2. Material accounting policies
2.1 Basis of preparation and presentation of financial
statements
Statement of Compliance
The financial statements of the Company have been
prepared in accordance with the Indian Accounting
Standards (Ind AS) and the relevant provisions of the
Companies Act, 2013 (the "Act") (to the extent notified)
and the guidelines issued by the Securities Exchange
Board of India ("SEBI") to the extent applicable. The Ind AS
are prescribed under Section 133 of the Act read with Rule
3 of the Companies (Indian Accounting Standards) Rules,
2015 and relevant amendment rules issued thereafter.
Accounting policies are consistently applied except where
a newly-issued Ind AS initially adopted or a revision to an
existing Ind AS requires a change in the accounting policy.
Basis of Measurement
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 below.
Historical cost is generally based on the fair value of the
consideration given in exchange for goods and services.
Historical Cost Convention
Fair value is the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date,
regardless of whether that price is directly observable or
estimated using another valuation technique. In estimating
the fair value of an asset or a liability, the Company takes
into account the characteristics of the asset or liability
if market participants would take those characteristics
into account when pricing the asset or liability at the
measurement date. Fair value for measurement and/
or disclosure purposes in these financial statements
is determined on such a basis, except for share based
payment transactions that are within the scope of Ind AS
102, leasing transactions that are within the scope of Ind
AS 116 and measurements that have some similarities
to fair value but are not fair value, such as value in
use in Ind AS 36.
Measurement of fair values
Fair value measurements under Ind AS are categorised
into Level 1,2, or 3 based on the degree to which the inputs
to the fair value measurements are observable and the
significance of the inputs to the fair value measurement
in its entirety, which are described as follows:
• Level 1 inputs are quoted prices (unadjusted) in
active markets for identical assets or liabilities that
the Company can access at measurement date
• Level 2 inputs are inputs, other than quoted prices
included within level 1, that are observable for the
asset or liability, either directly or indirectly; and
• Level 3 inputs are unobservable inputs for the
valuation of assets or liabilities
Presentation of financial statements
The Balance Sheet, the Statement of Profit and Loss
and the Statement of Changes in Equity are prepared
and presented in the format prescribed in the Division III
of Schedule III to the Companies Act, 2013 (the "Act").
The Statement of Cash Flows has been prepared and
presented as per the requirements of Ind AS 7 "Statement
of Cash Flows". The Balance Sheet, Statement of Profit
and Loss, Statement of Cash Flow and Statement of
Changes in Equity are together referred as the financial
statement of the Company.
Amounts in the financial statements are presented in Indian
Rupees (H) in crore rounded off to two decimal places as
permitted by Schedule III to the Act. Per share data are
presented in Indian Rupee (H) to two decimal places.
Functional and presentation currency
These financial statements are presented in Indian Rupees
(INR) which is also the Company's functional currency. All
amounts have been rounded to the nearest crores, unless
otherwise indicated.
2.2 Business Combination
Acquisitions of businesses are accounted for using the
acquisition method. The consideration transferred in a
business combination is measured at fair value, which is
calculated as the sum of the acquisition date fair values of
the assets transferred by the Company, liabilities incurred
by the Company to the former owners of the acquiree and
the equity interests issued by the Company in exchange
of control of the acquiree. Acquisition related costs are
generally recognised in Standalone Statement of Profit
and Loss as incurred.
At the acquisition date, the identifiable assets acquired
and the liabilities assumed are recognised at their fair
value, except that
• Deferred tax assets or liabilities related to employee
benefits arrangements are recognised and measured
in accordance with Ind AS 12 Income taxes and Ind
AS 19 Employee benefits respectively.
• Liabilities or equity instruments related to share-
based payment arrangements of the acquiree or
share-based payment arrangements of the Company
entered into to replace share-based payment
arrangements of the acquiree are measured in
accordance with Ind AS 102 Share-based Payment at
the acquisition date; and
• Assets (or disposal group) that are classified as held
for sale in accordance with Ind AS 105 Non-current
Assets Held for Sale and Discontinued Operations
are measured in accordance with that Standard.
Goodwill is measured as the excess of the sum of
the consideration transferred, the amount of any non¬
controlling interests in the acquiree (if any) over the net
of the acquisition date amounts of the identifiable assets
acquired and the liabilities assumed.
In case of a bargain purchase, before recognising a gain
in respect thereof, the Company determines whether
there exists clear evidence of the underlying reasons
for classifying the business combination as a bargain
purchase. Thereafter, the Company reassesses whether
it has correctly identified all of the assets acquired
and all of the liabilities assumed and recognises any
additional assets or liabilities that are identified in that
reassessment. The Company then reviews the procedures
used to measure the amounts that Ind AS requires for the
purposes of calculating the bargain purchase. If the gain
remains after this reassessment and review, the Company
recognises it in other comprehensive income and
accumulates the same in equity as capital reserve. This
gain is attributed to the acquirer. If there does not exist
clear evidence of the underlying reasons for classifying
the business combination as a bargain purchase, the
Company recognises the gain, after reassessing arid
reviewing (as described above), directly in equity as
capital reserve.
