Government securities (such unencumbered approved securities held as per the provisions of section 45 IB of RBI Act). The company has implemented the LCR framework and has maintained LCR well above the regulatory threshold. The average LCR for the quarter ended March 31, 2024 was 191% which is above the regulatory requirement of 85%. For the quarter ended March 31, 2023 average LCR was stood at 293%.

77. Audit trail

The Company uses accounting software for maintaining its books of account which have a feature of audit trail (edit log) facility at the application level for each change made in the books of account along with such changes made. This feature of audit trail (edit log) facility was operated throughout the year for all the transactions recorded in such software.

However, Company has not enabled audit trail for direct database layer changes as access to the database of all accounting software is available only to database administrators for the limited purpose of its maintenance for which access and monitoring controls are enabled. Also, no changes have been made to any transaction recorded in the books of account, directly at the database level during the year. The audit trail (edit log) feature has not been tampered with during the year.

78. OTHER STATUTORY INFORMATION

78.1 No Benami Property are held by the Company and or no proceedings have been initiated or are pending against the company for holding any benami property under the Benami Transactions (Prohibition) Act, 1988 (45 of 1988) and rules made thereunder.

78.2 The company has searched transactions with Struck-off companies by comparing company’s counter parties with publicly available database of struck of companies through a manual name search. Based on such a manual search, no party identified to be reported in the financial statements.

78.3 There is no charges or satisfaction in relation to any debt / borrowings yet to be registered with ROC beyond the statutory period.

78.4 The Company has complied with the number of layers prescribed under clause (87) of section 2 of the Act read with Companies (Restriction on number of Layers) Rules, 2017.

78.5 Other than the transactions that are carried out as part of Company’ normal lending business:

A) The Company has not advanced or loaned or invested funds (either borrowed funds or share premium or any other sources or kind of funds) to any other person(s) or entity(ies), including foreign entities (Intermediaries) with the understanding (whether recorded in writing or otherwise) that the Intermediary shall -

(a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the company (Ultimate Beneficiaries) or

(b) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries;

B) The Company has not received any fund from any person(s) or entity(ies), including foreign entities (Funding Party) with the understanding (whether recorded in writing or otherwise) that the company shall -

(a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (Ultimate Beneficiaries) or

(b) provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries."

78.6 The Company has not traded or invested in Crypto currency or Virtual Currency during the financial year

78.7 There are no transactions which have not been recorded in the books of accounts and has been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961. Also, there are no previously unrecorded income and related assets.

78.8 The Company has in respect of the investments made, complied with no of layers as defined under section 2(87) of the Companies Act, 2013.

78.9 The Company has nothing to report on compliance with approved Scheme(s) of Arrangements.

78.10 There are no differences between the quarterly returns of assets given as security submitted to the banks and the books of account.

79. EVENTS AFTER THE REPORTING DATE/ OTHER DEVELOPMENTS

79.1 Material events occurring after the balance sheet date are taken into cognizance and there are no other events after the reporting date that require disclosure in the financial statements.

79.2 The Code on Social Security, 2020 (the Code) has been enacted, which would impact contribution by the Company towards Provident Fund and Gratuity. The impact of changes if any arising on enactment of the Code will be assessed by the company after the effective date of the same and the rules thereunder are notified

80. Previous year figures, unless otherwise stated, are given within brackets and have been reworked, regrouped, re-arranged and re-classified to conform to the current year presentation.

Note: The accompanying notes form an integral part of the financial statements (Note No: 1-80).

As per our separate report of even date attached.

For PKF Sridhar & Santhanam LLP For and on behalf of the Board of Directors of

Chartered Accountants MUTHOOT CAPITAL SERVICES LIMITED

FRN No:003990S/S200018

Sd/- Sd/- Sd/- Sd/-

Viswanadh VNSS Kuchi Thomas John Muthoot Thomas George Muthoot Thomas Muthoot

Partner Chairman Managing Director Director

Membership No: 210789 DIN: 00011618 DIN: 00011552 DIN: 00082099

UDIN: 24210789BKGFFF7171 Place: Hyderabad

Sd/- Sd/- Sd/-

Mathews Markose Ramandeep Singh Srikanth Menon

Chief Executive Officer Chief Finance Officer Company Secretary &

Compliance Officer Mem No: F11743

Place: Kochi Date: 23 ^rd May 2024

---

Mar 31, 2019

1. CORPORATE INFORMATION

Muthoot Capital Services Limited (‘the Company’) is a public company domiciled in India, governed by the Companies Act 2013 and is a Systemically Important Deposit Accepting Non-Banking Financial Company (“NBFC”) registered with Reserve Bank of India. The shares of the Company are listed on the Bombay Stock Exchange and the National Stock Exchange. During the year, the Company was primarily engaged in the business of financing for purchase of automobiles, mainly two wheelers against hypothecation of the vehicles and granting of personal/business loans etc.

2. NOTES ON ACCOUNTS FOR THE YEAR ENDED 31st MARCH, 2019

Amounts in the financial statements are presented in thousands, except for per share data and as otherwise stated.

The Company has only one class of shares referred to as equity shares having a par value of Rs.10. Each holder of equity share is entitled to one vote per share.

In the event of liquidation of the Company, the holders of the equity shares will be entitled to receive any of the remaining assets of the Company, after distribution of all preferential amounts. However, no such preferential amounts exist currently. The distribution will be in proportion to the number of equity shares held by the shareholders.

As per the records of the Company, including its register of shareholders/members and other declarations received from shareholders regarding beneficial interest, the above shareholding represents both legal and beneficial ownerships of shares.

Terms of Repayment of Bank Loans:

Security and Rate of Interest of Term Loans from Banks

The term loans from banks are secured by charge on the entire current assets including loans receivable of the company. The rate of interest varies from 9.30% to 11.00% as on the Balance Sheet date.

These loans are repayable in equal monthly/ quarterly instalments which are spread over period up to 36 months.

Security and Rate of Interest of Term Loans from Financial Institution

The term loans from Mahindra & Mahindra Financial Services Ltd is secured by creating a paripassu hypothecation charge together with other term loan & working capital lenders of the borrower, over receivables/ loan assets/book debts.

The Company has taken one Term Loans from Mahindra & Mahindra Financial Services Ltd in in two tranches of Rs.50 00 00 thousand each with interest rates being 9.5% and 10.75%. The loan is repayable in six equal quarterly installments over a period of 18 months.

2.1.1 Subordinated Term Loans/Debts (Sub Debts):

A. Northern Arc Capital Limited (Formerly known as IFMR Capital Finance Private Limited) -

The Company has taken two Subordinated Unsecured Term Loans from Northern Arc Capital Ltd. of Rs.15 00 00 thousand each on 29th June, 2016 and 30th March, 2017 respectively, with interest rates being 12.5% and 11.95%. The loans will be repaid only on maturity i.e. after 66 months from the date of availing the loan.

B. The Company has also accepted subordinated debts from public under three schemes, namely Monthly, Annual and Maturity interest payment with interest rates ranging from 9% to 13.4%. The maturity period of the loan ranges from 60 months to 96 months. The subordinated debts issued under each scheme will be repaid only on maturity.

The Unsecured Term loans / Subordinated Debts of the Company qualify as Tier II Capital under Master Directions - Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 2016 issued by Reserve Bank of India.

2.1.2 Public Deposits:

The Company has accepted Public Deposits under three schemes, namely Monthly, Annual and Maturity interest payment. The deposits issued under each scheme will be repaid only on maturity, unless claimed by the depositor earlier and, if permissible, to be repaid as per the regulations issued in this regard by the Reserve Bank of India. The rate of interest on these deposits ranges from 7.0 % to 11.75% per annum. The repayment period ranges from 12 months to 60 months

2.1.3 Current portion of interest accrued, but not due on the above borrowings amounting to Rs.3 51 47 thousand (Rs.5 14 07 thousand) is shown in Note No. 2.8 under Other Current Liabilities .

2.1.4 The liability towards Unrealized Gain appears in the financial statements in the manner given below:

2.1.5 Loans from Banks - Working Capital Demand Loans and Cash Credits Guaranteed Loans

The Working Capital Demand Loans, Cash Credits and Term Loans obtained from Banks have been personally guaranteed by the Promoter Directors of the Company, namely, Mr. Thomas John Muthoot, Mr. Thomas George Muthoot and Mr. Thomas Muthoot.

Security and Rate of Interest of Working Capital Demand Loans and Cash Credits from Banks

The Cash Credits and Working Capital Demand Loan facilities have been obtained from the banks by creating First Charge by way of hypothecation of the entire current assets, including business loans, hypothecation loans and all other loan receivables, ranking pari-passu with other banks and Debenture Holders.

