2. Material accounting policies and critical accounting estimate and judgments
2.1 Basis of Preparation, measurement and significant accounting policies
The principal accounting policies applied in the preparation of these financial statements are set out below. The Polices have
been consistently applied to all the years presented, unless otherwise stated.
2.1.1. Statement of Compliance
The standalone financial statements have been prepared in accordance with Indian Accounting Standards (Ind AS) as per
the Companies (Indian Accounting Standards) Rules, 2015 as amended from time to time and notified under Section 133 of
the Companies Act, 2013 (the Act) along with other relevant provisions of the Act and the applicable regulations of Reserve
Bank of India (RBI). The financial statements have been prepared on a going concern basis. The Company uses accrual basis
of accounting except in case of significant uncertainties.
2.1.2. Functional and Presentation currency
These financial statements are presented in Indian Rupee (INR) , which is also the functional currency of the company, in
denomination of Crore with rounding off to two decimals as permitted by Schedule III to the Act except otherwise stated.
2.1.3 Basis of Measurements
The Financial Statements have been prepared on a historical cost basis, except for certain financial instruments that are
measured at fair values at the end of each reporting period.
2.1.4 Measurement of fair values
The Company's accounting policies and disclosures require the measurement of financial assets and liabilities at fair values.
The Company has established policies and procedures with respect to measurement of fair values.
The Company classifies the fair value of its financial instruments in the following hierarchy, based on the inputs used in
their valuation:
Level 1 - The fair value of financial instruments traded in active markets is based on quoted (unadjusted) market prices at
the end of the reporting period.
Level 2 - The fair valuation of instruments not traded in active markets is determined based on observable market data and
by using valuation techniques.
Level 3 - Where one or more of the significant inputs are not from observable market data.
2.1.5 Order of Liquidity
The Company is covered in the definition of Non-Banking Financial Company as defined in Companies (Indian Accounting
Standards) (Amendment) Rules, 2016. Pursuant to Ind AS 1 - 'Presentation of Financial Statements' and amendment to
Division III of Schedule III to the Companies Act, 2013 dated October 11, 2018, the Company presents its balance sheet
in the order of liquidity. This is since the Company does not supply goods or services within a clearly identifiable operating
cycle, therefore making such presentation more relevant. A maturity analysis of recovery or settlement of assets and
liabilities within 12 months after the reporting date and more than 12 months after the reporting date is presented in Note
No. 49(i)
2.1.6 Compliance with RBI Master Direction
The Company complies in all material respects, with the prudential norms relating to income recognition, asset classification
and provisioning for bad and doubtful debts and other matters, specified in the master directions issued by the Reserve
Bank of India ('RBI') in terms of Master Direction - Reserve Bank of India (Non-Banking Financial Company -Scale Based
Regulation) Directions 2023, issued by Reserve Bank of India vide circular no. RBI/DoR/2023-24/106 DoR.FIN.REC.
NO.45/03.10.119/2023-24 October 19, 2023 as amended (the "RBI Master Directions"). Indian Accounting Standards and
Guidance Notes issued by the Institute of Chartered Accountants of India (referred to in these Directions as "ICAI") shall be
followed insofar as they are not inconsistent with any of these Directions.
2.1.7 Material accounting estimates, judgements and assumptions
In preparing these financial statements, management has made judgements, estimates and assumptions that affect the
application of the Company's accounting policies and the reported amounts of assets, liabilities, income, expenses and the
disclosures of contingent liabilities. Actual results may differ from these estimates. Estimates and underlying assumptions
are reviewed on an ongoing basis. Revisions of estimates are recognised prospectively.
The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have
a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial
year, are described below. The Company based its assumptions and estimates on parameters available when the financial
statements were issued. Existing circumstances and assumptions about future developments, however, may change due
to market changes or circumstances arising that are beyond the control of the Company. Such changes are reflected in the
assumptions when they occur.
Following are areas that involved a higher degree of estimate and judgement or complexity in determining the carrying
amount of some assets and liabilities.
The areas involving critical estimates or judgements are:
(i) Estimation of fair value of unlisted securities
The fair value of financial instruments that are not traded in an active market is determined using valuation techniques.
The Company uses its judgement to select a variety of methods and make assumptions that are mainly based on
market conditions existing at the end of each reporting period.