When the consideration transferred by the Company in
a business combination includes assets or liabilities
resulting from a contingent consideration arrangement,
the contingent consideration is measured at its
acquisition-date fair value and included as part of the
consideration transferred in a business combination.
Changes in the fair value of the contingent consideration
that qualify as measurement period adjustments are
adjusted retrospectively, with corresponding adjustments
against goodwill or capital reserve, as the case maybe.
Measurement period adjustments are adjustments that
arise from additional information obtained during the
'measurement period' (which cannot exceed one year
from the acquisition date) about facts and circumstances
that existed at the acquisition date.
The subsequent accounting for changes in the fair
value of the contingent consideration that do not
qualify as measurement period adjustments depends
on how the contingent consideration is classified.
Contingent consideration that is classified as equity is
not re-measured at subsequent reporting dates and its
subsequent settlement is accounted for within equity.
Contingent consideration that is classified as an asset
or a liability is re-measured at fair value at subsequent
reporting dates with the corresponding gain or loss being
recognised in Statement of Profit and Loss.
When a business combination is achieved in stages, the
Company's previously held equity interest in the acquiree
is re-measured to its acquisition-date fair value and the
resulting gain or loss, if any, is recognised in Statement
of Profit and Loss. Amounts arising from interests in the
acquiree prior to the acquisition date that have previously
been recognised in other comprehensive income are
reclassified to Statement of Profit and Loss where
such treatment would be appropriate if that interest
were disposed of.
Common control transactions
Business combinations involving entities that are
controlled by the Company are accounted for using the
pooling of interests method as follows:
1) The assets and liabilities of the combining entities
are reflected at their carrying amounts.
2) No adjustments are made to reflect fair values, or
recognise any new assets or liabilities. Adjustments
are only made to harmonise accounting policies.
3) The balance of the retained earnings appearing in the
financial statements of the transferor is aggregated
with the corresponding balance appearing in the
financial statements of the transferee or is adjusted
against general reserve.
4) The identity of the reserves are preserved and the
reserves of the transferor become the reserves of
the transferee.
5) The difference, if any, between the amounts
recorded as share capital issued plus any additional
consideration in the form of cash or other assets
and the amount of share capital of the transferor
is transferred to capital reserve and is presented
separately from other capital reserves.
The financial information in the financial statements
in respect of prior periods is restated as if the business
combination had occurred from the beginning of the
preceding period in the financial statements, irrespective
of the actual date of combination. However, where the
business combination had occurred after that date, the
prior period information is restated only from that date.
2.3 Investments in Subsidiaries and Associates
Subsidiaries:
Subsidiaries are all entities over which the company
has control. The Company controls an entity when the
company is exposed to, or has rights to, variable returns
from its involvement with the entity and has the ability
to affect those returns through its power to direct the
relevant activities of the entity.
Associates:
An associate is an entity over which the Company has
significant influence. Significant influence is the power to
participate in the financial and operating policy decisions
of the investee but is not control or joint control over
those policies.
Investments in Subsidiaries and Associates are accounted
at cost net off impairment loss, if any.
2.4 Property, plant and equipment and Intangible assets
A Property, plant and equipment
a. Recognition and measurement
Property, plant and equipment (PPE) is
recognised when it is probable that future
economic benefits associated with the item
will flow to the Company and the cost of the
item can be measured reliably. PPE is stated
at original cost net of tax / duty credits availed,
if any, less accumulated depreciation and
cumulative impairment, if any. PPE not ready
for the intended use on the date of the Balance
Sheet is disclosed as "capital work-in-progress".
PPE held for use are stated in the balance sheet
at cost less accumulated depreciation and
accumulated impairment losses
b. Subsequent expenditure
Subsequent expenditure is capitalised only if it
is probable that the future economic benefits
associated with the expenditure will flow to
the Company and the cost of the item can be
measured reliably.
c. Depreciation
Depreciation / amortisation is recognised on
a straight-line basis over the estimated useful
lives of respective assets as under:
The estimated useful lives, residual values
and depreciation method are reviewed at the
end of each reporting period, with the effect
of any changes in estimate accounted for on a
prospective basis.
d. Derecognition
An item of property, plant and equipment is
derecognised upon disposal or when no future
economic benefits are expected to arise from
the continued use of the asset. Any gain or loss
arising on the disposal or retirement of an item
of property, plant and equipment is determined
as the difference between the sales proceeds
and the carrying amount of the asset and is
recognised in Statement of Profit or Loss.
B Intangible assets
a. Recognition and measurement
Intangible assets are recognised 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 amortisation
and cumulative impairment. Administrative
and other general overhead expenses that
are specifically attributable to acquisition of
intangible assets are allocated and capitalised
as a part of the cost of the intangible assets.
b. Subsequent expenditure
Subsequent expenditure is capitalised only if it
is probable that the future economic benefits
associated with the expenditure will flow to
the Company and the cost of the item can be
measured reliably.
c. Amortisation
Intangible assets are amortised on straight line
basis over the estimated useful life of 5 years.