Interest on these loans varies between 8.4% to 11.2% per annum as on the Balance Sheet date.

These loans are repayable within a period upto 12 months from the date of sanction.

2.1.6. Loans and Advances from Related Parties

The Company has entered into transactions with Promoter Director of the Company. The Company pays interest @ 12% p.a in respect of interest bearing loans(Balance outstanding as at 31st March, 2019 was ? 7 55 00 thousand (? 3 05 00 thousand)). The total balance outstanding (interest and non-interest bearing loan) as at 31st March 2019 is Rs.10 24 34 thousand (Rs.5 78 06 thousand)

2.1.7. Inter Corporate Deposits

The Company has taken an Inter Corporate Deposit from Adtech Systems Ltd. This is repayable after a period of 3 months with an effective rate of interest of 9% per annum. The balance Outstanding as on 31st March, 2019: Rs.1 62 47 thousand (Rs.1 49 95 thousand)

Trade Payables includes amounts payable to related parties amounting to Rs.2 85 17 thousand (Rs.2 47 26 thousand)

2.1.8 Amount Payable to Micro, Small and Medium Enterprises

There are no Micro, Small and Medium Enterprises as defined in the Micro, Small and Medium Enterprises Development Act, 2006 to whom the Company owes dues on account of Principal amount together with interest and accordingly no additional disclosures have been made.

The above information regarding Micro, Small and Medium Enterprises has been determined to the extent such parties have been identified on the basis of information available with the Company. This has been relied upon by the auditors.

2.1.9 Debentures:

The Company has issued Redeemable Non-Convertible Debentures on Private Placement basis in various series. The debentures issued under each series have a repayment period depending on the scheme it falls under. The debentures are repayable within a period of 1 to 6 years, depending on the schemes. The schemes range from Monthly, Annual and Maturity Interest payment. The rate of interest of matured debentures ranges from 11% to 14.19% per annum.

2.1.10 Investment in PMS is represented by the following-

(a) Nil (7 750) shares of Rs.2/- each in Manappuram Finance Ltd - Rs. Nil (Rs.764 thousand)

(b) 9 260 (10 526) shares of Rs.10/- each in Muthoot Finance Ltd-Rs.41 94 thousand (Rs.48 57thousand)

(c) 5 02 006 (Nil) units in HDFC Ultra Short-term Fund Rs.52 21 thousand (?Nil)

(d) Balance with PMS Rs. Nil (Rs.4 thousand)

2.1.11 Aggregate amount of quoted investment is Rs.6 83 65 thousand (Rs.14 81 15 thousand) and market value is Rs.725 07 thousand (Rs.15 60 91 thousand), aggregate amount of unquoted investment is ?3 45 00 thousand (?3 05 04 thousand). Aggregate provision for diminution in value of investment is Nil.

2.1.12 In accordance with the guidelines given in the Master Direction - Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 2016 issued by Reserve Bank of India, the Company has created floating charge on the statutory liquid assets comprising of Investment in Government Securities of face value of Rs.14 88 00 thousand (Cost- Rs.14 24 94 thousand) and bank deposits of Rs.2 00 00 thousand in favor of trustees representing the deposit holders of the Company.

Deferred Tax Asset and Deferred Tax Liabilities have been set off wherever the Company has legally enforceable right to set off current tax assets against current tax liabilities and the Deferred Tax Assets and Deferred Tax Liabilities relating to the same taxation authority.

2.1.13 Aggregate amount of quoted investment is ?8 35 63 thousand (Rs.19 thousand) and market value is ?8 8961 thousand (Rs.27 thousand).

2.1.14 Deposits disclosed above, have a maturity period of less than 12 months as at the end of reporting period, except for deposits offered as collateral security against securitization transaction amounting to Rs.45 78 34 thousand (Nil)

2.1.15 The Company has repossessed assets worth Rs. 3 84 thousand on 31st March, 2019 (Rs.15 19 thousand). The same has been fully provided for and charged to statement of Profit and Loss as on the date of the Balance Sheet and the realizable value is shown as Nil.

2.1.16 Loans Buyout

The company has entered into arrangements with other NBFCs for the buyout of receivables of Four Wheeler Portfolio, Two Wheeler Portfolios and Micro Finance Portfolio. The rate of interest receivable on the loan buyouts ranges between 13.7% to 16% per annum on the diminishing balance. The tenure of the loans ranges between 21 months and 37 months.

2.1.17 Term Loans

The company has advanced Term Loans to other Companies / NBFCs secured by way of first charge/pari-passu charge on the loan portfolio created out of the lending by the Company. The rate of interest receivable on the term loans ranges between 12.4% to 16% per annum on the diminishing balance. The tenure of the loans ranges between 15 and 48 months.

2.1.18 Other receivables include amounts receivable from related parties amounting to Rs.748 thousand (Rs.3 87 thousand).

2.1.19 It comprises of Company’s share of future interest strip receivables in case of par structure of securitisation.

2.1.20 Prepaid expense includes expense paid to related parties amounting to Rs.14 08 thousand (Nil).

2.1.21 An amount of Rs.7 75 77 thousand (Rs.1 60 35 thousand) has been written off against the nonperforming hypothecation assets. (Refer significant accounting policy No 1.19)

3.Employee Benefit Plans

3.1 Defined Benefit Plans - Gratuity

The Company has entered into an arrangement with the LIC of India to cover the liability payable to the employees towards the gratuity under a Gratuity Trust Scheme based on Group Gratuity Cum Assurance Scheme of the LIC of India which is a defined benefit scheme and the company has to make contributions under such scheme.

4.1.1 As per the terms of appointment approved by the Board of Directors, remuneration of Mr. Ravi Oruganti is being paid to Muthoot Fincorp Limited.

4.2 Provisions for doubtful debts due from related parties at the balance sheet date-Nil (Nil)

4.3 Amounts written off or written back of debts due from or to related parties-Nil (Nil)

The operating lease arrangements are renewable on a periodical basis and relates to rented premises. The lease agreements have lease escalation clauses.

5. GENERAL

5.1 Particulars showing maturity pattern of secured privately placed Redeemable Non Convertible Debentures

Secured by charge on all movable assets, book debts, receivables and advances in the books of the company.

5.2 Cost Insurance Freight (CIF) value of imports - NIL

5.3 Expenditure in foreign currency

5.4 Earnings in Foreign Currency - NIL

6. Reporting of Fraud - No cases of frauds were reported during the financial year 2018-19

7. Disclosures required in Master Directions - Non-Banking Financial Company - Systemically Important Non-Deposit taking company and Deposit taking company (Reserve Bank) Directions, 2016 issued by Reserve Bank of India.

Note 1: Only the SPVs relating to outstanding securitization transactions are reported here Note 2: Based on the information duly certified by SPV’s auditors on which reliance is placed by Auditors.

Note 1: The above maturity profile has been compiled from the internal records and system reports maintained by the management on which reliance is placed by the auditors.

Note 2: Above includes Interest accrued.

Note 3: In accordance with the revised ALM policy of the management, Non-Performing Assets as at 31st March 2019 have been categorized under the maturity pattern of “ Over 1 year upto 3 years” for the above disclosure.

iii. Details of financing of parent company products - NIL

iv. Details of Single Borrower Limit (SBL) / Group Borrower Limit (GBL) exceeded by the company - NIL

v. Unsecured Advances

The unsecured Loans against Demand Promissory Notes (DPN) executed by the borrowers and outstanding as at 31.03.2019 is Rs.14 50 13 thousand (as at 31.03.2018 Rs.8 11 43 thousand).

A. Registration obtained from other financial sector regulators - NIL

B. Disclosure of Penalties imposed by Reserve Bank of India and other regulators - NIL

C. Ratings Assigned by Credit Rating Agencies and migration of ratings during the year

D. Provisions and Contingencies

Break up of ‘Provisions and Contingencies’ shown under the head Expenditure in the Statement of Profit and Loss

E. Drawn Down from Reserves-Nil

F. Concentration of Deposits, Advances, Exposures and NPAs

G. Concentration of Deposits (for deposit taking NBFCs)

Note vi.(i): Additions/Reductions to NPA do not include accounts classified as NPA and regularized during the same financial year.

Note vi.(ii): Provisions made during the year includes additional provision amounting to Rs.14 09 10 thousand (Rs.4 00 00 thousand) created over and above the minimum levels specified by RBI in accordance with the accounting policy as stated in 1.19 (i)(b) and does not include loans written off during the year as stated in Note 2.26.1.

H. Overseas Assets (for those with joint ventures and subsidiaries abroad) - NIL

I. Off-balance sheet SPVs sponsored (which are required to be consolidated as per accounting norms) - NIL

The above particulars have been compiled from the internal registers maintained by the management on which reliance is placed by the auditors.

