2) Material accounting policies2.1 Basis of preparation of financial statements
A) Statement of compliance
These financial statements have been prepared
in accordance with the Indian Accounting
Standards ('Ind AS') notified under Section 133
of the Companies Act, 2013 ('the Act') read with
Companies (Indian Accounting Standards) Rules,
2015 as amended from time to time. In addition,
the guidance notes/ announcements issued by the
Institute of Chartered Accountants of India (ICAI)
are also applied along with compliance with other
statutory promulgations which require a different
treatment. Any directions issued by the RBI or other
regulators are implemented as and when they
become applicable.
The Company has complied with the disclosures
as required by the Master Direction - Reserve
Bank of India (Non-Banking Financial Companies -
Registration, Exemptions and Framework for Scale
Based Regulation) Directions, 2025 issued by the
Reserve Bank of India (RBI) vide their Notification No.
RBI/DOR/2025-26/339 dated 28th November, 2025,
as amended.
To provide more reliable and relevant information about
the effect of certain items in the Balance Sheet and
Statement of Profit and Loss, the Company has changed
the classification of certain items. Previous year's figures
have been re-grouped or reclassified, to conform to
current year's grouping / classifications. There is no impact
on Equity or Net Profit/Loss due to these regrouping /
reclassifications.
The accounting policies are applied consistently to all
the periods presented in the financial statements except
where a newly issued accounting standard is initially
adopted or a revision to an existing accounting standard
requires a change in the accounting policy hitherto in use.
A summary of the material accounting policy information
and other explanatory information is in accordance with
the Companies (Indian Accounting Standards) Rules, 2015
(as amended) as specified under Section 133 of the Act
including applicable Indian Accounting Standards (Ind
AS) and accounting principles generally accepted in India.
B) Functional and presentation currency
The Company's presentation and functional currency
is Indian Rupees. All figures appearing in the financial
statements are in Indian Rupees in Lakhs rounded off to
two decimal places as permitted by Schedule III to the
Act. Per share data is presented in Indian Rupees to two
decimal places.
C) Basis of preparation, presentation and disclosure of
financial statements
The financial statements are prepared on a going concern
basis in accordance with Ind AS 1, as the management
is satisfied that the Company shall be able to continue
its business for the foreseeable future and no material
uncertainty exists. In making this assessment, the
Management has considered a wide range of information
relating to present and future conditions, including
projections of profitability, cash flows, and capital
resources.
The financial statements have been prepared on
the historical cost basis except for certain financial
instruments that are measured at fair values at the end
of each reporting period, as explained in the accounting
policies. Historical cost is generally based on the fair value
of the consideration given in exchange for goods and
services. Further, assets and liabilities are classified as per
the normal operating cycle (determined at 12 months)
and other criteria set out in Schedule III of the Act as
applicable to NBFCs.
D) Fair value measurement
Fair value is the price that would be received on sale of an
asset or paid to transfer liability in an orderly transaction
between market participants at the measurement date in
the principal or, in its absence, the most advantageous
market to which the Company has access at that date.
The best estimate of the fair value of a financial instrument
on initial recognition is normally the transaction price.
If the Company determines that the fair value on initial
recognition differs from the transaction price and the fair
value is evidenced neither by a quoted price in an active
market for an identical asset or liability nor based on a
valuation technique that uses only data from observable
markets, then the financial instrument is initially measured
at fair value, adjusted to defer the difference between the
fair value on initial recognition and the transaction price.
Subsequently, that difference is recognized in Statement
of Profit and Loss on an appropriate basis over the life
of the instrument but not later than when the valuation
is wholly supported by observable market data or the
transaction is closed out.
All assets and liabilities for which fair value is measured
or disclosed in the financial statements are categorized
within the fair value hierarchy, described as follows, based
on the lowest level input that is significant to the fair value
measurement as a whole:
Level 1 - Valuation using quoted market price in
active markets:
The fair value for financial instruments traded in active
markets at the reporting date is based on their quoted
market price, without any deduction for transaction costs.
The market is regarded as active if transactions for the asset
or liability take place with sufficient frequency and volume
to provide pricing information on an ongoing basis.
Level 2 - Valuation using observable inputs:
If there is no quoted price in an active market, then the
Company uses valuation techniques that maximize the
use of relevant observable inputs and minimize the use
of unobservable inputs. The chosen valuation technique
incorporates most of the factors that market participants
would take into account in pricing a transaction.