(ii) Effective interest rate method
The Company recognises interest income/expense using the effective interest rate, i.e., a rate that represents the best
estimate of a constant rate of return over the expected life of the loans. The effective interest method also accounts
for the effect of potentially different interest rates at various stages and other characteristics of the product life
cycle (including prepayments and penalty interest and charges). This estimation, by nature, requires an element of
judgement regarding the expected behaviour and life cycle of the instruments, as well expected changes to India's
base rate and other fee income/expense that are integral parts of the instrument.
(iii) Impairment of financial assets using the expected credit loss method
The measurement of impairment losses on loan assets and commitments, requires judgement, in estimating the
amount and timing of future cash flows and recoverability of collateral values while determining the impairment
losses and assessing a significant increase in credit risk.
The Company's Expected Credit Loss (ECL) calculation is the output of a complex model with a number of underlying
assumptions regarding the choice of variable inputs and their interdependencies. Elements of the ECL model that are
considered accounting judgements and estimates include:
- The Company's criteria for assessing if there has been a significant increase in credit risk
- The segmentation of financial assets when their ECL is assessed on a collective basis
- Development of ECL model, including the various formulae and the choice of inputs
- Selection of forward-looking macroeconomic scenarios and their probability weightings, to derive the economic
inputs into the ECL model
- It has been the Company's policy to regularly review its model in the context of actual loss experience and adjust
when necessary.
(iv) Business model assessment
Classification and measurement of financial assets depends on the results of the SPPI test 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 considered by the Company
in determining the business model 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 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
(v) Provisions and contingent liabilities
The Company creates a provision when there is present obligation as a result of a past event that probably requires an
outflow of resources, and a reliable estimate can be made of the amount of the obligation.
A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but
probably will not, require an outflow of resources. The Company also discloses present obligations for which a reliable
estimate cannot be made. When there is a possible obligation or a present obligation in respect of which the likelihood
of outflow of resources is remote, no provision or disclosure is made.
2.2 Income
2.2.1 Interest income
Interest income is calculated by applying the effective interest rate to the gross carrying amount of financial assets,
except for:
(a) Purchased or originated credit impaired (POCI) financial assets, for which the original credit-adjusted effective
interest rate is applied to the amortised cost of the fi nancial asset.
(b) Financial assets that are not 'POCI' but have subsequently become credit-impaired (or 'stage 3'), for which interest
revenue is calculated by applying the effective interest rate to the amortised cost (i.e. net of the expected credit loss
provision).
The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the
expected life of the financial asset or financial liability to the gross carrying amount of a financial asset (i.e. its amortised
cost before any impairment allowance) or to the amortised cost of a financial liability. The calculation does not consider
expected credit losses and includes transaction costs, premiums or discounts and fees and points paid or received that are
integral to the effective interest rate, such as origination fees. For POCI financial assets - assets that are credit-impaired
at initial recognition - the Company calculates the credit-adjusted effective interest rate, which is calculated based on the
amortised cost of the financial asset instead of its gross carrying amount and incorporates the impact of expected credit
losses in estimated future cash flows.
Interest income on fixed deposits is recognised as it accrues on a time proportion basis taking into account the
amount outstanding.
2.2.2 Fees, charges and commission income
The Company recognises service and administration charges at point in time towards rendering of additional services to its
customers on satisfactory completion of service delivery.
Fees and commission that are not directly linked to the sourcing of financial assets are recognised at point in time in the
Statement of Profit and Loss on an accrual basis when the right to receive the same is established.
Instrument Return Charges levied on customers for non payment of instalments on the contractual date is recognised
on realisation.
Foreclosure charges are collected from loan customers for early payment/closure of loan and are recognised on realisation.
Collection fee related to transferred assets under securitisation transactions is recognised on remittance of collection
proceeds to Special Purpose Vehicle (SPV) created under securitisation transaction.
2.2.3 Income from direct assignment
In case of direct assignment of loans, the assets are derecognized when all the rights, title, future receivables and interest
thereof along with all the risks and rewards of ownership are transferred to the purchasers of assigned loans. The profit if
any, as reduced by the estimated provision for loss/expenses and incidental expenses related to the transaction, is recognised
as gain or loss arising on assignment.
Servicing fees received is accounted for based on the underlying deal structure of the transaction as per the agreement and
excess interest spread (EIS) on the deal is accounted for upfront as and when it becomes due.
2.2.4 Income from securitisation
The Company securitises certain pools of loan receivables in accordance with applicable RBI guidelines. 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 Pay-out Account maintained by the SPV Trust for making scheduled
pay-outs to the investors in Pass Though Certificates (PTCs) issued by the SPV Trust.