8 Additional disclosures as required in terms of Para 18 of Master Directions - Non-Banking Financial Company - Systemically Important Non-Deposit taking company and Deposit taking company (Reserve Bank) Directions, 2016 issued by Reserve Bank of India.

Liabilities side:

8.1 Loans and advances availed by the NBFC, inclusive of interest accrued thereon but not paid:

Note 1 - Overdues for a sum of Rs.6 21 thousand in respect of Secured Debentures represents debentures for which payments could not be made as claims were not received from debenture holders.

Note 2 - Overdue of Rs.2 89 16 thousand in respect of Public Deposits includes deposits for a sum of Rs.1 00 85 thousand pending renewal and deposits for a sum of Rs.1 88 31 thousand for which payments could not be made as claims were not received from deposit holders.

Note 3- Overdue of Rs.49 thousand in respect of Subordinated Debt represents debts for which payments could not be made as claims were not received from Subordinated Debt holders.

Note 4 - Balance outstanding against amounts borrowed from banks is inclusive of interest accrued, but not due.

8.2 The value of repossessed assets is shown net of provision/diminution amounting to Rs. 3 84 thousand as on 31^st March 2019.

9. Previous year figures unless otherwise stated, are given within brackets and have been reworked, re-grouped, re-arranged and re-classified to conform to the current year presentation. The figures are rounded off to the nearest thousands.

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Mar 31, 2018

Refer Note No. 2.16 ‘Cash and Cash Equivalents.

Deferred Tax Asset and Deferred Tax Liabilities have been set off wherever the Company has legally enforceable right to set off current tax assets against current tax liabilities and the Deferred Tax Assets and Deferred Tax Liabilities relating to

2.17.1 The Company has repossessed assets worth Rs, 15 19 thousand on 31^st March, 2018 (Rs, 85 thousand). The same has been fully provided for and charged to statement of Profit and Loss as on the date of the Balance Sheet and the realizable value is shown as Nil.

2.17.2 Loans Buyout

The company has entered into arrangements with other NBFCs for the buyout of receivables against Four Wheeler Portfolio and Two Wheeler Portfolios. The rate of interest receivable on the loan buyouts ranges between 15% to 16% per annum on the diminishing balance. The tenure of the loans ranges between 20 months and 37 months.

2.17.3 Term Loans

The company has advanced Term Loans to other Companies / NBFCs secured by way of first charge on the loan portfolio created out of the lending by the Company. The rate of interest receivable on the term loans ranges between 12% to 16% per annum on the diminishing balance. The tenure of the loans ranges between 12 and 48 months.

Compiled based on information maintained by the Company on which reliance has been placed by the Auditor.

The operating lease arrangements are renewable on a periodical basis and relates to rented premises. The lease agreements have lease escalation clauses.

The earnings per share for the current period and previous periods have been restated in the manner required by Accounting Standard-20 “Earnings Per Share” in respect of 12,47,258 bonus shares allotted by the Company in accordance with the resolution of the shareholders of the Company passed at the Annual General Meeting held on 6th June 2017.

Note 1 - Overdues for a sum of Rs,18 00 thousand in respect of Secured Debentures represents debentures for which payments could not be made as claims were not received from debenture holders.

Note 2 - Overdue of Rs,3 39 62 thousand in respect of Public Deposits includes deposits for a sum of Rs,1 32 67 thousand pending renewal and deposits for a sum of Rs,2 06 95 thousand for which payments could not be made as claims were not received from deposit holders.

Note 3 - Balance outstanding against amounts borrowed from banks is inclusive of interest accrued, but not due.

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Mar 31, 2017

1. NOTES ON ACCOUNTS FOR THE YEAR ENDED 31^st MARCH, 2017

Amounts in the financial statements are presented in thousands, except for per share data and as otherwise stated.

The Company has only one class of shares referred to as equity shares having a par value of Rs. 10. Each holder of equity share is entitled to one vote per share.

In the event of liquidation of the Company, the holders of the equity shares will be entitled to receive any of the remaining assets of the Company, after distribution of all preferential amounts. However, no such preferential amounts exist currently. The distribution will be in proportion to the number of equity shares held by the shareholders.

The Company do not propose to declare dividend and consequently the requirements of appropriation to the General Reserve out of the profit for the year are not applicable.

As per the records of the Company, including its register of shareholders/members and other declarations received from shareholders regarding beneficial interest, the above shareholding represents both legal and beneficial ownerships of shares.

A. Subordinated Unsecured Term Loan -

The Company has taken two Subordinated Unsecured Term Loans from IFMR Capital Finance Private Limited of Rs. 15 00 00 thousand each on 29^th Jun 2016 and 30^th Mar 2017 respectively, with interest rates being 12.5% and 11.95%. The loans will be repaid only on maturity i.e. after 66 months from the date of availing the loan.

B Subordinated Debts (Sub debts) -

The Company has also accepted subordinated debts from public under three schemes, namely Monthly, Annual and Maturity schemes with interest rates ranging from 9.75% to 13.40%. The maturity period of the debts ranges from 60 months to 84 months. The subordinated debts issued under each scheme will be repaid only on maturity.

C The Subordinated Unsecured Term Loan and Subordinated Debts of the Company qualify as Tier II Capital under Master Directions - Non-Banking Financial Company - Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016 dated 09^th March, 2017.

Public Deposits:

The Company has accepted Public Deposits under three schemes, namely Monthly, Annual and Maturity schemes. The deposits issued under each scheme will be repaid only on maturity, unless claimed by the depositor earlier and if permissible to be repaid as per the regulations issued in this regard by the Reserve Bank of India. The rate of interest on these deposits ranges from 7% to 12.5% per annum. The repayment period ranges from 12 months to 60 months

Grand Total A. Loans from Banks Guaranteed Loans

The Working Capital Demand Loans, Cash Credits and Term Loans obtained from Banks have been personally guaranteed by the Promoter Directors of the Company, namely, Mr. Thomas John Muthoot, Mr. Thomas George Muthoot and Mr. Thomas Muthoot.

Security and Rate of Interest of Cash Credits and Working Capital Demand Loans from Banks

The Cash Credits and Working Capital Demand Loans facilities have been obtained from the banks by creating First Charge by way of hypothecation of the entire current assets, including business loans, hypothecation loans and all other loan receivables, ranking pari-passu with other banks and Debenture Holders.

Interest on these loans varies between 9.15% to 11.35% per annum as on the Balance sheet date.

These loans are repayable within a period upto 12 months from the date of sanction.

Security and Rate of Interest of Term Loans from Banks

The term loans from banks are secured by creating a first charge by way of hypothecation of entire current assets including hypothecation loans and all other loan and other current assets of the Company.

Rate of interest varies from 10.9% to 11.30% as on the Balance Sheet date.

These loans are repayable in equal monthly/quarterly installments spread over 10 months to 33 months.

B. Loans and Advances from Related Parties

The Company has entered into transactions with the Promoter Directors of the Company. The Company pays interest at 12% per annum. The balance outstanding as on March 31, 2017 was Rs. 13 64 06 thousand (March 31, 2016: Rs. 13 64 38 thousand).

C. Inter Corporate Deposits

The Company has taken an Inter Corporate Deposit from Adtech Systems Ltd. This is repayable after a period of 3 months with an effective rate of interest of 9% per annum. The balance outstanding as on March 31, 2017: Rs. 1 52 61 thousand (March 31, 2016: Rs. 1 40 85 thousand).

* There are no amounts due and outstanding to be credited to Investor Education and Protection Fund.

** Unrealized Gain on Loan Transfer Transactions comprises of future interest receivable under par structure of securitization.

*** Expenses payable includes amounts payable to related parties amounting to Rs. 1 51 58 thousand (March 31, 2016: Rs. 1 23 66 thousand)

**** Others includes amounts payable to related parties amounting to Rs. 53 78 thousand (March 31, 2016: Rs. 20 04 thousand)

Debentures:

The Company has issued Redeemable Non-Convertible Debentures on Private Placement basis in various series. The debentures issued under each series have a repayment period depending on the scheme it falls under. The debentures are repayable within a period of 1 to 6 years, depending on the schemes. The schemes range from Monthly, Annual and Maturity Interest payment. The rate of interest of the Unmatured debentures range from 10.92% to 14.19% per annum and the rate of interest of matured debentures ranges from 9.5% to 13.4% per annum.

The issued debentures are secured by a pari-passu first charge with the banks against the loans, including cash credit, demand loans and term loans, taken from them, on all movable assets, book debts and receivables created by undertaking the business of Hypothecation Loan and all other types of Loans, both present and future, created by the Company.

