1. Basis of preparation
Compliance with Ind AS:
The 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 Master Direction - Non¬
Banking Financial Company (Reserve Bank) Directions, 2016 ('the NBFC Master Directions') issued by RBI.
These financial statements have been prepared and presented under the historical cost convention, on the accrual
basis of accounting except for certain financial assets and liabilities that are measured at fair values at the end of each
reporting period, as stated in the accounting policies stated out below. The Financial statements have been
prepared on a going concern basis.
The Balance Sheet, the Statement of Changes in Equity and the Statement of Profit and Loss are presented in the format
prescribed under Division III of Schedule III of the Act, as amended from time to time, for Non- Banking Financial
Companies ('NBFCs') that are required to comply with Ind-AS. The Statement of Cash Flows has been presented as per the
requirements of Ind-AS 7 Statement of Cash Flows.
Use of estimates and judgements
The preparation of financial statements in conformity with Ind-AS requires management to make estimates, judgements
and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities
(including contingent liabilities) and disclosures as of the date of the financial statements and the reported amounts of
revenues and expenses for the reporting period. Actual results could differ from these estimates. Accounting estimates
and underlying assumptions are reviewed on an ongoing basis and could change from period to period. Appropriate
changes in estimates are recognised in the periods in which the Company becomes aware of the changes in
circumstances surrounding the estimates. Any revisions to accounting estimates are recognised prospectively in the
period in which the estimate is revised and future periods. The estimates and judgements that have significant
impact on the carrying amount of assets and liabilities at each balance sheet date are:
1. Expected credit loss measurement on Loans Given
2. Use of Effective interest Rates for measurement of revenue from Loan Instruments
3. Determination of Lease terms
4. Recognition of deferred tax
5. Useful life and expected residual value of assets
Rounding off amounts: The Standalone Financial Statements have been presented in Indian Rupees (INR), which is
the Company's functional currency. All amounts disclosed in the financial statements and notes have been rounded off to
the nearest lakh as per the requirement of schedule III (except share data), unless otherwise stated. Any differences
between total and sums of components in tables contained in this report are due to rounding.
(A) Date of recognition
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
(B) Initial measurement
Recognised financial instruments are initially measured at transaction price, which equates fair value. Transaction
costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (Other than the
financial assets or 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 fair value through profit and loss are recognised immediately in the statement of
profit and loss.
(C) Classification and subsequent measurement
(i) Financial assets
Based on the business model, the contractual characteristics of the financial assets and specific elections where
appropriate, the Company classifies and measures financial assets in the following categories:
- Amortised Cost
- Fair value through other comprehensive income ('FVOCI')
- Fair value through PROFIT and loss ('FVTPL')
(a) Financial assets carried at amortised cost
A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at
FVTPL:
• the asset is held within a business model whose objective is to hold assets to collect contractual cash flows ('Asset held to
collect contractual cash flows'); and
• the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of
principal and interest ('SPPI') on the principal amount outstanding.
After initial measurement and based on the assessment of the business model as asset held to collect contractual
cash flows and SPPI, such financial assets are subsequently measured at amortised cost using effective interest rate
('EIR') method. Interest income and impairment expenses are recognised in statement of profit and loss. Interest income
from these financial assets is included in finance income using the EIR method. Any gain and loss on derecognition is also
recognised in statement of profit and loss.
The EIR method is a method of calculating the amortised cost of a financial instrument and of allocating interest over the
relevant period. The EIR is the rate that exactly discounts estimated future cash flows (including all fees paid or received
that form an integral part of the EIR, transaction costs and other premiums or discounts) through the expected life of
the instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.
The Company records loans at amortised cost.
(b) Financial assets at fair value through other comprehensive income
Financial assets that are held within a business model whose objective is both to collect the contractual cash flows and to
sell the assets, ('Contractual cash flows of assets collected through hold and sell model') and contractual cash flows
that are SPPI, are subsequently measured at FVOCI. Movements in the carrying amount of such financial assets are
recognised in Other Comprehensive Income ('OCI'). Amounts recorded in OCI are not subsequently transferred to the
statement of profit and loss.