These securitisation transactions also requires 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 de-recognition criteria as set out in Ind AS 109. Consideration received in this transaction is
presented as "Associated liability related to Securitisation transactions" and the loan receivables securitised are continued
to be reflected as loan assets. These loan assets are carried at amortised cost and the interest income is recognised by
applying the EIR to the gross carrying amount of financial assets other than credit-impaired assets.
In case of credit-impaired financial assets, the Company recognises interest income on the amortised cost net of impairment
loss on financial assets at EIR. If financial asset is no longer credit-impaired, the Company reverts to calculating interest
income on a gross basis (amortised cost).
2.2.5 Income from investments
Ý Profit or losses in respect of Investments / dealing in shares and securities are recognized on trade dates.
Ý Profit /Loss on dealing in securities and derivatives comprises profit/loss on sale of securities, unrealized profit/loss
on securities held as stock in trade and profit/loss on equity derivative instruments.
Ý Profit or losses in respect of Investments in mutual fund are recognised on the date of sale.
Ý Profit/Loss on sale of securities is determined based on the FIFO method. Profit/loss on exchange traded equity
derivatives transactions are accounted for based on the 'Guidance Note on Accounting for Equity Index and equity
stock Futures and Options issued by the Institute of Chartered Accountants of India.
Ý Equity Index/Stock-Futures
Ý Equity index/Stock Futures are marked-to-market. Debit or credit balance disclosed under loans and advances or
current liabilities, respectively, in the Mark-to-Market-Equity Index/Stock futures account.
Ý As on the balance sheet date, the Profit/loss on open positions in index/stock futures is accounted for as follows:
Ý Credit balance in the "Mark-to-Market Margin-Equity Index/Stock Futures account "being anticipated profit, is
ignored and no credit is taken to profit and loss account.
Ý Debit balance in the "Mark-to-Market Margin-Equity Index/Stock Futures account "being anticipated loss, is
recognized in the profit and loss account.
On final settlement or squaring-up of contracts for Equity Index/stock Futures, the profit or loss is calculated as difference
between settlement/ squaring-up price and contract price. Accordingly debit or credit balance pertaining to the settled/
squared-up contract in "Mark-to-Market Margin-Equity Index/Stock Futures account "is recognized in the profit and loss
account upon expiry of the Contracts. When more than one contract in respect of the relevant series of Equity Index/Stock
Futures to which the squared-up contract pertains is outstanding at the time of the squaring-up of the Contract, the contract
price of the contract so squared-up is determined using weighted average method for calculating profit/loss on squaring-up.
2.2.6 Dividend income
Dividend income on units of shares/mutual funds is recognised in the statement of profit or loss on receipt basis.
2.2.7 Rental income
Lease income from operating leases where the Company is a lessor is recognised in income on a straight-line basis over
the lease term unless the receipts are structured to increase in line with expected general inflation to compensate for the
expected inflationary cost increases. The respective leased assets are included in the balance sheet based on their nature.
2. 3 Expenditures:
2.3.1 Finance costs
Finance costs include interest expense computed by applying the effective interest rate on respective financial instruments
measured at Amortised cost. Financial instruments include bank term loans, associated liabilities in respect of securitisation
transactions, non-convertible debentures, fixed deposits mobilized, commercial papers, subordinated debts and exchange
differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost.
Finance costs are charged to the Statement of profit and loss.
Interest expense on lease liabilities computed by applying the Company's weighted average incremental borrowing rate has
been included under finance costs.
2.3.2 Fees and Commission expense
Fees and commission expenses which are not directly linked to the sourcing of financial assets, such as commission/incentive
incurred on value added services and products distribution, recovery charges, guarantee fees under guarantee scheme and
fees for management of portfolio etc., are recognised in the Statement of Profit and Loss on an accrual basis.
2.3.3 Employee Benefit Expense
Employee benefit expenses include cost attributable to the services rendered by the employees of the Company is recognised
as employee benefits expenses in the Statement of Profit and Loss
2.3.4 Other Expenses
Expenses are recognised on accrual basis inclusive of goods and services tax for which input credit is not statutorily permitted.
2.4 Financial instruments
Recognition of Financial Instruments All financial instruments are recognised on the date when the Company becomes party
to the contractual provisions of the financial instruments. For tradeable securities, the Company recognises the financial
instruments on settlement date.
(i) Financial assets
Initial Measurement
At initial recognition, the Company measures a financial asset or financial liability at its fair value plus or minus, in the case
of a financial asset or financial liability not at fair value through profit or loss, transaction costs that are incremental and
directly attributable to the acquisition or issue of the financial asset or financial liability, such as fees and commissions.