** Loan Buyout

The Company has entered into arrangements with other NBFCs for the buyout of receivables against Micro Finance Portfolio and Two Wheeler Portfolios. The rate of interest receivable on the loan buyouts ranges between 15% to 16% per annum on the diminishing balance. The tenure of the loans ranges between 15 and 30 months.

***Term Loans

The company has advanced Term Loans to other Companies/NBFCs secured by way of first charge on the loan portfolio created out of the lending by the Company. The rate of interest receivable on the term loans ranges between 13.5% to 16% per annum on the diminishing balance. The tenure of the loans ranges between 12 and 48 months.

2. DEFINED BENEFIT PLANS- GRATUITY VALUATION

The Company has entered into an arrangement with the LIC of India to cover the liability payable to the employees towards the gratuity under a Gratuity Trust Scheme based on Group Gratuity Cum Assurance Scheme of the LIC of India which is a defined benefit scheme and the Company has to make contributions under such scheme.

3. RELATED PARTY DISCLOSURES

Related party disclosures as per AS 18 - ''Related Party Disclosures'' for the year ended 31^st March 2017, are given below:

4. LEASES

The Lease rentals charged during the period and the maximum obligation on operating leases payable as per the rentals stated in the respective agreements are as follows:

The operating lease arrangements are renewable on a periodical basis and relates to rented premises. The lease agreements have lease escalation clauses.

5. GENERAL

(i) Some of the Receivables and Payables, Loans and Advances, Hypothecation Loans, Deposits, Secured Debentures and Unsecured Loans are subject to confirmation/reconciliation due to non-receipt of the statement of accounts and confirmation letters. Necessary adjustments, if any, in the accounts will be made on completion of the reconciliation/receipt of confirmation letters/statement of accounts.

(ii) Amount Payable to Micro, Small And Medium Enterprises

There are no Micro, Small and Medium Enterprises as defined in the Micro, Small and Medium Enterprises Development Act, 2006 to whom the Company owes dues on account of Principal amount together with interest and accordingly no additional disclosures have been made.

The above information regarding Micro, Small and Medium Enterprises has been determined to the extent such parties have been identified on the basis of information available with the Company. This has been relied upon by the auditors.

(iii) Particulars showing maturity pattern of secured privately placed Redeemable Non-Convertible Debentures Secured by charge on all movable assets, book debts, receivables and advances in the books of the Company.

B. Details of Collection amounts directly remitted in the Company''s bank account

The Company collected its dues from the customers in the following ways:

6. Collection by way of direct remittance in the bank account of the Company by borrowers/collection agencies/ company executives, in cash

7. Collection by way of payment by borrowers/collection agencies and company executives in cash to the branches of Muthoot Fincorp Limited who are appointed as the authorized agents for collection of Hypothecation dues from the customers. Muthoot Fincorp Ltd transfers such amount collected from customers in cash through bank transfer to the account of the Company.

8. Collection by way of ECS/NACH

In all the cases mentioned above, the Company, in accordance with the practices and method of accounting regularly followed, accounted the receipt of cash/electronic mode collection by crediting the respective borrowers'' account and debiting the account of Muthoot Fincorp Limited/ Bank Account, as the case may be.

During the period from November 8, 2016 to December 30, 2016 an aggregate amount of ''1 38 88 thousand had been remitted in cash in the designated bank account with State Bank of India directly by certain customers and collection agents/ company executives through various branches of Muthoot Fincorp Ltd across the country against the hypothecation receivables. Such cash was not actually received in cash at offices of the Company. Hence such receipt of cash directly deposited in the bank account of the Company not routed through the cash account of the Company. Therefore those receipts of cash are not considered as movement of cash.

9. REPORTING OF FRAUD - No cases of frauds were reported during the financial year 2016-17

10. SECURITISATION TRANSACTION

a. During the year the Company has securitized on "at Par" basis vide Pass Through Certificate route loan receivables of 1,32,550 contracts amounting to Rs. 349 5 5 74 thousand for a consideration of Rs. 349 55 74 thousand and de-recognized those assets of value Rs. 349 55 74 thousand from the books.

b. Interest Only Strip representing present value of interest spread receivable has been recognized and reflected under other current assets as "Interest Strip Retained on Securitization of Receivables" (Refer note no.2.18) and unrealized gains have been recognized as liability under other current liabilities as "Unrealized Gain on Loan Transfer Transactions" (Refer note no. 2.6).

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Mar 31, 2015

CORPORATE INFORMATION

Muthoot Capital Services Limited (the Company) is a public company domiciled in India and incorporated under the provisions of the Companies Act, 1956. Muthoot Capital Services Limited was incorporated on February 18, 1994 as a public limited company. Its shares are listed on the Bombay Stock Exchange. The Company is registered as an A-category Deposit taking Non-Banking Financial Company (NBFC) with Reserve Bank of India. During the year the Company was mainly engaged in financing for purchase of automobiles, namely two wheelers against hypothecation of the respective vehicles and granting of personal/business loans against demand promissory notes. The Company also engaged itself in buying loan portfolios from other NBFCs financing the two wheelers /micro finance segment. The Company has a reasonably good presence in the non-banking financial sector in rural and semi-urban areas.

Amounts in the financial statements are presented in thousands, except for per share data and as otherwise stated. Previous year figures have been reworked, re-grouped, re-arranged and reclassified to conform to the current year presentation.

Debentures:

The Company has issued Redeemable Non-Convertible Debentures on Private Placement basis in various series. The debentures issued under each series have a repayment period depending on the scheme it falls under. The debentures are repaid within a period of 1 to 6 years, depending on the schemes. The schemes range from Monthly, Annual and Maturity Interest Payment. The rate of interest of the Unmatured Debentures range from 10.9% to 14.2% per annum and the rate of interest of Matured Debentures ranges from 9.5% to 13.1% per annum.

The issued debentures are secured by a Pari-passu First Charge on all movable assets, book debts and receivables created by undertaking the business of Loan against Gold Jewellery, Hypothecation Loan and all other types of Loans, both present and future, created by the company.

Subordinated Debts (Sub Debts):

The Company has accepted subordinated debts under three schemes namely Monthly, Annual and Maturity schemes with interest rates ranging from 12.25% to 13.40%. The subordinated debts issued under each scheme will be repaid only on maturity.

Public Deposits:

The Company has accepted Public Deposits under three schemes namely Monthly, Annual and Maturity schemes. The deposits issued under each scheme will be repaid only on maturity, unless claimed by the Depositor earlier and if permissible to be repaid as per the regulations issued in this regard by the Reserve Bank of India. The rate of interest on these deposits ranges from 9% to 12.5% per annum with monthly rest.

Guaranteed Loans

The Working Capital Demand Loans and Cash Credit obtained from Banks have been personally guaranteed by the Promoter Directors of the Company, namely, Mr.Thomas John Muthoot, Mr. Thomas George Muthoot and Mr. Thomas Muthoot.

Security of the Loans from Banks

The Working Capital Demand Loans and Cash Credit facility have been obtained from the banks by creating First Charge on the entire current assets including gold loan and hypothecation loan receivables ranking pari-passu with other Banks and Debenture Holders.

Rate of interest

Short-Term Borrowings from banks carries interest at the rate of 11.5% to 14% per annum during the year.

Term Loan from Banks:

The term loan from banks are secured by hypothecation of specific assets covered by Hypothecation Loan Receivables/ on entire current assets including hypothecation loan receivables, gold loan receivables and other current assets of the company. Rate of interest varies from 12% to 13%. The loan is repayable in equal monthly/ quarterly instalments spread over 24 months to 36 months.

Loan from Directors

The Company has entered into transactions involving receipts and payments of different amounts with the directors of the Company. The Company pays interest at 12% per annum. The balance outstanding as on March 31,2015 was RS. 2 73 05 thousand (March 31, 2014: RS. 8 21 30 thousand).

Inter Corporate Deposits

The Company has taken an Inter Corporate Deposit of RS. 1 30 00 thousand from Adtech Systems Ltd during the month of March 2015, which is repayable after a period of 3 months with an effective rate of interest of 9% per annum.

Expenditure against Corporate Social Responsibility Activities

(a) The Gross Amount required to be spent by the Company during the year is RS. 59 24 thousand

(b) Amount spent during the year on:

3. DEFINED BENEFIT PLANS- GRATUITY VALUATION

The Company has entered into an arrangement with LIC of India to cover the liability payable to the employees towards the gratuity under a Gratuity Trust Scheme based on Group Gratuity Cum Assurance Scheme of the LIC of India which is a defined benefit scheme and the company has to make contributions under such scheme.