Level 3 - Valuation with significant unobservable
inputs:
The valuation techniques are used only when fair value
cannot be determined by using observable inputs.
The Company regularly reviews significant unobservable
inputs and valuation adjustments. Level 3 assets are
typically very illiquid, and fair values can only be calculated
using estimates.
The Company uses valuation techniques that are
appropriate in the circumstances and for which sufficient
data is available to measure fair value, maximizing the use
of relevant observable inputs and minimizing the use of
unobservable inputs.
E) Significant accounting judgements, estimates and
assumptions
The preparation of the financial statements requires
the management to make judgments, estimates and
assumptions in the application of accounting policies
that affect the reported amount of assets, liabilities and
the accompanying disclosures along with contingent
liabilities as at the date of financial statements and revenue
and expenses for the reporting period. 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 outcomes
different from the estimates. Differences between actual
results and estimates are recognized in the year in which
the results are known or materialized, i.e., prospectively.
Estimates and judgements are continually evaluated
and are based on historical experience and other factors,
including expectations of future events that are believed
to be reasonable under the circumstances. The key
areas involving estimation uncertainty, higher degree of
judgement or complexity, or areas where assumptions are
significant to the financial statements include:
i) Impairment of financial assets
ii) Estimation of fair value measurement of financial
assets and liabilities
iii) Effective interest rate method
iv) Business model assessment
v) Provisions and Contingencies
vi) Useful life and expected residual value of assets
vii) Tax position for current tax and recognition of
deferred tax assets/liabilities
viii) Measurement of Defined Benefit Obligations and
actuarial assumptions
ix) Classification of lease and related discount rate
2.2 Financial Instruments
a) Recognition and initial measurement -
Financial assets and financial liabilities are recognized
when the company becomes a party to the contractual
provisions of the instruments.
Financial assets and financial liabilities are initially
measured at fair value. Transaction costs that are directly
attributable to the acquisition or issue of financial assets
and financial liabilities (other than financial assets and
financial liabilities at Fair Value through Profit and Loss
(FVTPL)) are added to or deducted from the fair value of
the financial assets or financial liabilities, as appropriate, on
initial recognition. Transaction costs directly attributable
to the acquisition of financial assets or financial liabilities at
Fair Value through Profit and Loss (FVTPL) are recognized
immediately in Statement of Profit and Loss.
b) Classification and subsequent measurement of
financial assets -
On initial recognition, a financial asset is classified as
measured at
- Amortized cost
- Fair Value Through Other Comprehensive Income
(FVTOCI) - debt instruments
- Fair Value Through Other Comprehensive Income
(FVTOCI) - equity instruments
- Fair Value Through Profit and Loss (FVTPL)
Amortized cost -
The Company's business model is not assessed on an
instrument-by-instrument basis, but at a higher level of
aggregated portfolios being the level at which they are
managed. The financial asset is held with the objective
to hold financial assets in order to collect contractual
cash flows as per the contractual terms that give rise on
specified dates to cash flows that are solely payment
of principal and interest (SPPI) on the principal amount
outstanding. Accordingly, the Company measures bank
balances, loans, Trade receivables and other financial
instruments at amortized cost.
Fair Value Through Other Comprehensive Income -
debt instruments -
The Company measures its debt instruments at FVTOCI
when the instrument is held within a business model,
the objective of which is achieved by both collecting
contractual cash flows and selling financial assets; and the
contractual terms of the financial asset meet the SPPI test.
Fair Value Through Other Comprehensive Income -
equity instruments -
The Company subsequently measures all equity
investments at fair value through Profit or Loss, unless
the Company's management has elected to classify
irrevocably some of its equity instruments at FVTOCI,
when such instruments meet the definition of equity
under Ind AS 32 Financial Instruments and are not held
for trading.
Financial assets are not reclassified subsequent to their
initial recognition, except if and in the period the Company
changes its business model for managing financial assets.
All financial assets not classified as measured at amortized
cost or FVTOCI are measured at FVTPL. This includes all
derivative financial assets.
Subsequent measurement of financial assets:
Financial assets at amortized cost are subsequently
measured at amortized cost using effective interest
method. The amortized cost is reduced by impairment
losses. Interest income, foreign exchange gains and losses
and impairment are recognized in Statement of Profit and
Loss. Any gain or loss on derecognition is recognized in
Statement of Profit and Loss.
