2. Material Accounting Policies:
2.1 Basis of preparation:
These financial statements have been prepared in accordance with Indian Accounting Standards (Ind AS)
notified under section 133 of the Companies Act, 2013 ('the Act') read together with the Companies
(Indian Accounting Standards) Rules, 2015, as amended from time to time, other relevant provisions of the
Act and the RBI guidelines/regulations to the extent applicable on an accrual basis.
The financial statements have been prepared on a historical cost basis, except for certain financial assets
and financial liabilities that are measured at fair value.
Summary of material accounting policies
On 31 March 2023, the Ministry of Corporate Affairs notified Companies (Indian Accounting Standards)
Amendment Rules, 2023 amending the Companies (Indian Accounting Standards) Rules, 2015. The amend¬
ments come into force with effect from 1 April 2023, i.e., Financial Year 2023-24. One of the major changes
is in Ind AS 1 'Preparation of Financial Statements, which requires companies to disclose in their financial
statements 'material accounting policies' as against the erstwhile requirement to disclose 'significant ac¬
counting policies'. The word 'significant' is substituted by 'material'.
Accounting policy information is expected to be material if users of an entity's financial statements would
need it to understand other material information in the financial statements.
The Company applied the guidance available under paragraph 117B of Ind AS 1, Presentation of Financial
Statements in evaluating the material nature of the accounting policies.
2.2 Presentation of financial statements:
The Balance Sheet, Statement of changes in Equity for the year and the Statement of Profit and Loss are
prepared and presented in the format prescribed in the Division III of Schedule III to the Companies Act,
2013 ("the Act") applicable for Non-Banking Finance Companies ("NBFC"). The Statement of Cash Flows
has been prepared and presented as per the requirements of Ind AS 7 "Statement of Cash Flows". The
disclosure requirements with respect to items in the Balance Sheet and Statement of Profit and Loss, as
prescribed in the Schedule III to the Act, are presented by way of Notes forming part of standalone financial
statements along with the other notes required to be disclosed under the notified accounting Standards and
the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.
Amounts in the financial statements are presented in Indian Rupees in lakhs rounded off to two decimal
places as permitted by Schedule III to the Companies Act, 2013. Per share data are presented in Indian
Rupee to two decimal places.
2.3 Financial instruments:
(i) Classification of financial Instruments
Financial assets and financial liabilities are recognised in the Company's balance sheet when the Company
becomes a party to the contractual provisions of the instrument. recognised financial assets and financial
liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisi¬
tion or issue of financial assets and financial liabilities (other than financial assets and financial liabilities
at 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 FVTPL are recognised immediately in profit or loss. A financial asset and a
financial liability is offset and Notes forming part of standalone financial statements presented on net basis
in the balance sheet when there is a current legally enforceable right to set-off the recognised amounts and
it is intended to either settle on net basis or to realise the asset and settle the liability simultaneously:
a. Financial Assets:
Initial recognition and measurement
All financial assets are recognised initially at fair value plus, in the case of financial assets not recorded at
fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial
asset. Purchases or sales of financial assets that require delivery of assets within a time frame established
by regulation or convention in the market place (regular way trades) are recognised on the trade date, i.e.,
the date that the Company commits to purchase or sell the asset.
Subsequent measurement
(i) Debt instrument at FVTPL
Debt instruments included within the FVTPL category are measured at fair value with all changes recognised
in the statement of profit and loss. The Company has not designated any debt instrument as at FVTPL.
(ii) Investment in Preference Shares and Unquoted trade Investments
Investment in Preference Shares and Unquoted trade Investments are measured at amortised cost using
Effective Rate of Return (EIR).
(iii) Investment in equity instruments
All equity investments in scope of Ind AS 109 are measured at fair value. Equity instruments which are held
for trading and contingent consideration recognised by an acquirer in a business combination to which Ind
AS103 applies are classified as at FVTPL. For all other equity instruments, the Company may make an
irrevocable election to present in other comprehensive income subsequent changes in the fair value. The
Company makes such election on an instrument by-instrument basis. The classification is made on initial
recognition and is irrevocable.