5. RELATED PARTY DISCLOSURES

List of Related Parties as on March 31, 2015 is given below:

A. Particulars of Companies/ Firms/Limited Liability Partnerships/Trusts where control/significant influence exists:-

Sl No Name of the Company/Firm/LLP/Trusts

1 MPG Hotels and Infrastructure Ventures Private Limited

2 Muthoot Fincorp Limited

3 EMMEL Realtors and Developers Private Limited

4 Mariposa Agri Ventures and Hospitalities Private Limited

5 Finance Companies' Association (India)

6 Muthoot Pappachan Chits (India) Private Limited

7 The Thinking Machine Media Private Limited

8 Calypso Agri Development and Hospitalities Private Limited

9 Mandarin Agri Ventures and Hospitalities Private Limited

10 E L Toro Agri Projects and Hospitalities Private Limited

11 Fox Bush Agri Developement and Hospitalities Private Limited

12 Cinnamon Agri Development and Hospitalities Private Limited

13 Pine Pink Agri Ventures and Hospitalities Private Limited

14 L M Realtors Private Limited

15 Muthoot Dairies and Agri Ventures Private Limited

16 Jungle Cat Agri Development and Hospitalities Private Limited

17 Buttercup Agri Projects and Hospitalities Private Limited

18 Flame Agri Projects and Hospitalities Private Limited

19 Goblin Agri Projects and Hospitalities Private Limited

20 Alaska Agri Projects and Hospitalities Private Limited

21 Muthoot Holdings Private Limited

22 Muthoot APT Ceramics Limited

23 Muthoot Housing Finance Company Limited

24 Muthoot Automobile Solutions Private Limited

25 Muthoot Agri Development and Hospitalities Private Limited

26 Bamboo Agri Projects and Hospitalities Private Limited

27 Muthoot Automotive (India) Private Limited

28 Muthoot Land and Estates Private Limited

29 Muthoot Buildtech (India) Private Limited

30 Muthoot Properties (India) Limited

31 Muthoot Kuries Private Limited

32 Muthoot Equities Limited

33 Muthoot Hotels Private Limited

34 Muthoot Agri Projects and Hospitalities Private Limited

35 Muthoot Motors Private Limited

36 Muthoot Infrastructure Private Limited

37 The Right Ambient Resorts Private Limited

Sl No Name of the Company/Firm/LLP/Trusts

38 Muthoot Pappachan Technologies Limited

39 Muthoot Pappachan Medicare Private Limited

40 Muthoot Exim Private Limited

41 Palakkad Infrastructure Private Limited

42 Muthoot Risk Insurance and Broking Services Private Limited

43 Muthoot Bankers

44 Muthoot Cine Enterprise

45 Muthoot Estate Investments

46 Muthoot Finance Company

47 Muthoot Insurance Services

48 Muthoot Motors (Cochin)

49 MPG Apex Management LLP

50 MPG Automobiles LLP

51 MPG Land Developers LLP

52 Muthoot Pappachan Foundation

B. Promoters and Key Managerial Personnel (KMP)

Sl No Name of the Promoters and KMP Designation

1 Thomas John Muthoot Chairman

2 Thomas George Muthoot Managing Director

3 Thomas Muthoot Director

4 R. Manomohanan Chief Executive Officer

5 Vinodkumar M. Panicker Chief Finance Officer

6 Syam Kumar R. Company Secretary & Head-Governance

C. Relatives of Promoters and Key Managerial Personnel (KMP)

Sl No Promoters and KMP Name of Relatives Nature of Relationship

1 Thomas John Muthoot Mrs. Janamma Thomas Mother Mrs. Preethi John Spouse Ms. Susan John Muthoot Daughter Mr. Thomas M John Son

2 Thomas George Muthoot Mrs.Nina George Spouse Ms. Tina Suzanne George Daughter Ms. Ritu Elizabeth George Daughter Ms. Swetha Ann George Daughter

3 Thomas Muthoot Mrs. Remy Thomas Spouse Ms. Suzannah Muthoot Daughter Ms. Hannah Muthoot Daughter

4 R. Manomohanan Mrs. S. Krishnakumari Spouse Mr. Binu Mohan M. Son Mr. Ginu Mohan M. Son

5 Vinodkumar M. Panicker Mrs. Rashmi V Panicker Spouse Ms. Priyanka V Panicker Daughter Ms. Ananya V Panicker Daughter

6 Syam Kumar R. Mrs. Maya R. Unnithan Spouse Ms. Nandini Syamkumar Daughter Mr. Nandan Syamkumar Son

7. BASIS OF CLASSIFICATION OF ASSETS AND LIABILITIES

During this year, the receivables against financing activities have been treated as current assets following the principle that the operating cycle of the Company is 3 years, being the time required for realisation of the loans granted for the purchase of 2 wheelers/Other Assets.

Accordingly, the borrowings taken from the banks and other sources repayable within a period of the operating cycle of 3 years are also treated as current liabilities.

In the previous year, the receivables against financing activities beyond the period of 1 year were treated as non-current assets and the borrowings/ other liabilities due to the banks/other institutions beyond the period of 1 year were also treated as non-current liabilities.

The particulars of current and non-current assets/liabilities, following the method adopted during the previous year, are given below for the purpose of information and to know the effect of the change of method adopted with regard to classification of assets and liabilities:

10. EMPLOYEES DRAWING REMUNERATION IN EXCESS OF RS. 5 LAKHS PER MONTH FOR PART OR WHOLE OF THE YEAR

(i) Mr. Thomas George Muthoot, Managing Director, was paid Salary and allowances of RS. 160 62 thousand, during the year ended 31st March,2015 (2014: RS. 161 65 thousand).

(ii) Mr. R. Manomohanan, Chief Executive Officer, was paid salary, allowances and commission on profits of RS. 1 08 19 thousand during the year ended 31st March,2015. (2014: RS. 108 55 thousand).

12. CONTINGENT LIABILITIES NOT PROVIDED FOR

(RS. in '000) Particulars As at 31-Mar-15 31-Mar-14

Income Tax issues where the Company 23 58 23 58 is in appeal

The Company is of the opinion that the above demands are not sustainable and expects to succeed in its appeals / defense.

13. GENERAL

(i) Some of Receivables and Payables, Loans and Advances, Hypothecation Loans, Deposits, Secured Debentures and Unsecured Loans are subject to confirmation/reconciliation due to non receipt of the statement of accounts and confirmation letters. Necessary adjustments, if any, in the accounts will be made on completion of the reconciliation/ receipt of confirmation letters/statement of accounts.

(ii) Amount Payable To Micro, Small and Medium Enterprises

There is no Micro, Small and Medium Enterprises as defined in the Micro, Small and Medium Enterprises Development Act, 2006 to whom the Company owes dues on account of Principal amount together with interest and accordingly no additional disclosures have been made.

The above information regarding Micro, Small and Medium Enterprises has been determined to the extent such parties have been identified on the basis of information available with the Company. This has been relied upon by the auditors.

(iii) Particulars Showing Maturity Pattern of Secured Privately Placed Redeemable Non Convertible Debentures Secured by a charge on all movable assets, book debts, receivables and advances including loan against gold created by the Company.

14. REPORTING ON FRAUD

During the year there have been certain instances of fraud on the Company by employees, where in hypothecation loans related misappropriations or cash embezzlements have occurred for amounts aggregating to RS. 3 79 thousand. The Company recovered RS. 3 33 thousand. The Company is in the process of recovering the balance amounts also from the concerned employees and taking legal actions whereever possible.

(III) Unsecured Advances

The Unsecured Loans against Demand Promissory Notes (DPN) executed by the borrowers and outstanding amount is RS. 7 27 92 thousand (March 31,2014; RS. 1 34 51 thousand).

H. Details of financing of parent company products - NIL

I. Details of Single Borrower Limit (SBL) / Group Borrower Limit (GBL) exceeded by the company - NIL

J. Registration obtained from other financial sector - NIL regulators

K. Disclosure of Penalties imposed by Reserve Bank of India and other regulators - NIL

L. Ratings Assigned by Credit Rating Agencies and migration of ratings during the year

Sl No Name of the Rating Agency Rated Instrument Rating

1 CRISIL Short-Term Debts CRISIL A1

2 CRISIL Public Deposits FA Stable

3 CRISIL Bank Loan Facilities CRISIL A/Stable

(e ) Sector-wise NPAs Sl No Sector Percentage of NPAs to Total Advances in that sector

1 Agriculture & allied activities 100% (Against Gold Security)

2 MSME 0%

3 Corporate borrowers 0%

4 Services 0%

5 Unsecured personal loans 0.03%

6 Auto loans 4.16%

7 Other personal loans 0%

O. Overseas Assets (for those with joint ventures and subsidiaries abroad) - NIL

P. Off-balance sheet SPVs sponsored

(which are required to be consolidated as - NIL per accounting norms)

Q. Customer Complaints pertaining to the Financial Year

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Mar 31, 2014

1. CONTINGENT LIABILITIES NOT PROVIDED FOR

(Rs.in ''000)

Particulars As at

31-Mar-14 31-Mar-13

Income Tax issues where the Company is in appeal 23 58 23 58

The Company is of the opinion that the above demands are not sustainable and expects to succeed in its appeals / defense.