Transaction costs of financial assets and financial liabilities carried at fair value through profit or loss are expensed in profit
or loss. Immediately after initial recognition, an expected credit loss allowance (ECL) is recognised for financial assets
measured at amortised cost and investments in debt instruments measured at FVOCI, which results in an accounting loss
being recognised in profit or loss when an asset is newly originated.
When the fair value of financial assets and liabilities differs from the transaction price on initial recognition, the entity
recognizes the difference as follows:
a) When the fair value is evidenced by a quoted price in an active market for an identical asset or liability (i.e. a Level 1
input) or based on a valuation technique that uses only data from observable markets, the difference is recognised as
a gain or loss.
b) In all other cases, the difference is deferred, and the timing of recognition of deferred day one profit or loss is
determined individually. It is either amortised over the life of the instrument, deferred until the instrument's fair value
can be determined using market observable inputs, or realised through settlement.
When the Company revises the estimates of future cash flows, the carrying amount of the respective financial assets or
financial liability is adjusted to reflect the new estimate discounted using the original effective interest rate. Any changes
are recognised in profit or loss.
Subsequent measurement
The Company has applied Ind AS 109 and classifies its financial assets in the following measurement categories:
i. Fair value through profit or loss (FVPL).
ii. Fair value through other comprehensive income (FVOCI); or
iii. Amortised cost.
The classification requirements for debt and equity instruments are described below:
Debt instruments
Debt instruments are those instruments that meet the definition of a financial liability from the issuer's perspective, such as
loans, government and corporate bonds and trade receivables.
Classification and subsequent measurement of debt instruments depend on:
(i) the Company's business model for managing the asset; and
(ii) the cash flow characteristics of the asset.
Based on these factors, the Company classifies its debt instruments into one of the following three measurement categories:
Amortised cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely
payments of principal and interest ('SPPI'), and that are not designated at FVPL, are measured at amortised cost. The
carrying amount of these assets is adjusted by any expected credit loss allowance recognised.(a). Interest income from these
financial assets is recognised using the effective interest rate method.
Fair value through other comprehensive income: Financial assets that are held for collection of contractual cash flows
and for selling the assets, where the assets' cash flows represent solely payments of principal and interest, and that are not
designated at FVPL, are measured at fair value through other comprehensive income. Movements in the carrying amount
are taken through OCI, except for the recognition of impairment gains or losses, interest revenue and foreign exchange
gains and losses on the instrument's amortised cost which are recognised in profit or loss. When the financial asset is
derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to profit or loss. Interest
income from these financial assets is included in 'Interest income' using the effective interest rate method.
Fair value through profit or loss: Assets that do not meet the criteria for amortised cost or FVOCI are measured at fair
value through profit or loss. A gain or loss on a debt investment that is subsequently measured at fair value through profit or
loss and is not part of a hedging relationship is recognised in profit or loss in the period in which it arises, unless it arises from
debt instruments that were designated at fair value, or which are not held for trading. Interest income from these financial
assets is included in 'Interest income' using the effective interest rate method.
Fair value option for financial assets: The Company may also irrevocably designate financial assets at fair value through
profit or loss if doing so significantly reduces or eliminates an accounting mismatch created by assets and liabilities being
measured on different bases.
Business model: The business model reflects how the Company manages the assets in order to generate cash flows. That
is, whether the Company's objective is solely to collect the contractual cash flows from the assets or is to collect both the
contractual cash flows and cash flows arising from the sale of assets. If neither of these is applicable (e.g. financial assets are
held for trading purposes), then the financial assets are classified as part of 'other' business model and measured at FVPL.
Factors considered by the Company in determining the business model for a Company of assets include past experience
on how the cash flows for these assets were collected, how the asset's performance is evaluated and reported to key
management personnel, how risks are assessed and managed and how managers are compensated. Securities held for
trading are held principally for the purpose of selling in the near term or are part of a portfolio of financial instruments
that are managed together and for which there is evidence of a recent actual pattern of short-term profit-taking. These
securities are classified in the 'other' business model and measured at FVPL.