(c) Financial assets at fair value through profit and loss
Financial assets which do not meet the criteria for categorisation as at amortised cost or as FVOCI, are measured
at FVTPL. Subsequent changes in fair value are recognised in the statement of profit and loss.
(ii) Financial liabilities and equity instrument
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.
(a) Equity instrument: An equity instrument is any contract that evidences a residual interest in the assets of an entity
after deducting all of its liabilities. An equity instrument issued by the Company is recognised at the proceeds received, net
of directly attributable transaction costs.
(b) Financial liabilities: Financial liabilities are measured at amortised cost. The carrying amounts aredetermined
based on the EIR method. Interest expense is recognised in statement of profit and loss.
Any gain or loss on de-recognition of financial liabilities is also recognised in statement of profit and loss.
(D) Reclassification
Financial assets are not reclassified subsequent to their initial recognition, apart from the exceptional
circumstances in which the Company acquires, disposes of, or terminates a business line or in the period the Company
changes its business model for managing financial assets. Financial liabilities are not reclassified.
(E) Derecognition
(i) Financial assets : The company derecognises a financial asset when the contractual rights to the cash flows from the
financial assets expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially
all of the risks and rewards of ownership of the financial asset are transferred or in which the company neither
transfers nor retains substantially all of the risks and rewards of the ownership and does not retain control of the financial
asset.
If the company enters into transactions whereby it transfers assets recognised on its balance sheet but retains either all or
substantially all of the risks and rewards of the transferred assets, the transferred assets are not derecognised.
On derecognition of a financial asset, the difference between the carrying amount of the asset (or the carrying amount
allocated to the portion of the asset derecognised) and the sum of (i) the consideration received (including any
new asset obtained less any new liability assumed) and (ii) any cumulative gain or loss that had been recognised in OCI is
recognised in statement of profit and loss.
(ii) Financial liabilities: A financial liability is derecognised when the obligation under the liability is discharged, cancelled
or expires. Where an existing financial liability is replaced by another from the same lender on substantially
different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated
as a derecognition of the original liability and the recognition of a new liability. In this case, a new financial liability based
on the modified terms is recognised at fair value. The difference between the carrying value of the original financial
liability and the new financial liability with modified terms is recognised in statement of profit and loss.
(F) Impairment of financial assets
The Company applies the ECL model in accordance with Ind-AS 109 for recognising impairment loss on financial
assets. The ECL allowance is based on the credit losses expected to arise from all possible default events over the
expected life of the financial asset ('lifetime ECL'), unless there has been no significant increase in credit risk since
origination, in which case, the allowance is based on the 12-month ECL. The 12-month ECL is a portion of the lifetime ECL
which results from default events that are possible within 12 months after the reporting date.
ECL is calculated on a collective basis, considering the retail nature of financial assets.
The impairment methodology applied depends on whether there has been a significant increase in credit risk. When
determining whether the risk of default on a financial asset has increased significantly since initial recognition, the
Company considers reasonable and supportable information that is relevant and available without undue cost or
effort. This includes both quantitative and qualitative information and analysis based on a provision matrix which takes into
account the Company's historical credit loss experience, current economic conditions and forward-looking information.
The measurement of impairment losses across all categories of financial assets requires judgement, in particular,
the estimation of the amount and timing of future cash flows when determining impairment losses and the assessment of
a significant increase in credit risk. These estimates are driven by a number of factors, changes in which can result in
different levels of allowances. The Company regularly reviews its models in the context of actual loss experience and makes
adjustments when such differences are significantly material.
(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 debtor does not have assets or sources of income that could generate sufficient cash flows
to repay the amounts subject to the write-off. However, financial assets that are written-off could still be subject to
enforcement activities under the Company's recovery procedures, taking into account legal advice where appropriate. Any
recoveries made are recognised in statement of profit and loss.
(H) Offsetting
Financial assets and financial liabilities are generally reported gross in the balance sheet. They are only offset and reported
net when, the Company has a legally enforceable right to offset the recognised amounts and it intends either to settle
them on a net basis or to realise the asset and settle the liability simultaneously.
3. Derivative financial instruments
The company has not entered into any derivative financial instruments.
4. Cash and cash equivalents
Cash and cash equivalents include cash at banks and on hand, demand deposits with banks, other short term highly liquid
investments with original maturities of three months or less that are readily convertible to known amounts of cash and
which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within
borrowings in current liabilities in the balance sheet.