The method of amortisation and useful life are
reviewed at the end of each accounting year
with the effect of any changes in the estimate
being accounted for on a prospective basis.
Amortisation on impaired assets is provided
by adjusting the amortisation charge in
the remaining periods so as to allocate the
asset's revised carrying amount over its
remaining useful life.
d. Derecognition
An intangible asset is derecognised on disposal,
or when no future economic benefits are
expected from use or disposal. Gains or losses
arising from derecognition of an intangible
asset, measured as the difference between the
net disposal proceeds and the carrying amount
of the asset, are recognised in the statement of
Profit and Loss when the asset is derecognised.
C Impairment losses on non-financial assets
As at the end of each year, the Company reviews the
carrying amount of its non-financial assets that is
PPE and intangible assets to determine whether there
is any indication that these assets have suffered an
impairment loss.
An asset is considered as impaired when on
the balance sheet date there are indications of
impairment in the carrying amount of the assets, or
where applicable the cash generating unit to which
the asset belongs, exceeds its recoverable amount
(i.e. the higher of the assets' net selling price and
value in use). The carrying amount is reduced to
the level of recoverable amount and the reduction is
recognised as an impairment loss in the Statement
of Profit and Loss.
When an impairment loss subsequently reverses,
the carrying amount of the asset (or a cash¬
generating unit) is increased to the revised estimate
of its recoverable amount, but so that the increased
carrying amount does not exceed the carrying
amount that would have been determined had no
impairment loss been recognised for the asset (or
cash-generating unit) in prior years. A reversal of
an impairment loss is recognised immediately in
profit or loss.
2.5 Financial Instruments
Recognition of Financial Instruments
Financial instruments comprise of financial assets and
financial liabilities. Financial assets and liabilities are
recognized when the company becomes the party to the
contractual provisions of the instruments. Financial assets
primarily comprise of loans and advances, premises and
other deposits, trade receivables and cash and cash
equivalents. Financial liabilities primarily comprise of
borrowings, trade payables and other financial liabilities.
Initial Measurement of Financial Instruments
Recognised financial assets and financial liabilities
are initially measured at fair value except for trade
receivables which are initially measured at transaction
price. Transaction costs and revenues that are directly
attributable to the acquisition 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 and revenues directly attributable to the acquisition
of financial assets or financial liabilities at FVTPL are
recognised immediately in profit or loss.
If the transaction price differs from fair value at
initial recognition, the Company will account for such
difference as follows:
• if fair value is evidenced by a quoted price in an
active market for an identical asset or liability or
based on a valuation technique that uses only data
from observable markets, then the difference is
recognised in profit or loss on initial recognition (i.e.
day 1 profit or loss);
• in all other cases, the fair value will be adjusted to
bring it in line with the transaction price (i.e. day 1
profit or loss will be deferred by including it in the
initial carrying amount of the asset or liability).
After initial recognition, the deferred gain or loss will be
released to the Statement of profit and loss on a rational
basis, only to the extent that it arises from a change in
a factor (including time) that market participants would
take into account when pricing the asset or liability.
Classification of Financial Assets
• Debt instruments that are held within a business
model whose objective is to collect the contractual
cash flows, and that have contractual cash flows
that are solely payments of principal and interest
on the principal amount outstanding (SPPI), are
subsequently measured at amortised cost;
• all other debt instruments (e.g. debt instruments
managed on a fair value basis, or held for
sale) and equity investments are subsequently
measured at FVTPL.
However, the Company may make the following irrevocable
election / designation at initial recognition of a financial
asset on an asset-by-asset basis:
• the Company may irrevocably elect to present
subsequent changes in fair value of an equity
investment that is neither held for trading nor
contingent consideration recognised by an acquirer
in a business combination to which Ind AS 103
applies, in OCI; and
• the Company may irrevocably designate a debt
instrument that meets the amortised cost or FVTOCI
criteria as measured at FVTPL if doing so eliminates
or significantly reduces an accounting mismatch
(referred to as the fair value option).
A financial asset is held for trading if:
• it has been acquired principally for the purpose of
selling it in the near term; or
• on initial recognition it is part of a portfolio of
identified financial instruments that the Company
manages together and has a recent actual pattern of
short-term profit-taking; or
• it is a derivative that is not designated and effective
as a hedging instrument or a financial guarantee
Subsequent Measurement of Financial Assets:
All recognised financial assets that are within the scope
of Ind AS 109 are required to be subsequently measured
at amortised cost or fair value on the basis of the entity's
business model for managing the financial assets
and the contractual cash flow characteristics of the
financial assets.
Financial assets at amortised cost or at FVTOCI
The Company assesses the classification and
measurement of a financial asset based on the contractual
cash flow characteristics of the individual asset basis and
the Company's business model for managing the asset.
For an asset to be classified and measured at amortised
cost or at FVTOCI, its contractual terms should give rise to
cash flows that are meeting SPPI test.