SPPI: Where the business model is to hold assets to collect contractual cash flows or to collect contractual cash flows and
sell, the Company assesses whether the financial instruments' cash flows represent solely payments of principal and interest
(the 'SPPI test'). In making this assessment, the Company considers whether the contractual cash flows are consistent with
a basic lending arrangement i.e. interest includes only consideration for the time value of money, credit risk, other basic
lending risks and a profit margin that is consistent with a basic lending arrangement. Where the contractual terms introduce
exposure to risk or volatility that are inconsistent with a basic lending arrangement, the related financial asset is classified
and measured at fair value through profit or loss.
Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are
solely payment of principal and interest.
The Company reclassifies debt investments when and only when its business model for managing those assets changes. The
reclassification takes place from the start of the first reporting period following the change. Such changes are expected to
be very infrequent, and none occurred during the period.
Equity instruments:
Equity instruments are instruments that meet the definition of equity from the issuer's perspective; that is, instruments that
do not contain a contractual obligation to pay and that evidence a residual interest in the issuer's net assets.
The Company subsequently measures all equity investments at fair value. Where the Company's management has elected
to present fair value gains and losses on equity investments in other comprehensive income, there is no subsequent
reclassification of fair value gains and losses to profit or loss following the derecognition of the investment.
Changes in the fair value of financial assets at fair value through profit or loss are recognised in net gain/loss on fair value
changes in the statement of profit or loss. Impairment losses (and reversal of impairment losses) on equity investments
measured at FVOCI are not reported separately from other changes in fair value.
Gains and losses on equity investments at FVPL are included in the statement of profit or loss.
(ii) Impairment
ECL are recognised for financial assets held under amortised cost, debt instruments measured at FVOCI, and certain
loan commitments
Financial assets where no significant increase in credit risk has been observed are considered to be in 'stage 1' and for which
a 12-month ECL is recognised. Financial assets that are considered to have significant increase in credit risk are considered
to be in 'stage 2' and those which are in default or for which there is an objective evidence of impairment are considered to
be in 'stage 3'. Lifetime ECL is recognised for stage 2 and stage 3 financial assets.
At initial recognition, allowance (or provision in the case of loan commitments) is required for ECL towards default events
that are possible in the next 12 months, or less, where the remaining life is less than 12 months.
In the event of a significant increase in credit risk, allowance (or provision) is required for ECL towards all possible default
events over the expected life of the financial instrument ('lifetime ECL').
Financial assets (and the related impairment loss allowances) are written off in full, when there is no realistic prospect
of recovery.
Treatment of the different stages of financial assets and the methodology of determination of ECL
(a) Credit impaired (stage 3)
The Company recognises a financial asset to be credit impaired and in stage 3 by considering relevant objective
evidence, primarily whether:
- Contractual payments of either principal or interest are past due for more than 90 days;
- The loan is otherwise considered to be in default.
Restructured loans, where repayment terms are renegotiated as compared to the original contracted terms due to
significant credit distress of the borrower, are classified as credit impaired. Such loans continue to be in stage 3 until
they exhibit regular payment of renegotiated principal and interest over a minimum observation period, typically 12
months- post renegotiation, and there are no other indicators of impairment. Having satisfied the conditions of timely
payment over the observation period these loans could be transferred to stage 1 or 2 and a fresh assessment of the
risk of default be done for such loans.
Interest income is recognised by applying the EIR to the net amortised cost amount i.e. gross carrying amount less ECL
allowance.
(b) Significant increase in credit risk (stage 2)
An assessment of whether credit risk has increased significantly since initial recognition is performed at each reporting
period by considering the change in the risk of default of the loan exposure. However, unless identified at an earlier
stage, 30 days past due is considered as an indication of financial assets to have suffered a significant increase in credit
risk. Based on other indications such as borrower's frequently delaying payments beyond due dates though not 30
days past due are included in stage 2 for mortgage loans.
The measurement of risk of defaults under stage 2 is computed on homogenous portfolios, generally by nature of loans,
tenors, underlying collateral, geographies and borrower profiles. The default risk is assessed using PD (probability
of default) derived from past behavioural trends of default across the identified homogenous portfolios. These past
trends factor in the past customer behavioural trends, credit transition probabilities and macroeconomic conditions.
The assessed PDs are then aligned considering future economic conditions that are determined to have a bearing on
ECL.
(c) Without significant increase in credit risk since initial recognition (stage 1)
ECL resulting from default events that are possible in the next 12 months are recognised for financial instruments in
stage 1. The Company has ascertained default possibilities on past behavioural trends witnessed for each homogenous
portfolio using application/behavioural score cards and other performance indicators, determined statistically.