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Mar 31, 2013

CORPORATE INFORMATION

Muthoot Capital Services Limited (the company) is a public company domiciled in India and incorporated under the provisions ofthe Companies Act, 1956. Its shares are listed in the Mumbai stock exchange in India. The Company is registered as a Non Banking Financial Company (NBFC) with Reserve Bank of India. Duringthe yearthe Company is mainly engaged in asset financing activities, especially two wheelers and three wheelers.

The presentation in the Balance Sheet, Statement of Profit and Loss, Notes to Accounts is in terms of Revised Schedule VI of Companies Act, 1956 which has become mandatory with effect from Ia April, 201 I. The assets and liabilities are classified as Current and Non Current based on the twelve months of operations.

Amounts in the financial statements are presented in thousands, except for per share data and as otherwise stated. Previous yearfigures have been reworked, re-grouped, re-arranged and reclassified to conform to the current year presentation.

Guaranteed Loans

The Working Capital Demand Loans and Cash Credit obtained from Banks have been personally guaranteed by the Directors ofthe Company, namely, Thomas John Muthoot, Thomas George Muthoot and Thomas Muthoot.

Security ofthe Loan from Banks

The Working Capital Demand Loans and Cash Credit facility have been obtained from the banks by creating First Charge on the entire current assets including gold loan receivables, hypothecation loans receivables, loan against company''s own debentures, Loan against Demand Promissory Notes and Other Current Assets ranking paripassu with other working capital lenders and Debenture Holders.

Rate of interest

Short Term Borrowings from banks carries interest at the rate of 10.2% to 14% perannum.

Loan from Directors

The company has entered into transactions involving receipts and payments of different amounts with the directors ofthe company. The company pays interest at 12% per annum. The balance outstanding as on March 3 1,2013 was Rs.768.25 Lakhs inclusive of interest accrued there on(March 31,2012: Rs.917.4I Lakhs).

1. DEFINED BENEFIT PLANS-GRATUITY PLAN

The company has entered into an arrangement with the LIC of India to cover the liability payable to the employees towards the gratuity under a Gratuity Trust Scheme based on Group Gratuity Cum Assurance Scheme of the LIC of India which is a defined benefit scheme and the company has to make contributions under such scheme.

2. EMPLOYEES DRAWING REMUNERATION IN EXCESS OF RS. 5 LAKHS PER MONTH FOR PART OR WHOLE OF THE YEAR

(I) Mr. Thomas George Muthoot, Managing Director, was paid Salary and allowances of Rs. I 15.44 Lakhs duringthe year ended March 3 1,2013 (2012: Rs. 62.65 Lakhs).

(ii) Mr. R. Manomohanan, Chief Executive Officer, was paid salary, allowances and commission on profits of Rs. 88.49 Lakhs.

3. CONTINGENT LIABILITIES NOT PROVIDED FOR

(Rs.in ''000)

Particulars As at

31 -Mar-13 3I-Mar-I2

Income Tax issues where the Company is in appeal 23 58

Cases remanded back to assessing authority on the basis ofthe appeal filed before Income Tax Appellate Tribunal by the Income Tax department. 5 52

The Company is ofthe opinion that the above demands are not sustainable and expects to succeed in its appeals / defense.

4. GENERAL

(i) Some of Receivables and Payables, Loans and Advances, Hypothecation loan, Deposits, Secured Bonds and Unsecured Loans are subject to confirmation/reconciliation due to non receipt of the statement of accounts and confirmation letters. Necessary adjustments if any in the accounts will be made on completion ofthe reconciliation/receipt of confirmation letters/statement of accounts.

(ii) Amount payable to Micro, Small And Medium Enterprises

There is no Micro, Small and Medium Enterprises as defined in the Micro, Small and Medium Enterprises Development Act, 2006 to whom the Company owes dues on account of principal amount together with interest and accordingly no additional disclosures have been made.

The above information regarding Micro, Small and Medium Enterprises has been determined to the extent such parties have been identified on the basis of information available with the Company. This has been relied upon by the auditors.

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Mar 31, 2012

CORPORATE INFORMATION

Muthoot Capital Services Limited (the company) is a public company domiciled in India and incorporated under the provisions of the Companies Act, 1956. Its shares are listed in the Mumbai stock exchange in India. The Company is registered as a Non Banking Financial Company (NBFC) with Reserve Bank of India. During the year the Company is mainly engaged in asset financing activities, especially two wheelers and three wheelers.

Amounts in the financial statements are presented in thousands, except for per share data and as otherwise stated.

Refer to Note 2.29 for details of basic and diluted shares.

The Company has only one class of shares referred to as equity shares having a par value of Rs. 10.

Each holder of equity share is entitled to one vote per share.

The Company declares and pays dividends in Indian rupees. The dividend proposed by the board of directors is subjected to the approval of the shareholders in the ensuing Annual General Meeting.

The Board of Directors in their meeting on June 11, 2012 proposed a final dividend of Rs 3.5 per equity share. The total dividend appropriation for the year ended March 31, 2012 amounted to Rs. 507 lakhs including corporate dividend tax of Rs.71 lakhs.

During the year ended March 31, 2011, the amount of per share dividend recognized as distributions to equity shareholders was Rs. 3/-. The total dividend appropriation for the year ended March 31, 2011 amounted to Rs 226.63 lakhs including corporate divided tax of Rs. 31.63 lakhs.

In the event of liquidation of the Company, the holders of the equity shares will be entitled to receive balance if any of the remaining assets of the Company, after distribution of all preferential amounts. However, no such preferential amounts exist currently. The distribution will be in proportion to the number of equity shares held by the shareholders.

As per the records of the company, including its register of shareholders/members and other declarations received from shareholders regarding beneficial interest, the above shareholding represents both legal and beneficial ownerships of shares

The Company has issued 59,72,575 number of equity shares of Rs. 10/- each at a premium of Rs. 70/- by way of right issue and money raised by right issue has been utilized for the repayment of unsecured loan obtained from one of the promoters, general corporate purpose and right issue expenses of Rs. 4,272.78 lakhs, Rs. 468.45 lakhs and Rs. 36.83 lakhs respectively, as intended for the purpose of the issue.

Debenture Redemption reserve

As per the clarification regarding Debenture Redemption Reserve given in general Circular no. 9/2002 dated 18-4-2002 issued by the Department of Company affairs, of NBFCs registered with RBI u/s. 45-IA of the RBI (Amendment) Act, 1997, Debenture Redemption Reserve is not required in the case of privately placed debentures. The directors confirm that the company issued only privately placed secured non convertible debenture and hence it is not required to create Debenture Redemption Reserve u/s 117C of the Companies Act 1956 and accordingly the company did not create Debenture Redemption Reserve during the year ended March 31, 2012 and the debenture redemption reserve created in the earlier year is transferred to surplus in the statement of Profit and Loss as the debentures against which the reserve created is fully redeemed.

Term Loan

The company had obtained Term Loans from HDFC bank for acquiring two motor vehicles, having an outstanding balance of Rs. 1,81,456 ( 2011: Rs. 3,45,438) and Rs. 1,27,959 (2011: Rs 3,66,382) respectively. Both the vehicles have been hypothecated as security for the purpose of the loan. The first loan had been obtained at an interest rate of 10.17% p.a, repayable in 60 equal monthly installments. The latter loan had been obtained at an interest rate of 9.52% p.a, repayable in 36 equal monthly installments. The current maturities of the above loans have been classified under the head "Other Current Liabilities" (Note 2.6)

Debentures

The Company has issued Redeemable non-convertible debentures on private placement basis in various series. The debentures issued under each series have a repayment period depending on the scheme it falls under. The debentures are repaid within a period of 1 year to 5.5 years, depending on the schemes. The schemes range from Monthly, Annual and Maturity Interest Payment. The rate of interest on these debentures range from 10% to 19.63% p.a.

The issued debentures are secured by a first charge on all movable assets, book debts and receivables acquired by undertaking the business of Loan against Gold Jewellery, Hypothecation Loan and any other type of Loans, both present and future, created by the company.

Current portion of the interest accrued but not due on debentures Rs.101.76 lakhs is shown in Note: 2.6

Guaranteed Loans

The Working Capital Demand Loans and Cash Credit borrowings obtained from Banks have been personally guaranteed by the Directors of the Company, namely, Mr. Thomas John Muthoot, Mr. Thomas George Muthoot and Mr. Thomas Muthoot.