For the purpose of SPPI test, principal is the fair value of
the financial asset at initial recognition. That principal
amount may change over the life of the financial asset
(e.g. if there are repayments of principal). Interest consists
of consideration for the time value of money, for the credit
risk associated with the principal amount outstanding
during a particular period of time and for other basic
lending risks and costs, as well as a profit margin. The
SPPI assessment is made in the currency in which the
financial asset is denominated.
Contractual cash flows that are SPPI are consistent with
a basic lending arrangement. Contractual terms that
introduce exposure to risks or volatility in the contractual
cash flows that are unrelated to a basic lending
arrangement, such as exposure to changes in equity prices
or commodity prices, do not give rise to contractual cash
flows that are SPPI. An originated or an acquired financial
asset can be a basic lending arrangement irrespective of
whether it is a loan in its legal form.
An assessment of business models for managing financial
assets is fundamental to the classification of a financial
asset. The Company determines the business models at
a level that reflects how financial assets are managed at
individual basis and collectively to achieve a particular
business objective.
When a debt instrument measured at FVTOCI is
derecognised, the cumulative gain/loss previously
recognised in OCI is reclassified from equity to profit or
loss. In contrast, for an equity investment designated as
measured at FVTOCI, the cumulative gain/loss previously
recognised in OCI is not subsequently reclassified to profit
or loss but transferred within equity.
Debt instruments that are subsequently measured at
amortised cost or at FVTOCI are subject to impairment.
Equity Investments at FVTOCI
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 investments as equity
instruments at FVTOCI, when such instruments meet
the definition of Equity under Ind AS 32 'Financial
Instruments: Presentation' and are not held for trading.
Such classification is determined on an instrument-by¬
instrument basis.
Gains and losses on equity instruments measured through
FVTPL are recognised in the Statement of Profit & Loss.
Gains and losses on equity instruments measured through
FVTOCI are never recycled to profit or loss. Dividends are
recognised in profit or loss as dividend income when the
right of the payment has been established, except when
the Company benefits from such proceeds as a recovery
of part of the cost of the instrument, in which case, such
gains are recorded in OCI. Equity instruments at FVTOCI
are not subject to an impairment assessment.
Financial assets at fair value through profit or loss
(FVTPL)
Investments in equity instruments are classified as at
FVTPL, unless the Company irrevocably elects or initial
recognition to present subsequent changes in fair value
in other comprehensive income for investments in equity
instruments which are not held for trading.
Debt instruments that do not meet the amortised cost
criteria or FVTOCI criteria are measured at FVTPL. In
addition, debt instruments that meet the amortised cost
criteria or the FVTOCI criteria but are designated as at
FVTPL are measured at FVTPL
A financial asset that meets the amortised cost criteria
or debt instruments that meet the FVTOCI criteria may
be designated as at FVTPL upon initial recognition if
such designation eliminates or significantly reduces a
measurement or recognition inconsistency that would
arise from measuring assets or liabilities or recognising
the gains and losses on them on different bases.
Financial assets at FVTPL are measured at fair value at
the end of each reporting period, with any gains or losses
arising on remeasurement recognised in profit or loss. The
net gain or loss recognised in profit or loss incorporates
any dividend or interest earned on the financial asset.
Dividend on financial assets at FVTPL is recognised when
the Company's right to receive the dividends is established,
it is probable that the economic benefits associated with
the dividend will flow to the entity, the dividend does not
represent a recovery of part of cost of the investment and
the amount of dividend can be measured reliably.
Reclassifications
If the business model under which the Company holds
financial assets changes, the financial assets affected
are reclassified. The classification and measurement
requirements related to the new category apply
prospectively from the first day of the first reporting
period following the change in business model that
result in reclassifying the Company's financial assets.
During the current financial year and previous accounting
period there was no change in the business model under
which the Company holds financial assets and therefore
no reclassifications were made. Changes in contractual
cash flows are considered under the accounting policy
on Modification and derecognition of financial assets
described below.
Impairment of Financial Assets
The Company assesses at each reporting date whether
there is any objective evidence that the financial assets is
deemed to be impaired.
Company applies 'simplified approach' which requires
expected lifetime losses to be recognized from initial
recognition of the receivables. The Company uses
historical default rates to determine impairment
loss. At each reporting date these historical default
rates are reviewed.
Overview of the Expected Credit Loss principles:
The Company records allowance for expected credit
losses for all loans, other debt financial assets not held at
FVTPL, together with loan commitments issued, financial
guarantee contracts and other assets in this section all
referred to as 'financial instruments'. Equity instruments
are not subject to impairment loss under Ind AS 109.
Expected credit losses (ECL) are a probability-weighted
estimate of the present value of credit losses. Credit loss
is the difference between all contractual cash flows that
are due to the Company in accordance with the contract
and all the cash flows that the Company expects to
receive (i.e. all cash shortfalls). The Company estimates
cash flows by considering all contractual terms of the
financial instrument (for example, prepayment, extension,
call and similar options) through the expected life of that
financial instrument.