If the Company decides to classify an equity instrument as at FVTOCI, then all fair value changes on the
instrument, excluding dividends, are recognised in the OCI. There is no recycling of the amounts from OCI
to the statement of profit and loss, even on sale of investment. However, the Company may transfer the
cumulative gain or loss within equity.
Equity instruments i.e., investments in equity shares within the FVTPL category are measured at fair value
with all changes recognised in the statement of profit and loss.
(iv) Investments in subsidiaries
Investments in subsidiaries are carried at cost less accumulated impairment losses, if any. Where an
indication of impairment exists, the carrying amount of the investment is assessed and written down
immediately to its recoverable amount. On disposal of investments in subsidiaries and joint venture, the
difference between net disposal proceeds and the carrying amounts are recognized in the statement of
profit and loss.
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial
assets) is primarily derecognised (i.e., removed from the Company's balance sheet) when:
(i) The rights to receive cash flows from the asset have expired, or
(ii) 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.
When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass¬
through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership.
When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor
transferred control of the asset, the Company continues to recognise the transferred asset to the extent of
the Company's continuing involvement. In that case, the Company also recognises an associated liability.
The transferred asset and the associated liability are measured on a basis that reflects the rights and
obligations that the Company has retained.
b. Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or
loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective
hedge, as appropriate. All financial liabilities are recognised initially at fair value and, in the case of loans
and borrowings and payables, net of directly attributable transaction costs.
The Company's financial liabilities include trade and other payables, loans and borrowings including bank
overdrafts, financial guarantee contracts.
Subsequent measurement
The measurement of financial liabilities depends on their classification, as described below:
(i) Loans and borrowings
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised
cost using the EIR method. Gains and losses are recognised in the statement of profit and loss when the
liabilities are derecognised as well as through the EIR amortisation process.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs
that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of
profit and loss.
2.4 Impairment:
The Company recognises loss allowances for ECLs on the following financial instruments that are not
measured at FVTPL:
• Loans and advances to customers
• Debt investment securities
• Trade and other receivable
• Lease receivables
• Irrevocable loan commitments issued and
• Financial guarantee contracts issued
Credit-impaired financial assets:
financial asset is 'credit-impaired' when one or more events that have a detrimental impact on the esti¬
mated future cash flows of the financial asset have occurred. Credit-impaired financial assets are referred
to as Stage 3 assets. Evidence of credit impairment includes observable data about the following events:
• significant financial difficulty of the borrower or issuer
• a breach of contract such as a default or past due event
• the lender of the borrower, for economic or contractual reasons relating to the borrower's financial
difficulty, having granted to the borrower a concession that the lender would not otherwise consider
• the disappearance of an active market for a security because of financial difficulties; or Notes forming
part of standalone financial statements
• the purchase of a financial asset at a deep discount that reflects the incurred credit losses.
It may not be possible to identify a single discrete event-instead; the combined effect of several events may
have caused financial assets to become credit-impaired. The Company assesses whether debt instruments
that are financial assets measured at amortised cost or FVTOCI are credit-impaired at each reporting date.
To assess if corporate debt instruments are credit impaired, the Company considers factors such as bond
yields, credit ratings and the ability of the borrower to raise funding.
A loan is considered credit-impaired when a concession is granted to the borrower due to a deterioration in
the borrower's financial condition, unless there is evidence that as a result of granting the concession the
risk of not receiving the contractual cash flows has reduced significantly and there are no other indicators
of impairment. For financial assets where concessions are contemplated but not granted the asset is
deemed credit impaired when there is observable evidence of credit-impairment including meeting the
definition of default. The definition of default (see below) includes unlikeliness to pay indicators and a back¬
stop if amounts are overdue for more than 90 days. The 90-day criterion is applicable unless there is
reasonable and supportable information to demonstrate that a more lagging default criterion is more
appropriate.