5. Property, plant and equipment
All property, plant and equipment are stated at cost, less accumulated depreciation and impairment loss, if any.
The Cost comprises of purchase cost including taxes paid net of Input tax credit, borrowing costs if capitalisation
criteria are met and directly attributable cost of bringing the asset to its working condition for
the intended use and expected cost of decommissioning.
6. Intangible assets
Intangible assets acquired or developed are measured on initial recognition at cost of acquisition and development,
including cost attributable to readying the asset for use. Such intangible assets are subsequently measured at cost less
accumulated amortisation and any accumulated impairment losses.
7. Depreciation/Amortisation
Depreciable amount for property, plant and equipment / intangible fixed assets is the cost of an asset, or other amount
substituted for cost, less its estimated residual value. Depreciation on property, plant and equipment is provided on
Straight line basis as per the useful life estimated by company.
Intangible assets are amortised on straight line basis over their respective individual useful lives estimated by the
management. The Company uniformly estimates a zero-residual value for all these assets. Items costing less than 5,000
are fully depreciated in the year of purchase. Depreciation is pro-rated in the year of acquisition as well as in the year
of disposal.
The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at each
financial year end and adjusted prospectively, if appropriate. 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.
Property, plant and equipment is de-recognised on disposal or when no future economic benefits are expected from its
use. Any gain or loss arising on de-recognition of the asset (calculated as the difference between the net disposal
proceeds and the carrying amount of the asset) is recognised in other income/expense in the statement of profit
and loss in the year the asset is de-recognised.
8. Impairment of non-financial assets
The Company assesses at each balance sheet date whether there is any indication that an asset may be impaired
due to events or changes in circumstances indicating that their carrying amounts may not be realised. If any such
indication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the
asset to which the asset belongs is less than its carrying amount, the carrying amount is reduced to its recoverable
amount. The reduction is treated as an impairment loss and is recognised in the statement of profit and loss. If at the
balance sheet date there is an indication that a previously assessed impairment loss no longer exists, the recoverable
amount is reassessed and the asset is reflected at the revised recoverable amount, subject to maximum of the
depreciated historical cost.
9. Revenue recognition
Specific policies for the Company's different sources of revenue are explained below:
A. Income from lending business
Interest income: Interest income on a financial asset at amortised cost is recognised on a time proportion basis taking into
account the amount outstanding and the effective interest rate ('EIR'). The EIR is the rate that exactly discounts
estimated future cash flows of the financial asset through the expected life of the financial asset or, where appropriate, a
shorter period, to the net carrying amount of the financial instrument. The future cash flows are estimated taking
into account all the contractual terms of the instrument.
The interest income is calculated by applying the EIR to the gross carrying amount of non-credit impaired financial assets
(i.e. at the amortised cost of the financial asset before adjusting for any expected credit loss allowance). For credit-
impaired financial assets the interest income is calculated by applying the EIR to the amortised cost of the credit-impaired
financial assets (i.e. the gross carrying amount less the allowance for ECLs). As required under RBI directions for
NBFCs, interest income on loans past due two quarters is recognised on realisation.
B. Other financial charges
Cheque bouncing charges, late payment charges, prepayment charges and application money are recognised on a point-in¬
time basis, and are recorded when realised since the probability of collecting such monies is established when the
customer pays.
C. Misc. Income
Any other income is accounted on accrual basis. However, where it is not possible to estimate or accrue such other income,
the same is accounted on receipt basis.
10. Employee Benefits
Gratuity
Gratuity is in the nature of a defined benefit plan. Provision for gratuity is calculated on the basis of actuarial valuations
carried out at balance sheet date and is charged to the statement of profit and loss. The actuarial valuation is performed
using the projected unit credit method. Remeasurement, comprising of actuarial gains and losses, the effect of the asset
ceiling, excluding amounts included in net interest on the net defined benefit liability and the return on plan assets
(excluding amounts included in net interest on the net defined benefit liability), are recognised immediately in the balance
sheet with a corresponding debit or credit to retained earnings through OCI in the period in which they occur.
Remeasurements are not reclassified to profit or loss in subsequent periods.
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