The Company measures the loss allowance for a financial
instrument at an amount equal to the lifetime expected
credit losses if the credit risk on that financial instrument
has increased significantly since initial recognition. If the
credit risk on a financial instrument has not increased
significantly since initial recognition, the Company
measures the loss allowance for that financial instrument
at an amount equal to 12-month expected credit losses.
12-month expected credit losses are portion of the life¬
time expected credit losses and represent the lifetime
cash shortfalls that will result if default occurs within the
12 months after the reporting date and thus, are not cash
shortfalls that are predicted over the next 12 months.
A loss allowance for full lifetime ECL is required for a
financial instrument if the credit risk on that financial
instrument has increased significantly since initial
recognition. For all other financial instruments, ECLs are
measured at an amount equal to the 12-month ECL.
The Company measures ECL on an individual basis.
Impairment losses and releases are accounted for and
disclosed separately from modification losses or gains
that are accounted for as an adjustment of the financial
asset's gross carrying value.
The Company has established a policy to 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 given the
uncertainty over the change in the risk of default occurring
over the remaining life of the financial instrument.
Based on the above process, the Company categorises its
loans into Stage 1, Stage 2 and Stage 3, as described below:
Stage 1: Defined as performing assets with upto 30 days
past due (DPD). Stage 1 loans will also include facilities
where the credit risk has improved and the loan has been
reclassified from Stage 2 to Stage 1.
Stage 2: Defined as under-performing assets having 31 to 90
DPD. Stage 2 loans will also include facilities, where the credit
risk has improved and the loan has been reclassified from
Stage 3 to Stage 2. Accounts with overdue more than 30 DPD
will be assessed for significant increase in credit risks.
Stage 3: Defined as assets with overdue more than 90
DPD. The Company will record an allowance for the life
time expected credit losses. These accounts will be
assessed for credit impairment.
For trade receivables or any contractual right to
receive cash or another financial asset that result from
transactions that are within the scope of Ind AS 115,
the Company always measures the loss allowance at an
amount equal to lifetime expected credit losses.
Derecognition of Financial Assets
A financial assets is derecognised only when:
• The Company has transferred the right to receive
cash flows from the financial assets or
• Retains the contractual rights to receive the cash
flows of the financial assets, but assumes a
contractual obligations to pay the cash flows to one
or more receipients.
Where the entity has transferred an asset, the Company
evaluates whether it has transferred substantially all
risks and rewards of ownership of the financial asset. In
such cases, the financial asset is derecognised. Where
the entity has not transferred substantially all risks and
rewards of ownership of the financial asset, the financial
asset is not derecognised.
On de-recognition of a financial asset in its entirety,
the difference between the asset's carrying amount and
the sum of the consideration received and receivable and
the cumulative gain or loss that had been recognized in
other comprehensive income and accumulated in equity is
recognised in profit or loss if such gain or loss would have
otherwise been recognised in profit or loss on disposal of
that financial asset.
Write-off
Loans and trade receivables are written off when the
Company has no reasonable expectations of recovering
the financial asset (either in its entirety or a portion of
it). This is 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. A write-off constitutes a
derecognition event. The Company may apply enforcement
activities to financial assets written off. Recoveries
resulting from the Company's enforcement activities
previously written off are credited to the statement of
profit and loss.
Financial liabilities and equity instruments
Classification as debt or equity
Debt and equity instruments issued by a group entity
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 of its liabilities. Equity instruments issued by a group
entity are recognized at the proceeds received, net of
direct issue costs.
Repurchase of the Company's own equity instruments is
recognised and deducted directly in equity. No gain or loss
is recognised in profit or loss on the purchase, sale, issue
or cancellation of the Company's own equity instruments.
Financial liabilities
A financial liability is a contractual obligation to deliver
cash or another financial asset or to exchange financial
assets or financial liabilities with another entity under
conditions that are potentially unfavorable to the
Company or a contract that will or may be settled in
the its's own equity instruments and is a non-derivative
contract for which the Company is or may be obliged to
deliver a variable number of its own equity instruments, or
a derivative contract over own equity that will or may be
settled other than by the exchange of a fixed amount of
cash (or another financial asset) for a fixed number of the
it's own equity instruments.
All financial liabilities are subsequently measured at
amortised cost using the effective interest method
or at FVTPL. However, financial liabilities that arise
when a transfer of a financial asset does not qualify
for derecognition or when the continuing involvement
approach applies, financial guarantee contracts issued
by the Company, and commitments issued by the
Company to provide a loan at below-market interest rate
are measured in accordance with the specific accounting
policies set out below.
Financial liabilities at FVTPL
Financial liabilities are classified as at FVTPL when
the financial liability is either contingent consideration
recognized by the Company as an acquirer in a business
combination to which Ind AS 103 applies or is held for
trading or it is designated as at FVTPL.
A financial liability is classified as held for trading if:
• it has been incurred principally for the purpose of
repurchasing it in the near term; or
• on initial recognition it is part of a portfolio of
identified financial instruments that the Company
manages together and has a recent actual pattern of
short-term profit-taking; or
• it is a derivative that is not designated and effective
as a hedging instrument.