Security of the Loans from Banks

The Working Capital Demand Loans and Cash Credit borrowings have been obtained from the banks by creating first charge on the entire current assets including gold loan receivables, hypothecation loan receivables, loan against company's own debentures, loan against demand promissory notes and other current assets ranking paripassu with other working capital lenders and Debenture Trustees.

Rate of interest

Cash credit borrowings from banks carries interest at the rate of 12.75% to 13.50% per annum.

Loan from Directors

The company has entered into frequent transactions involving receipts and payments of different amounts with the directors of the company. The company pays interest at the rate of 12% per annum. The balance outstanding as on March 31, 2012 was Rs 6,81,52,937/- inclusive of interest accrued thereon. (March 31, 2011: Rs. 24,96,54,115/-)

Provision for Income Tax represents the tax provision remaining as on the balance sheet date after setting off the advance tax paid during the year against the tax due for the assessment year 2012-13 (31st March 2011 for the assessment year 2011-12).

Deferred tax asset and deferred tax liabilities have been offset wherever the Company has legally enforceable right to set off current tax assets against current tax liabilities and the deferred tax assets and deferred taxes relate to the same taxation authority.

Cash and cash equivalents as of March 31, 2012 include restricted cash and bank balances of Rs. 26 lakhs. The restrictions are primarily on account of cash and bank balances held as margin money deposits against guarantees.

The deposits maintained by the Company with banks comprise of time deposits, which can be withdrawn by the Company at any point without prior notice or penalty on the principal.

Out of the above Hypothecation loan, as on 31 March, 2012, Rs Nil was receivable from Related Party (March 31, 2011: Rs. 64,364).

Interest on hypothecation loans was recognized on accrual basis upto the current reporting date as against for the completed months upto the previous year. This resulted in an increase of interest on hypothecation loan by Rs.412.39 Lakhs for the year ended March 31, 2012

2.1 GRATUITY PLANS

The company has entered into an arrangement with the LIC of India to cover the liability payable to the employees towards the gratuity under a Gratuity Trust Scheme based on Group Gratuity Cum Assurance Scheme of the LIC of India which is a defined benefit scheme and the company has to make contributions under such scheme.

2.2 Related Party Disclosures

1. List of related parties as on March 31, 2012 is given below.

A. Particulars of companies/ Firms/Proprietorship where control / significant influence exists:

Sl. Name of the Company/Firm No.

1 Alaska Agri Projects And Hospitalities Private Limited

2 Bamboo Agri Projects And Hospitalities Private Limited

3 Buttercup Agri Projects And Hospitalities Private Limited

4 Calypso Agri Development And Hospitalities Private Limited

5 Cinnamon Agri Development And Hospitalities Pvt. Ltd.

6 Double Tails Agri Development And Hospitalities Private Limited

7 El Toro Agri Projects And Hospitalities Private Limited

8 Fireworks Agri Development And Hospitalities Private Limited

9 Flame Agri Projects And Hospitalities Private Limited

10 Fox Bush Agri Development And Hospitalities Private Limited

11 Goblin Agri Projects And Hospitalities Private Limited

12 Jungle Cat Agri Development And Hospitalities Private Limited

13 L. M. Realtors Private Limited

14 Linden Agri Ventures And Hospitalities Private Limited

15 Mandarin Agri Ventures And Hospitalities Private Limited

16 Mariposa Agri Ventures And Hospitalities Private Limited

17 Mpg Hotels And Infrastructure Ventures Pvt. Ltd.

18 Mpg Sports Academy Pvt Ltd.

19 Musk Agri Ventures And Hospitalities Private Limited

20 Muthoot Agri Development And Hospitalities Pvt. Ltd.

21 Muthoot Agri Projects And Hospitalities Pvt Ltd

22 Muthoot Agri Ventures And Hospitalities Pvt. Ltd.

23 Muthoot Apt Ceramics Ltd.

24 Muthoot Automobiles Solutions Private Ltd.

25 Muthoot Automotive (India) Pvt Ltd

26 Muthoot Buildtech (India) Private Limited

27 Muthoot Equities Ltd.

28 Muthoot Fincorp Ltd

29 Muthoot Holdings Private Limited

30 Muthoot Hotels Private Limited

31 Muthoot Housing Finance Company Ltd

32 Muthoot Infrastructure Ltd.

33 Muthoot Kuries Private Limited

34 Muthoot Land And Estates Private Limited

35 Muthoot Motors Private Ltd.

36 Muthoot Pappachan Medicare Private Limited

37 Muthoot Properties (India) Private Limited

38 Muthoot Risk Insurance And Broking Services Pvt Ltd

39 Palakkad Infrastructure Private Limited

40 Panchratna Securities Limited

41 Pine Pink Agri Ventures And Hospitalities Private Limited

42 The Right Ambeint Resorts Private Limited

43 Emmel Realtors And Developers Private Limited

44 Muthoot Exim Private Limited

45 Muthoot Bankers

46 Muthoot Cine Enterprises

47 Muthoot Estate Investments

48 Muthoot Finance Company

49 Muthoot Insurance Services

50 Muthoot Motors (Cochin)

51 MPG Asset Management Llp

52 MPG Land And Estate Llp

53 MPG Land Developers Llp

54 MPG Air Catering Llp

55 MPG Automobiles Llp

56 MPG Real Estate Llp

57 MPG Hospitality Llp

58 Muthoot Travel Online

2.3 LEASES

Obligation on Long Term Non cancellable operating leases

The operating lease arrangements are renewable on a periodic basis and relates to rented premises.The lease agreements have price escalation clauses.

2.4 CONTINGENT LIABILITIES NOT PROVIDED FOR (Rs. in '000)

Particulars As at 31-Mar-12 As at 31-mar-11

Contested claims not provided for : Cases remanded back to assessing authority on the basis of the appeal filed before Income Tax Appellate Tribunal By Income Tax department for the assessment years 2002-'03, 2003-'04 & 2005-'06 5 52 5 52



The Company is of the opinion that the above demands are not sustainable and expects to succeed in its appeals / defense.

2.5 GENERAL

2.5.1 Some of Receivables and Payables, Loans and Advances, Hypothecation loan, Deposits, Secured Bonds and Unsecured Loans are subject to confirmation/reconciliation due to non receipt of the statement of accounts and confirmation letters. Necessary adjustments if any in the accounts will be made on completion of the reconciliation/receipt of confirmation letters/statement of accounts.

2.5.2 Amount Payable To Micro,Small And Medium Enterprises

There is no Micro, Small and Medium Enterprises as defined in the Micro, Small and Medium Enterprises Development Act, 2006 to whom the Company owes dues on account of Principal amount together with interest and accordingly no additional disclosures have been made.

The above information regarding Micro, Small and Medium Enterprises has been determined to the extent such parties have been identified on the basis of information available with the Company. This has been relied upon by the auditors.

Note : Amount overdue Rs.43.48 lakhs in secured debentures represents debentures for which payments could not be made as claims were not received from debenture holders.

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Mar 31, 2011

1. BALANCE SHEET

1.1 Debenture Redemption Reserve (DRR)

As per the clarification regarding Debenture Redemption Reserve given in general Circular no. 9/2002 dated 18-4-2002 issued by Department of Company Affairs, for NBFCs registered with RBI u/s. 45-IA of the RBI (Amendment) Act, 1997, Debenture Redemption Reserve is not required in the case of privately placed debentures. The Directors confirm that the Company issued only privately placed secured bonds and hence it is not required to create Debenture Redemption Reserve u/s 117C of the Companies Act, 1956, and accordingly the Company did not create Debenture Redemption Reserve during the year ended March 31, 2011.

1.2 Secured Loans

"Particulars of privately placed Secured Redeemable Bonds; Secured by a charge on all movable assets, book debts, receivables and advances including loans against security of gold created by the company"

Note:- The balance outstanding in respect of the secured redeemable debentures for which maturity attained on or before 31.03.2011 represents the amount not claimed by the Bondholders.

The year of redemption shown above is based on the maturity date of the bonds outstanding as on 31.03.2011.

1.3 Loans from Banks

a. ICICI Working Capital Demand Loan

The Company has availed a working capital loan of Rs.1,000 Lakhs from ICICI Bank Ltd as on the balance sheet date (31.03.2010 : Rs.2,000 Lakhs) by creating first charge on current assets of the Company ranking pari passu with other participating banks and debenture trustees and personal guarantee of the Chairman Mr. Thomas John Muthoot and the Directors Mr. Thomas George Muthoot and Mr. Thomas Muthoot.

b. Loans from State Bank of Travancore

As on the balance sheet date, the Company has availed a working capital demand loan of Rs.1,511.50 Lakhs (31.03.2010 : Rs.Nil) and cash credit of Rs.2,027.70 Lakhs (31.03.2010 : Rs.217.17 Lakhs) from State Bank of Travancore by creating first charge on the entire current assets including gold loan receivables, business loans receivables, vehicle loan receivables, loan against companys own bonds, DPN, ICD etc ranking pari passu with other working capital lenders and personal guarantee of the Chairman Mr. Thomas John Muthoot and the Directors Mr. Thomas George Muthoot and Mr. Thomas Muthoot.

c. Loan from HDFC Bank Ltd.