(d) Measurement of ECL
The assessment of credit risk and estimation of ECL are unbiased and probability weighted. It incorporates all
information that is relevant including information about past events, current conditions and reasonable forecasts of
future events and economic conditions at the reporting date. In addition, the estimation of ECL takes into account
the time value of money. Forward looking economic scenarios determined with reference to external forecasts of
economic parameters that have demonstrated a linkage to the performance of our portfolios over a period of time
have been applied to determine impact of macro economic factors.
The Company has calculated ECL using three main components: a probability of default (PD), a loss given default
(LGD) and the exposure at default (EAD). ECL is calculated by multiplying the PD, LGD and EAD and adjusted for time
value of money using a rate which is a reasonable approximation of EIR.
- Determination of PD is covered above for each stage of ECL.
- EAD represents the expected balance at default, taking into account the repayment of principal and interest from
the Balance Sheet date to the date of default together with any expected drawdowns of committed facilities.
- LGD represents expected losses on the EAD given the event of default, taking into account, among other
attributes, the mitigating effect of collateral value at the time it is expected to be realised and the time value
of money.
(iii) Modification of loans
The Company sometimes renegotiates or otherwise modifies the contractual cash flows of loans to customers. When
this happens, the Company assesses whether or not the new terms are substantially different to the original terms. The
Company does this by considering, among others, the following factors:
i) If the borrower is in financial difficulty, whether the modification merely reduces the contractual cash flows to
amounts the borrower is expected to be able to pay.
ii) Whether any substantial new terms are introduced, such as a profit share/equity-based return that substantially
affects the risk profile of the loan.
iii) Significant extension of the loan term when the borrower is not in financial difficulty.
iv) Significant change in the interest rate.
v) Change in the currency the loan is denominated in.
vi) Insertion of collateral, other security or credit enhancements that significantly affect the credit risk associated with
the loan.
If the terms are substantially different, the Company de-recognizes the original financial asset and recognizes a 'new' asset
at fair value and recalculates a new effective interest rate for the asset. The date of renegotiation is consequently considered
to be the date of initial recognition for impairment calculation purposes, including for the purpose of determining whether
a significant increase in credit risk has occurred. However, the Company also assesses whether the new financial asset
recognised is deemed to be credit-impaired at initial recognition, especially in circumstances where the renegotiation was
driven by the debtor being unable to make the originally agreed payments. Differences in the carrying amount are also
recognised in profit or loss as a gain or loss on derecognition.
If the terms are not substantially different, the renegotiation or modification does not result in derecognition, and the
Company recalculates the gross carrying amount based on the revised cash flows of the financial asset and recognizes a
modification gain or loss in the statement of profit or loss. The new gross carrying amount is recalculated by discounting
the modified cash flows at the original effective interest rate (or credit-adjusted effective interest rate for purchased or
originated credit-impaired financial assets).
(iv) Derecognition other than on a modification
Financial assets, or a portion thereof, are derecognised when the contractual rights to receive the cash flows from the assets
have expired, or when they have been transferred and either
(i) the Company transfers substantially all the risks and rewards of ownership, or (ii) the Company neither transfers nor
retains substantially all the risks and rewards of ownership and the Company has not retained control. The Company
directly reduces the gross carrying amount of a financial asset when there is no reasonable expectation of recovering
a financial asset in its entirety or a portion thereof.
The Company enters into transactions where it retains the contractual rights to receive cash flows from assets but
assumes a contractual obligation to pay those cash flows to other entities and transfers substantially all of the risks and
rewards. These transactions are accounted for as 'pass through' transfers that result in derecognition if the Company:
(i) Has no obligation to make payments unless it collects equivalent amounts from the assets.
(ii) Is prohibited from selling or pledging the assets; and
(iii) Has an obligation to remit any cash it collects from the assets without material delay.
Collateral (shares and bonds) furnished by the Company under standard repurchase agreements and securities
lending and borrowing transactions are not de-recognised because the Company retains substantially all the risks and
rewards on the basis of the predetermined repurchase price, and the criteria for derecognition are therefore not met.
This also applies to certain securitisation transactions in which the Company retains a subordinated residual interest.
(ii) Financial Liabilities
(a) Initial measurement
The Company recognises all financial liabilities initially at fair value adjusted for transaction costs that are
directly attributable to the issue of financial liabilities except in the case of financial liabilities recorded at FVTPL
where the transaction costs are charged to Statement of Profit and Loss. Generally, the transaction price is
treated as fair value unless there are circumstances which prove to the contrary in which case, the difference, if
material, is charged to Statement of Profit and Loss.