Financial liabilities that are not held-for-trading and are not
designated as at FVTPL are measured at amortized cost.
Financial liabilities subsequently measured at amortised
cost
Financial liabilities that are not held-for-trading and are not
designated as at FVTPL are measured at amortized cost
at the end of subsequent accounting periods. The carrying
amounts of financial liabilities that are subsequently
measured at amortised cost are determined based on
the effective interest method. Interest expense that is not
capitalized as part of costs of an assets is included in the
'Finance Costs' line item.
The effective interest method is a method of calculating
the amortised cost of a financial liability and of allocating
interest expense over the relevant period. The effective
interest rate is the rate that exactly discounts estimated
future cash payments (including all fees and points paid or
received that form an integral part of the effective interest
rate, transaction costs and other premiums or discounts)
through the expected life of the financial liability, or (where
appropriate) a shorter period, to the net carrying amount
on initial recognition.
De-recognition of financial liabilities
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
derecognised and the consideration paid and payable is
recognized in statement of profit or loss.
Offsetting
Financial assets and financial liabilities are offset and the
net amount is presented in the balance sheet when, and
only when, there is a legally enforceable right to set off the
amounts and the Company intends either to settle them
on a net basis or to realise the asset and settle the liability
simultaneously.
2.6 Revenue recognition
Revenue is recognised to the extent that it is probable
that the economic benefits will flow to the Company and
the revenue can be reliably measured and there exists
reasonable certainty of its recovery.
a. Interest Income
Interest income on financial instruments at
amortised cost is recognised on a time proportion
basis taking into account the amount outstanding
and the effective interest rate (EIR) applicable.
Interest on financial instruments measured as at
fair value is included within the fair value movement
during the period.
The EIR is the rate that exactly discounts estimated
future cash flows of the financial instrument through
the expected life of the financial instrument 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 calculation of the EIR includes all fees paid or
received between parties to the contract that are
incremental and directly attributable to the specific
lending arrangement, transaction costs, and all other
premiums or discounts. For financial assets at Fair
Value through Profit and Loss ('FVTPL'), transaction
costs are recognised in statement of profit or loss at
initial recognition.
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 financial assets originated
or purchased credit-impaired (POCI) the EIR reflects
the ECLs in determining the future cash flows
expected to be received from the financial asset.
b. Fees and Commission Income
Ind AS 115, Revenue from contracts with customers,
outlines a single comprehensive model of accounting
for revenue arising from contracts with customers.
The Company recognises revenue from contracts
with customers based on a five-step model as set
out in Ind AS 115:
Step 1: Identify contract(s) with a customer: A
contract is defined as an agreement between two
or more parties that creates enforceable rights and
obligations and sets out the criteria for every contract
that must be met.
Step 2: Identify performance obligations in the
contract: A performance obligation is a promise in
a contract with a customer to transfer a goods or
services to the customer.
Step 3: Determine the transaction price: The
transaction price is the amount of consideration
to which the Company expects to be entitled in
exchange for transferring promised goods or
services to a customer,
Step 4: Allocate the transaction price to the
performance obligations in the contract: For a
contract that has more than one performance
obligation, the Company allocates the transaction
price to each performance obligation in an amount
that depicts the amount of consideration to which
the Company expects to be entitled in exchange for
satisfying each performance obligation.
Step 5: Recognise revenue when (or as) the Company
satisfies a performance obligation.
Revenue from Investment Banking business, which
mainly includes the lead manager's fees, selling
commission, underwriting commission, fees for
mergers, acquisitions & advisory assignments and
arrangers' fees for mobilising funds is recognised
based on the milestone achieved as set forth under
the terms of agreement.
c. Dividend Income
Dividend income from investments is recognised
when the Company's right to receive dividend has
been established.
d. Other income
Other Income represents income earned from the
activities incidental to the business and is recognised
when the right to receive the income is established
as per the terms of the contract.
2.7 Leases
Leases are classified as finance leases whenever the
terms of the lease transfer substantially all the risks and
rewards of ownership to the lessee. All other leases are
classified as operating leases.
Assets acquired under finance lease are capitalised at the
inception of lease at the fair value of the assets or present
value of minimum lease payments whichever is lower.
These assets are fully depreciated on a straight line basis
over the lease term or its useful life whichever is shorter.
Assets held under finance leases are initially recognised
as assets of the Company at their fair value at the
inception of the lease or, if lower, at the present value of
the minimum lease payments. The corresponding liability
to the lessor is included in the balance sheet as a finance
lease obligation.
Lease payments are apportioned between finance
expenses and reduction of the lease obligation so as
to achieve a constant rate of interest on the remaining
balance of the liability. Finance expenses are recognised
immediately in profit or loss, unless they are directly
attributable to qualifying assets, in which case they are
capitalised in accordance with the Company's general
policy on borrowing costs.
The Company evaluates each contract or arrangement,
whether it qualifies as lease as defined under Ind AS 116.
The Company as a lessee
The Company assesses, whether the contract is, or
contains, a lease. A contract is, or contains, a lease if the
contract involves-
a) the use of an identified asset,
b) the right to obtain substantially all the economic
benefits from use of the identified asset, and
c) the right to direct the use of the identified asset.