The Company has availed a working capital demand loan of Rs.1,511.59 Lakhs as on the balance sheet date (31.03.2010 : Rs.1,000 Lakhs) from HDFC Bank Ltd secured by first pari passu charge on the current assets of the Company including gold loan receivables and hire purchase receivable and personal guarantee of the Chairman Mr. Thomas John Muthoot and the Directors Mr. Thomas George Muthoot and Mr. Thomas Muthoot.

d. Loan From AXIS Bank Ltd.

The Company has availed a cash credit/working capital demand loan of Rs.1,017.57 lakhs as on the balance sheet date (March 31, 2010 : Rs.996.36 lakhs) from Axis Bank Ltd., secured by pari pasu first charge on entire current assets including loan receivables and personal guarantee of the Chairman Mr, Thomas John Muthoot and the directors Mr. Thomas Goerge Muthoot and Mr. Thomas Muthoot

e. Vehicle Loans From HDFC Bank Ltd.

The Company has availed hypothecation loans from HDFC Bank Ltd. for the purchase of 3 cars. The amount outstanding as on 31.03.2011 is Rs.7.12 Lakhs (31.03.2010 : Rs.11.02 Lakhs).

1.4. Unsecured Loans

a. Loan From Directors

The Company has entered into frequent recurring and repetitive transactions involving receipts and payments of different amounts with the Directors of the Company. The balance outstanding as on March 31, 2011 was Rs.2,924.64 Lakhs, inclusive of interest accrued thereon. (March 31, 2010 : Rs.2,240.43 Lakhs)

b. Inter Corporate Deposit

During the year the Company accepted a short term inter corporate deposit of Rs.3,000 Lakhs from M/s ECL Finance Limited to meet the working capital requirement.

1.5. Loans and Advances

Loans and advances includes gold Loans, loan against bonds, DPNs, deposits and other advances. (Grouped under Schedule G)

1.6. Current Liabilities & Provisions

a. To the extent identified with available information the Company does not owe any amount to Micro, Small and Medium Enterprises.

b. The Company provided an amount of Rs.12.75 Lakhs (31.03.2010 : Rs. NIL) to meet the unforseen losses/contingent liabilities, if any as on the balance sheet date.

2. PROFIT AND LOSS ACCOUNT

2.1 Retirement benefits

The Company has entered into an arrangement with the LIC of India to cover the liability payable to the employees towards gratuity under a Gratuity Trust Scheme based on Group Gratuity Cum Assurance Scheme of the LIC of India. The Gratuity Trust Scheme is a defined benefit scheme and the Company has to make contributions under such scheme.

2.2 Financial Expenses

"Interest on Other Borrowings" includes Rs.550.88 Lakhs (2009-10 : Rs.159.41 Lakhs) being interest paid/credited to Directors in respect of unsecured loans received from them."

2.3 "During the year the Company made a Provision of Rs.43.56 Lakhs being 0.25% of its Standard Assets as Per Notification No. DNBS.222/CGM(US)-2011 issued by the Reserve Bank of India on January 17, 2011."

3. GENERAL

3.1 i. Expenditure in Foreign currency Nil

ii. Earning in Foreign currency Nil

iii. Remittances in Foreign currency on account of dividend Nil

iv. C I F value of imports Nil

3.2 Some of the balances under Sundry debtors, Sundry creditors, Loans and advances, Stock on hire, Deposits, Secured Bonds and Unsecured loans are subject to confirmation/reconciliation due to non-receipt of the statements of accounts and confirmation letters. Necessary adjustments if any, in the accounts will be made on completion of the reconciliation/receipt of confirmation letter/statement of accounts.

3.3 Earnings Per Share

Basic and Diluted earning per equity share has been computed by dividing net profit after tax by the weighted average number of equity shares outstanding as on 31.03.2011.

3.4 Related Party Disclosures

Related Party Disclosures as required by AS-18 "Related party disclosures" issued by ICAI are given below. The related Parties are being recognized/identified by the management and relied up on by the auditors.

1 List of related parties as on March 31, 2011 is given below.

A List of companies/Firms where control/significant influence exists;

1) Alaska Agri Projects and Hospitalities Private Limited

2) Bamboo Agri Projects and Hospitalities Private Limited

3) Buttercup Agri Projects and Hospitalities Private Limited

4) Calypso Agri Development and Hospitalities Private Limited

5) Cinnamon Agri Development and Hospitalities Private Limited

6) Double Tails Agri Development and Hospitalities Private Limited

7) El Toro Agri Projects and Hospitalities Private Limited

8) EMMEL Realtors & Developers (P) Ltd.

9) Fireworks Agri Development and Hospitalities Private Limited

10) Flame Agri Projects and Hospitalities Private Limited

11) Fox Bush Agri Development and Hospitalities Private Limited

12) Goblin Agri Projects and Hospitalities Private Limited

13) Jungle Cat Agri Development and Hospitalities Private Limited

14) L.M Realtors Pvt Ltd.

15) Linden Agri Ventures and Hospitalities Private Limited

16) Mandarin Agri Ventures and Hospitalities Private Limited

17) Mariposa Agri Ventures and Hospitalities Private Limited

18) MPG Sports Academy Pvt Ltd.

19) Musk Agri Ventures and Hospitalities Private Limited

20) Muthoot Agri Development and Hospitalities Private Limited

21) Muthoot Agri Projects and Hospitalities Pvt Ltd.

22) Muthoot Agri Ventures and Hospitalities Private Limited

23) Muthoot APT Ceramics Ltd.

24) Muthoot Automotive India (P) Ltd.

25) Muthoot Bankers

26) Muthoot Buildtech (India) Private Limited

27) Muthoot Cine Enterprises (Kripa Theatres)

28) Muthoot Equities Limited

29) Muthoot Estate Investments

30) Muthoot Exim Pvt Ltd.

31) Muthoot Financiers

32) Muthoot Fincorp Ltd.

33) Muthoot Holdings Private Limited

34) Muthoot Hotels (P) Ltd.

35) Muthoot Hotels & Infrastructure Ventures (P) Ltd.

36) Muthoot Housing Finance Company Ltd.

37) Muthoot Infrastructure Ltd.

38) Muthoot Insurance Services

39) Muthoot Kuries Private Limited

40) Muthoot Land and Estates Private Limited

41) Muthoot Motors (Cochin)

42) Muthoot Motors Private Ltd.

43) Muthoot Pappachan Medicare Pvt Ltd.

44) Muthoot Properties (India) Private Limited

45) Muthoot Risk Insurance & Broking Services Ltd.

46) Muthoot Travel Online

47) Palakkad Infrastructure Pvt Ltd.

48) Pine Pink Agri Ventures and Hospitalities Private Limited

49) The Right Ambient Resorts Pvt Ltd.

B Name of the Key Managerial persons;

Sl No Name of the Person Designation

1) Thomas John Muthoot Chairman

2) Thomas George Muthoot Managing Director

3) Thomas Muthoot Director

C Relative of Key Managerial Personnel;

Key Managerial person Name of Relative Nature of Relationship

Thomas John Muthoot Mrs. Janamma Thomas Mother

Mrs. Preethi John Spouse

Ms. Susan John Muthoot Daughter

Mr. Thomas M John Son

Thomas George Muthoot Mrs. Nina George Spouse

Ms. Tina Suzanne George Daughter

Ms. Ritu Elizabeth George Daughter

Ms. Swetha Ann George Daughter

Thomas Muthoot Mrs. Remy Thomas Spouse

Ms. Suzannah Muthoot Daughter

Ms. Hannah Muthoot Daughter

4 Borrower group-wise classification of all leased assets, stock–on–hire and loans and advances

4.1 Contingent Liabilities

Contested claims not provided for: (Rs. In Lakhs)

Particulars As at 31.03.2011 As at 31.03.2010

Income Tax issues where the Company is in appeal 23.15 -

Decided in the Companys favour by Appellate Authorities and for which the Department is in further appeal with respect to Income Tax with Income Tax Appellate Tribunal 5.52 -

Note: The Company is of the opinion that the above demands are not sustainable and expects to succeed in its appeals / defence.

4.2 Previous years figures have been regrouped and rearranged wherever considered necessary to confirm to current years classifications.