(b) Subsequent measurement
In both the current and prior period, financial liabilities are classified as subsequently measured at amortised
cost, except for:
(a) Financial liabilities at fair value through profit or loss: this classification is applied to derivatives, financial
liabilities held for trading and other financial liabilities designated as such at initial recognition. Gains or
losses on financial liabilities designated at fair value through profit or loss are presented partially in other
comprehensive income (the amount of change in the fair value of the financial liability that is attributable
to changes in the credit risk of that liability, which is determined as the amount that is not attributable
to changes in market conditions that give rise to market risk) and partially profit or loss (the remaining
amount of change in the fair value of the liability). This is unless such a presentation would create, or
enlarge, an accounting mismatch, in which case the gains and losses attributable to changes in the credit
risk of the liability are also presented in profit or loss.
(b) Financial liabilities arising from the transfer of financial assets which did not qualify for derecognition,
whereby a financial liability is recognised for the consideration received for the transfer. In subsequent
periods, the Company recognizes any expense incurred on the financial liability; and
(c) Financial guarantee contracts and loan commitments.
(c) Derecognition
Financial liabilities are derecognised when they are extinguished i.e. when the obligation specified in the contract
is discharged, cancelled or expires).
The exchange between the Company and its original lenders of debt instruments with substantially different
terms, as well as substantial modifications of the terms of existing financial liabilities, are accounted for as an
extinguishment of the original financial liability and the recognition of a new financial liability. The terms are
substantially different if the discounted present value of the cash flows under the new terms, including any fees
paid net of any fees received and discounted using the original effective interest rate, is at least 10% different
from the discounted present value of the remaining cash flows of the original financial liability. In addition,
other qualitative factors, such as the currency that the instrument is denominated in, changes in the type of
interest rate, new conversion features attached to the instrument and change in covenants are also taken into
consideration. If an exchange of debt instruments or modification of terms is accounted for as an extinguishment,
any costs or fees incurred are recognised as part of the gain or loss on the extinguishment. If the exchange or
modification is not accounted for as an extinguishment, any costs or fees incurred adjust the carrying amount of
the liability and are amortised over the remaining term of the modified liability.
(iii) Financial guarantee contracts and loan commitments
Financial guarantee contracts are contracts that require the issuer to make specified payments to reimburse the holder
for a loss it incurs because a specified debtor fails to make payments when due, in accordance with the terms of a debt
instrument. Such financial guarantees are given to banks, financial institutions and others on behalf of customers to
secure loans, overdrafts and other banking facilities.
Financial guarantee contracts are initially measured at fair value and subsequently measured at the higher of:
(a) The amount of the loss allowance; and
(b) The premium received on initial recognition less income recognised in accordance with the principles of Ind AS
115. Loan commitments provided by the Company are measured as the amount of the loss allowance.
For loan commitments and financial guarantee contracts, the loss allowance is recognised as a provision. However,
for contracts that include both a loan and an undrawn commitment and the Company cannot separately identify the
expected credit losses on the undrawn commitment component from those on the loan component, the expected
credit losses on the undrawn commitment are recognised together with the loss allowance for the loan. To the extent
that the combined expected credit losses exceed the gross carrying amount of the loan, the expected credit losses are
recognised as a provision.
2.5 Investment in subsidiaries, associates and joint ventures
Investment in subsidiaries, associates and Joint Ventures are recognised at cost and are not adjusted to fair value at the end
of each reporting period as allowed by Ind AS 27 'Separate financial statement'. Cost of investment represents amount paid
for acquisition of the said investment. The Company assesses at the end of each reporting period, if there are any indications
that the said investment may be impaired. If so, the Company estimates the recoverable value/amount of the investment
and provides for impairment, if any i.e. the deficit in the recoverable value over cost.
2.6 Taxes
Income tax expense comprises of current tax and deferred tax. It is recognised in Statement of profit and loss except to the
extent that it relates to an item recognised directly in equity or in other comprehensive income.
(a) Current tax
It comprises amount of tax payable in respect of the taxable income or loss for the year determined in accordance with
Income Tax Act, 1961 and any adjustment to the tax payable or receivable in respect of previous years. The Company's
current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.
Significant judgments are involved in determining the provision for income taxes including judgment on whether tax
positions are probable of being sustained in tax assessments. A tax assessment can involve complex issues, which can only be
resolved over extended time periods. Current tax assets and liabilities are offset only if there is a legally enforceable right to
set off the recognised amounts, and it is intended to realise the asset and settle the liability on a net basis or simultaneously.