The Company at the inception of the lease contract
recognises a Right-to-Use asset at cost and a
corresponding lease liability, for all lease arrangements in
which it is a lessee, except for leases with term of less
than twelve months (short term) and low-value assets.
Certain lease arrangements includes the options to
extend or terminate the lease before the end of the lease
term. Right-to-use assets and lease liabilities includes
these options when it is reasonably certain that they
will be exercised
The cost of the right-of-use assets comprises the amount
of the initial measurement of the lease liability, any
lease payments made at or before the inception date
of the lease plus any initial direct costs, less any lease
incentives received. Subsequently, the right-of-use assets
is measured at cost less any accumulated depreciation
and accumulated impairment losses and adjusted for
certain re-measurements of the lease liability, if any. The
right-of-use assets is depreciated using the straight-line
method from the commencement date over the shorter of
lease term or useful life of right-of-use assets.
Right to use assets are evaluated for recoverability
whenever events or changes in circumstances indicate
that their carrying amounts may not be recoverable.
For the purpose of impairment testing, the recoverable
amount (i.e. the higher of the fair value less cost to sell
and the value-in-use) is determined on an individual asset
basis unless the asset does not generate cash flows that
are largely independent of those from other assets. In
such cases, the recoverable amount is determined for the
Cash Generating Unit (CGU) to which the asset belongs.
For lease liabilities at inception, the Company measures
the lease liability at the present value of the lease payments
that are not paid at that date. The lease payments are
discounted using the interest rate implicit in the lease, if
that rate is readily determined, if that rate is not readily
determined, the lease payments are discounted using the
incremental borrowing rate.
The lease liability is subsequently increased by the interest
cost on the lease liability and decreased by lease payment
made. The carrying amount of lease liability is remeasured
to reflect any reassessment or lease modifications or to
reflect revised in-substance fixed lease payments. A change
in the estimate of the amount expected to be payable under
a residual value guarantee, or as appropriate, changes in
the assessment of whether a purchase or extension option
is reasonably certain to be exercised or a termination
option is reasonably certain not be exercised. The Company
has applied judgement to determine the lease term for
some lease contracts in which it is a lessee that include
renewal options. The assessment of whether the Company
is reasonably certain to exercise such options impacts
the lease term, which significantly affects the amount
of lease liabilities and right of use assets recognised.
The discounted rate is generally based on incremental
borrowing rate specific to the lease being evaluated.
The Company recognizes the amount of the re¬
measurement of lease liability as an adjustment to the
right-to-use assets. Where the carrying amount of the
right-to-use assets is reduced to zero and there is a
further reduction in the measurement of the lease liability,
the Company recognizes any remaining amount of the re¬
measurement in the Statement of profit and loss.
For short-term and low value leases, the Company
recognizes the lease payments as an operating expense
on a straight-line basis over the lease term.
Lease liability has been presented in Note 14 "Lease
Liabilities" and ROU asset that do not meet the definition
of Investment Property has been presented in Note 11
"Property, Plant and Equipment" and lease payments have
been classified as financing cash flows.
Lease payments are apportioned between finance
expenses and reduction of the lease obligation so as
to achieve a constant rate of interest on the remaining
balance of the liability. Finance expenses are recognised
immediately in Statement of Profit and Loss, unless they
are directly attributable to qualifying assets, in which case
they are capitalised in accordance with the Company's
policy on borrowing costs.
The Company as a lessor
Leases for which the Company is a lessor is classified as a
finance or operating lease. Contracts in which all the risks
and rewards of the lease are substantially transferred
to the lessee are classified as a finance lease. All other
leases are classified as operating leases.
Leases, for which the Company is an intermediate
lessor, it accounts for the head-lease and sub-lease as
two separate contracts. The sub-lease is classified as a
finance lease or an operating lease by reference to the
right-to-use asset arising from the head-lease.
For operating leases, rental income is recognized on a
straight-line basis over the term of the relevant lease.
2.8 Foreign currency transactions
In preparing the financial statements of the Company,
transactions in currencies other than the entity's functional
currency (foreign currencies) are recognised at the rates
of exchange prevailing at the dates of the transactions.
At the end of each reporting period, monetary items
denominated in foreign currencies are retranslated at the
rates prevailing at that date. Non-monetary items carried
at fair value that are denominated in foreign currencies are
retranslated at the rates prevailing at the date when the
fair value was determined. Non-monetary items that are
measured in terms of historical cost in a foreign currency
are not retranslated.
Exchange differences on monetary items are recognised
in the Statement Profit and Loss in the period in
which they arise.
2.9 Borrowing costs
Borrowing costs that are attributable to the acquisition,
construction or production of qualifying assets as defined
in Ind AS 23 are capitalized as a part of costs of such
assets. A qualifying asset is one that necessarily takes a
substantial period of time to get ready for its intended use.