Debt investment at FVTOCI is subsequently measured at
fair value. Interest income under effective interest method,
foreign exchange gains and losses and impairment are
recognized in Statement of Profit and Loss. Other net
gains and losses are recognized in OCI. On derecognition,
gains and losses accumulated in OCI are reclassified to
Statement of Profit and Loss.
For equity investments, the Company makes selection on
an instrument-by-instrument basis to designate equity
investments as measured at FVTOCI. These selected
investments are measured at fair value with gains and
losses arising from changes in fair value recognized in
Other Comprehensive income and accumulated in the
reserves. The cumulative gain or loss is not reclassified
to Statement of Profit and Loss on disposal of the
investments. These investments in equity are not held
for trading. Instead, they are held for strategic purposes.
Dividend income received on such equity investments is
recognized in Statement of Profit and Loss.
Equity investments that are not designated as measured
at FVTOCI are designated as measured at FVTPL and
subsequent changes in fair value are recognized in
Statement of Profit and Loss.
Financial assets at FVTPL are subsequently measured at
fair value. Net gains and losses, including any interest
or dividend income, are recognized in Statement of
Profit and Loss.
c) Derecognition of financial assets
A financial asset (or, where applicable, a part of a financial
asset or part of a Company of similar financial assets) is
primarily derecognized when:
• The rights to receive cash flows from the asset have
expired, or
• The Company has transferred its rights to receive cash
flows from the asset or has assumed an obligation to
pay the received cash flows in full without material
delay to a third party under a 'pass-through'
arrangement, and
• Either (a) the Company has transferred substantially all
the risks and rewards of the asset, or (b) the Company
has neither transferred nor retained substantially all
the risks and rewards of the asset but has transferred
control of the asset.
The transferred assets and the associated liability are
measured on a basis that reflects the rights and obligations
that the Company has retained.
On derecognition of a financial asset in its entirety, the
difference between the carrying amount (measured at
the date of derecognition) and the consideration received
(including any new asset obtained less any new liability
assumed) is recognized in the statement of Profit and Loss.
d) Financial guarantee contracts:
A financial guarantee contract is a contract that requires
the issuer to make specified payments to reimburse the
holder for a loss it incurs because a specified debtor fails
to make payments when due in accordance with the terms
of a debt instrument.
Financial guarantee contracts issued by the Company are
initially measured at their fair values and, if not designated
as at FVTPL, are subsequently measured at the higher of:
• the amount of loss allowance determined in
accordance with impairment requirements of Ind
AS 109; and
• the amount initially recognized less, when appropriate,
the cumulative amount of income recognized in
accordance with the principles of Ind AS 115
e) Offsetting
Financial assets and financial liabilities are offset and
the net amount presented in the Balance Sheet when,
and only when, the Company currently has a legally
enforceable right to set off the amounts, and it intends
either to settle them on a net basis or to realize the assets
and settle the liability simultaneously.
f) Impairment of financial instruments:
The Company uses 'Expected Credit Loss' (ECL) model,
for evaluating impairment of financial assets measured at
amortized cost or FVTOCI, except for investments in equity
instruments. The Company follows a 'three-stage' model
for impairment based on changes in credit quality since
initial recognition.
The Company perform an assessment, at the end of each
reporting period, of whether a financial instrument's credit
risk has increased significantly since initial recognition,
by considering the change in the risk of default occurring
over the remaining life of the financial instrument.
Based on the above, the Company categorizes its loans
into Stage 1, Stage 2 and Stage 3 as described below:
Stage 1 (Performing Assets) - includes financial assets that
have not had a significant increase in credit risk since initial
recognition or that have low credit risk at the reporting
date. For these assets, 12-month ECL is recognized
and interest income is calculated on the gross carrying
amount of the assets (that is, without deduction for credit
allowance). 12-month ECL are the portion of ECL that
results from default events on a financial instrument that
are possible within 12 months after the reporting date, if
the credit risk has not significantly increased since initial
recognition.
Stage 2 (Underperforming Assets with significant increase
in credit risk since initial recognition) - includes financial
instruments that have had a significant increase in credit
risk since initial recognition (unless they have low credit
risk at the reporting date) but that do not have objective
evidence of impairment. For these assets, lifetime ECL
are recognized, but interest income is calculated on the
gross carrying amount of the assets. Lifetime ECL are the
expected credit losses that result from all possible default
events over the expected life of the instrument.