Current tax is recognised in statement of profit or loss, except when they relate to items that are recognised in other
comprehensive income or directly in equity, in which case, the current tax is also recognised in other comprehensive income
or directly in equity respectively. The management periodically evaluates positions taken in the tax returns with respect to
situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.
(b) Deferred tax
Deferred tax assets and liabilities are recognised for the future tax consequences of temporary differences between the
carrying values of assets and liabilities and their respective tax bases. Deferred tax liabilities and assets are measured at the
tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and
tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred
tax liabilities and assets reflects the tax consequence that would follow from the manner in which the Company expects, at
the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
2.7 Property, plant and equipment and depreciation thereof
Freehold land is carried at historical cost. PPE at cost of acquisition (including incidental expenses), less accumulated
depreciation and accumulated impairment loss, if any.
Cost of acquisition consists of purchase price or construction cost which is the amount paid, freight, duties, taxes and any
other incidental expenses directly attributable to bringing the asset to the location and condition necessary for it to be
capable of operating in the manner intended by the management
Subsequent expenditure is recognised as an increase in the carrying amount of the asset when it is probable that future
economic benefits deriving from the cost incurred will flow to the enterprise and the cost of the item can be measured.
Other repairs and maintenance costs are expensed off as and when incurred.
Advances paid towards the acquisition of PPE outstanding at each balance sheet date are disclosed separately under
other non-financial assets. Capital work in progress comprises the cost of PPE that are not ready for its intended use at the
reporting date. Capital work-in-progress is stated at cost, net of impairment loss, if any.
Depreciation methods, estimated useful lives and residual value:
Depreciation on PPE is provided on straight-line basis in accordance with the useful lives specified in Schedule II to the
Companies Act, 2013 on a pro-rata basis subject to exceptions listed here below. Depreciation methods, useful lives and
residual values are reviewed in each financial year, and changes, if any, are accounted for prospectively.
The estimated useful lives for the different types of assets are:
The property, plant and equipment acquired under finance leases is depreciated over the asset's useful life or over the shorter
of the asset's useful life and the lease term if there is no reasonable certainty that the Company will obtain ownership at the
end of the lease term.
The useful lives have been determined based on technical evaluation done by the management's expert which are higher
than those specified by Schedule II to the Companies Act, 2013, in order to reflect the actual usage of the assets. The residual
values are not more than 5% of the original cost of the asset.
The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.
An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater
than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with carrying
amount and are recognised in the statement of profit or loss.
2.8 Investment Property
Properties held to earn rental income or for capital appreciation or both and that is not occupied by the Company is classified
as Investment Property.
It is measured initially at cost of acquisition including transaction costs, borrowing cost and other directly attributable cost
in bringing the asset to its working condition for its intended use.
Subsequent expenditure is capitalized to the asset carrying amount only when it is probable that the future economic
benefit associated with the expenditure will flow to the company.
Though the Company measures investment property using cost-based measurement, the fair value of investment property
is disclosed in the notes. Fair values are determined by property valuer, having appropriate recognised professional
qualifications and recent experience in the location and category of the property being valued.
Investment properties are derecognised either when they have been disposed off or when they are permanently withdrawn
from use and no future economic benefit is expected from their disposal. The difference between the net disposal proceeds
and the carrying amount of the asset is recognised in the statement of profit and loss in the period of derecognition.
2.9. Intangible assets
(i) Other intangibles
Intangible assets are recognised where it is probable that the future economic benefit attributable to the assets will flow
to the Company and its cost can be reliably measured. Intangible assets are stated at cost of acquisition less accumulated
amortization and impairment, if any.
Expenditure incurred on acquisition/development of intangible assets which are not put/ready to use at the reporting date
is disclosed under intangible assets under development. The Company amortises intangible assets on a straight-line basis
over the useful lives of the assets commencing from the month in which the asset is first put to use. The Company provides
pro rata depreciation from the day the asset is put to use.
2.10 Leased Assets:
In accordance with Ind AS 116 - Leases, the Right-Of-Use assets (Leasehold premises) are initially recognised at cost
which comprises of initial amount of lease liability adjusted for any lease payments made at or prior to the commencement
date of the lease plus any initial direct costs less any lease incentives. These are subsequently measured at cost less
accumulated depreciation and impairment losses, if any. Right-Of-Use assets (Leasehold premises) are depreciated from
the commencement date on a straight-line basis over the shorter of the lease term and useful life of the underlying asset.
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