Borrowing costs include interest expense calculated using
the EIR on respective financial instruments measured
at amortised cost, finance charges in respect of assets
acquired on finance lease and exchange differences
arising from foreign currency borrowings, to the extent
they are regarded as an adjustment to interest costs.
The effective interest rate (EIR) is the rate that exactly
discounts estimated future cash flows through the
expected life of the financial instrument to the gross
carrying amount of the financial liability. Calculation of the
EIR includes all fees paid that are incremental and directly
attributable to the issue of a financial liability.
2.10 Employee benefits
Defined contribution obligation
Retirement benefits in the form of provident fund are a
defined contribution scheme and the contributions are
charged to the Statement of Profit and Loss of the year
when the contributions to the respective funds are due.
Defined benefit obligation
The liabilities under the Payment of Gratuity Act, 1972
are determined on the basis of actuarial valuation made
at the end of each financial year using the projected
unit credit method.
The Company recognizes current service cost, past
service cost, if any and interest cost in the Statement of
Profit and Loss. Remeasurement gains and losses arising
from experience adjustment and changes in actuarial
assumptions are recognized in the period in which they
occur in the OCI.
Short-term benefits
Short-term employee benefits are expensed as the related
service is provided at the undiscounted amount of the
benefits expected to be paid in exchange for that service.
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. These benefits include performance
incentive and compensated absences which are expected
to occur within twelve months after the end of the period
in which the employee renders the related service.
Other long-term employee benefits
Liabilities recognised in respect of other long-term
employee benefits are measured at the present value
of the estimated future cash outflows expected to be
made by the Company in respect of services provided by
employees up to the reporting date.
2.11 Share-based payment arrangements
Equity-settled share-based payments to employees of
the Company are measured at the fair value of the equity
instruments at the grant date as per Black and Scholes model.
Details regarding the determination of the fair value of equity-
settled share-based transactions are set out in note 31.
The fair value determined at the grant date of the equity-
settled share-based payments to employees is recognised
as deferred employee compensation and is expensed in
the Statement of Profit and Loss over the vesting period
with a corresponding increase in stock option outstanding
in other equity.
At the end of each year, the Company revisits its estimate
of the number of equity instruments expected to vest
and recognizes any impact in profit or loss, such that the
cumulative expense reflects the revised estimate, with a
corresponding adjustment in other equity.
2.12 Taxation
Income tax
Income tax expense represents the sum of the tax currently
payable and deferred tax. Current and deferred tax are
recognised in the Statement of profit and loss, except
when they relate to items that are recognised in other
comprehensive income or directly in equity, in which case,
the current and deferred tax are also recognised in other
comprehensive income or directly in equity respectively.
The Company has determined that interest and
penalties related to income taxes, including uncertain
tax treatments, do not meet the definition of income
taxes, and therefore accounted for them under Ind AS 37
Provisions, Contingent Liabilities and Contingent Assets.
Current Tax
The Current tax is based on the taxable profit for the
year of the Company. Taxable profit differs from 'profit
before tax' as reported in the Statement of Profit and
Loss because of items of income or expense that are
taxable or deductible in other years and items that are
never taxable or deductible. The current tax is calculated
using applicable tax rates that have been enacted or
substantively enacted by the end of the reporting period.
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.
Deferred tax
Deferred tax is recognised on temporary differences
between the carrying amounts of assets and liabilities in
the Company's financial statements and the corresponding
tax bases used in the computation of taxable profit.
Deferred tax liabilities are generally recognised for all
taxable temporary differences. Deferred tax assets
are generally recognised for all deductible temporary
differences to the extent that it is probable that taxable
profits will be available against which those deductible
temporary differences can be utilised. Such deferred tax
assets and liabilities are not recognised if the temporary
difference arises from the initial recognition of assets and
liabilities in a transaction that affects neither the taxable
profit nor the accounting profit. Temporary differences in
relation to a right-of-use asset and a lease liability for a
specific lease are regarded as a net package (the lease)
for the purpose of recognising deferred tax.
Deferred tax liabilities are recognised for taxable temporary
differences associated with investments in subsidiaries,
except where the Company is able to control the reversal of
temporary difference and it is probable that the temporary
difference will not reverse in the foreseeable future. Deferred
tax assets arising from deductible temporary differences
associated with such investments and interests are only
recognised to the extent that it is probable that there will
be sufficient taxable profits against which to utilise the
benefits of the temporary differences and they are expected
to reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed
at the end of each reporting period and reduced to the
extent that it is no longer probable that sufficient taxable
profits will be available to allow all or part of the assets
to be recovered.
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 is realised, based on tax rates
(and tax laws) that have been enacted or substantively
enacted by the end of the reporting period.
Deferred tax assets and liabilities are offset when there
is a legally enforceable right to set off current tax assets
against current tax liabilities and when they relate to
income taxes levied by the same taxation authority and
the Company intends to settle its current tax assets and
liabilities on a net basis.
2.13 Goods and Services Input Tax Credit
Goods and Services tax input credit is accounted for in the
books in the period in which the supply of goods or service
received is accounted and when there is no uncertainty in
availing/utilising the credits.
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