Definition of default:
Critical to the determination of ECL is the definition of default. The definition of default is used in measuring
the amount of ECL and in the determination of whether the loss allowance is based on 12-month or lifetime
ECL, as default is a component of the probability of default (PD) which affects both the measurement of
ECLs and the identification of a significant increase in credit risk. The Company considers the following as
constituting an event of default:
• the borrower is past due more than 90 days on any material credit obligation: or
• the borrower is unlikely to pay its credit obligations to the Company in full.
When assessing if the borrower is unlikely to pay its credit obligation, the Company takes into account both
qualitative and quantitative indicators. The information assessed depends on the type of the asset. Quan¬
titative indicators, such as overdue status and non-payment on another obligation of the same counterparty
are key inputs in this analysis.
The Company uses a variety of sources of information to assess default which are either developed
internally or obtained from external sources. The definition of default is applied consistently to all financial
assets unless information becomes available that demonstrates that another default definition is more
appropriate for a particular financial asset.
Significant increase in credit risk:
The Company monitors all financial assets and Corporate Overview Reports financial guarantee contracts
that are subject to the impairment requirements to assess whether there has been a significant increase
in credit risk since initial recognition. If there has been a significant increase in credit risk the Company will
measure the loss allowance based on lifetime rather than 12-month ECL.
2.5 Cash & Cash Equivalents
Cash and bank balances comprise of cash balance in hand, in current accounts with banks, demand deposit,
short-term deposits, Margin Money deposits and unclaimed dividend accounts. For this purpose, "short¬
term" means investments having maturity of three months or less from the date of investment. Bank
overdrafts that are repayable on demand and form an integral part of our cash management are included
as a component of cash and cash equivalents for the purpose of the statement of cash flows. The Margin
money deposits and unclaimed dividend balances shall be disclosed as restricted cash balances.
2.6 Employee Benefits
a. Short term employee benefits
Short-term employee benefits are expensed as the related service is provided. A liability is recognised
for the amount expected to be paid if the Company has a present legal or constructive obligation to pay
this amount as a result of past service provided by the employee and the obligation can be estimated
reliably.
b. Defined Contribution Plan
The Company's contributions to defined contribution plans are charged to the statement of profit and
loss as and when the services are received from the employees.
c. Defined Benefit Plans
The liability in respect of defined benefit plans and other post-employment benefits is calculated using
the projected unit credit method consistent with the advice of qualified actuaries. The present value of
the defined benefit obligation is determined by discounting the estimated future cash outflows using
interest rates based on prevailing market yields of Indian Government Bonds and that have terms to
maturity approximating to the terms of the related defined benefit obligation. The current service cost
of the defined benefit plan, recognised in the statement of profit and loss in employee benefit expense,
reflects the increase in the defined benefit obligation resulting from employee service in the current
year, benefit changes, curtailments and settlements. Past service costs are recognised immediately in
income. The net interest cost is calculated by applying the discount rate to the net balance of the
defined benefit obligation and the fair value of plan assets. This cost is included in employee benefit
expense in the statement of profit and loss. Actuarial gains and losses arising from experience adjust¬
ments and changes in actuarial assumptions are charged or credited to equity in other comprehensive
income in the period in which they arise.
d. Termination benefits
Termination benefits are recognized as an expense when the Company is demonstrably committed,
without realistic possibility of withdrawal, to a formal detailed plan to either terminate employment
before the normal retirement date, or to provide termination benefits as a result of an offer made to
encourage voluntary redundancy. Termination benefits for voluntary redundancies are recognized as
an expense if the Company has made an offer encouraging voluntary redundancy, it is probable that
the offer will be accepted, and the number of acceptances can be estimated reliably.
e. Other long-term employee benefits
The Company's net obligation in respect of other long term employee benefits is the amount of future
benefit that employees have earned in return for their service in the current and previous periods.
That benefit is discounted to determine its present value. Re-measurements are recognized in the
statement of profit and loss in the period in which they arise.
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