Stage 3 (Non-performing or Credit-impaired assets) -
includes financial assets that have objective evidence of
impairment at the reporting date. For these assets, lifetime
ECL is recognized.
Measurement of Expected Credit Loss
Expected Credit Losses (ECL) on financial assets is an
unbiased probability weighted amount based out of
possible outcomes after considering risk of credit loss
even if probability is low and incorporate all available
information which is relevant to the assessment including
information about past events, current conditions
and reasonable and supportable forecasts of future
events and economic conditions at the reporting date.
Measurement of expected credit losses is based on
following parameters mentioned.
• Probability of default (PD): It is defined as the
probability of whether borrowers will default on
their obligations in future. Since the Company don't
have any history of past losses therefore it was not
adequate enough to create our own internal model
through which actual defaults for each grade could be
estimated. Hence, the default study published by one
of the recognized rating agency is used for estimating
the PDs for each range grade.
• Loss given default (LGD): It is the magnitude of the
likely loss, if there is a default. The LGD represents
expected losses on the EAD given the event of default,
taking into account, among other attributes, the
mitigating effect of collateral value.
• Exposure at default (EAD): 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.
• Forward looking information: While estimating the
expected credit losses, the Company consider the key
macro-economic factors.
g) Write offs: The gross carrying amount of a financial asset
is written off (either partially or in full) to the extent that
there is no reasonable expectation of recovering the asset
in its entirety or a portion thereof. This is generally the
case when the Company determines that the borrower
does not have assets or sources of income that could
generate sufficient cash flows to repay the amounts
subject to the write-off and when there is no reasonable
expectation of recovery from the collaterals held.
However, financial assets that are written off could still be
subject to enforcement activities in order to comply with
the Company's procedures for recovery of amounts due.
h) Simplified approach - Trade and other receivables
The Company follows the simplified approach for
recognition of impairment allowance on trade and other
receivables that do not contain a significant financing
component.
i) Presentation of allowance for ECL in the Balance Sheet -
Loss allowances for ECL are presented in the statement of
financial position as follows:
• For financial assets measured at amortized cost;
as a deduction from the gross carrying amount of
the assets;
• For debt instruments measured at FVTOCI; loss
allowance is recognized separately in Balance Sheet
and the carrying amount is at fair value.
j) Financial liabilities and equity instruments:
Debt and equity instruments issued by the Company
are classified as either financial liabilities or as equity
in accordance with the substance of the contractual
arrangements and the definitions of a financial liability
and an equity instrument.
Equity instruments
An equity instrument is any contract that evidences a
residual interest in the assets of an entity after deducting
all its liabilities. Equity Instruments issued by the Company
are recognized at the proceeds received, net of direct
issues costs.
Financial liabilities
Financial liabilities are classified as measured at amortized
cost or FVTPL. Financial liability is classified as FVTPL if it
is classified as held-for-trading or it is a derivative (that
does not meet hedge accounting requirements) or it is
designated as such on initial recognition. Other financial
liabilities are subsequently measured at amortized cost
using the effective interest method.
Interest expense and foreign exchange gains and losses
are recognized in Statement of Profit or Loss. Any gain or
loss on derecognition is also recognized in Statement of
Profit or Loss.
k) The Company de-recognizes financial liabilities when, and
only when, the Company's obligations are discharged,
cancelled or have expired. An exchange between with
a lender of debt instruments with substantially different
terms is accounted for as an extinguishment of the
original financial liability and the recognition of a new
financial liability. Similarly, a substantial modification
of the terms of an existing financial liability (whether or
not attributable to the financial difficulty of the debtor)
is accounted for as an extinguishment of the original
financial liability and the recognition of a new financial
liability. The difference between the carrying amount of
the financial liability derecognized and the consideration
paid and payable is recognized in Profit or Loss.
l) Foreign currency risk
The Company undertakes foreign currency transactions
as part of its foreign exchange business. The currency risk
arising from these transactions is centrally monitored by
a dedicated dealing room. The dealing room consolidates
and manages positions generated at individual locations
across the country and hedges such exposures through
transactions in the interbank market or by entering into
forward contracts. This centralized risk management
process ensures that open foreign currency positions are
maintained at minimal levels.
2.3 Cash and Cash equivalents
Cash and cash equivalents consist of cash in hand, bank
balances, foreign currencies and notes, demand deposits
with banks and other short-term deposits which are
readily convertible into known amounts of cash, are
subject to an insignificant risk of change in value and have
original maturities of less than or equal to three months.
Other bank balances include balances and deposits with
banks that are restricted for withdrawal and usage. For the
purpose of the statement of cash flows, cash and cash
equivalents consist of cash and short-term deposits.
2.4 Statement of Cash Flow
Statement of Cash Flows is prepared segregating the cash
flows into operating, investing and financing activities.
Cash flow from operating activities is reported using
indirect method adjusting the net Profit for the effects of:
i. changes during the period in inventories and
operating receivables and payables transactions of
a non-cash nature;
ii. Non-cash items such as depreciation, provisions,
deferred taxes, unrealized foreign currency gains
and losses, and undistributed profits of associates
and joint ventures; and
iii. all other items for which the cash effects are investing
or financing cash flows.
Cash and cash equivalents (including bank balances)
shown in the statement of cash flows exclude items
which are not available for general use as on the date of
Balance Sheet.
2.5 Property, plant and equipment
a) Recognition and Measurement
Tangible property, plant and equipment are stated at
cost less accumulated depreciation and impairment, if
any. The cost of property, plant and equipment comprise
purchase price and other non-refundable taxes or levies
and any directly attributable cost of bringing the asset to
its working condition for its intended use.
Advances paid towards the acquisition of property, plant
and equipment outstanding at each Balance Sheet date
is classified as capital advances under other non-financial
assets and the cost of assets not put to use before such
date are disclosed under 'Capital work-in-progress'.
The residual values and useful lives and method of
depreciation of PPE are reviewed at each financial year
end and adjusted prospectively.
b) Subsequent expenditure
Subsequent expenditure is capitalized only if it is
probable that the future economic benefits associated
with the expenditure will flow to the Company.
Expenditure incurred after the PPE has been put into
operations, such as repairs and maintenance expenses
are charged to the Statement of Profit and Loss during
the period in which they are incurred.
c) Depreciation, estimated useful lives and residual value
Depreciation is calculated using the straight-line method
to write down the cost of property and equipment to
their residual values over their estimated useful lives
as prescribed in Part C of Schedule II to the Companies
Act 2013. The estimated lives used and differences from
the lives prescribed under schedule II are noted in the
table below:
Depreciation is provided on a pro-rata basis i.e. from the
month in which asset is ready for use. Individual assets
costing less than or equals to Rs. 5,000 are depreciated in
full, in the year of purchase. Depreciation on assets sold
during the year is recognized on a pro-rata basis in the
Statement of Profit and Loss up to the date prior to the
date by which the assets have been disposed off.
Changes in the expected useful life are accounted for
by changing the depreciation period or methodology,
as appropriate, and treated as changes in accounting
estimates.
d) Derecognition
Property, plant and equipment are derecognised on
disposal or when no future economic benefits are
expected from its use. Any gain or loss arising on
de-recognition of the asset is recognised in other income/
expense in the statement of Profit and Loss (including
Other Comprehensive income) in the year the asset is
derecognised.
2.6 Intangible assets
Intangible assets are recognized when it is probable that
the future economic benefits that are attributable to the
asset will flow to the enterprise and the cost of the asset
can be measured reliably. Intangible assets are stated at
original cost net of tax/ duty credits availed, if any, less
accumulated amortization and cumulative impairment.
Direct expenses and administrative and other general
overhead expenses that are specifically attributable
to acquisition of intangible assets are allocated and
capitalized as a part of the cost of intangible assets.
These intangible assets are amortised on a straight-line
basis over their estimated useful life of three years, with
no residual value.
Any expenses on such software for support and
maintenance payable annually are charged to the
Statement of Profit and Loss.
2.7 Impairment of non-financial assets
The carrying values of assets at each Balance Sheet
date are reviewed for impairment, if any indication of
impairment exists. If the carrying amount of the assets
exceeds the estimated recoverable amount, impairment is
recognized for such excess amount in Statement of Profit
and Loss. Recoverable amount is the greater of the net
selling price and value in use. If at the reporting date, there
is an indication that a previously assessed impairment loss
no longer exists, the recoverable amount is reassessed and
the impairment losses previously recognized are reversed
such that the asset is recognized at its recoverable amount
but not exceeding written down value which would have
been reported if the impairment losses had not been
recognized initially.
2.8 Investment in subsidiaries
Subsidiaries are entities over which the Company
has control. The Company recognises investments in
subsidiaries and associates 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'.
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