3. Material accounting policies
3.1 Revenue recognition
Fees and Commission Income
Revenue from services is recognized as and when services are rendered as per the terms of the agreement with customers. Revenues are
disclosed net of the Goods and Services Tax charged on such services In terms of the contract, an excess of revenue over the billed at the
yearend is carried in the financial statements as trade receivables where the amount is recoverable from the customer without any future
performance obligation and the Company has unconditional right over such consideration (i e if only the passage of time is required before
payment of such consideration is due) Revenue is recognized at a point in time when the Company satisfies the performance obligations by
transferring the promised services to its customers
Interest income
Interest income from a financial asset is recognized when it is probable that the economic benefits will flow to the Company and the revenue
can be measured reliably and there exists reasonable certainty of its recovery. Interest income is accrued on a time basis, by reference to the
principle outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts
through the expected life of the financial asset to that asset’s net carrying amount on initial recognition
Other income
Financial instruments measured through profit and loss
Other income includes fair value gain in respect of financial assets measured through profit & loss.
Income on financial instruments measured at ammortised cost
All other incomes are recognized on an accrual basis when no significant uncertainty exists on their receipt.
3.2 Property, Plant and Equipment and Depreciation
Property, plant and equipment are stated at cost, less accumulated depreciation and impairment losses, if any The cost comprises the purchase
price, borrowing cost if capitalization criteria are met and directly attributable cost of bringing the asset to its working condition for its
intended use Any trade discounts and rebates are deducted in arriving at the purchase price Subsequent expenditure is capitalized to the
asset’s carrying amount only when it is probable that future economic benefits associated with the expenditure will flow to the Group and
the cost of the item can be measured reliably. All other repairs and maintenance costs are expensed when incurred
Subsequent measurement (depreciation method, useful lives and residual value)
Depreciation on assets is provided on Written Down Value Method (‘WDV’) in accordance with the rates arrived at based on the useful lives
prescribed under Schedule II of the Companies Act, 2013 Management estimates useful life of assets as follows:
Leasehold improvements are depreciated over the shorter of their useful life or the lease term, unless entity expects to use the asset beyond
lease term. For others, depreciation is calculated on pro rata basis over the estimated useful life of the asset
Assets individually costing less than Rs 5,000 are fully depreciated in the year of purchase.
The residual values, useful lives and method of depreciation are reviewed at the end of each financial year
De-recognition
An item of property, plant and equipment and any significant part initially recognized is derecognized upon disposal or when no future
economic benefits are expected from its use or disposal Any gain or loss arising on de-recognition of the asset (calculated as the difference
between the net disposal proceeds and the canying amount of the asset) is recognized in the Statement of Profit and Loss, when the asset is
derecognized
3.3 Intangible assets and Amortization
Recognition and initial measurement
Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business
combination is their fair value at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any
accumulated amortization and accumulated impairment losses
Subsequent measurement (amortization method, useful lives and residual value)
Intangible assets are amortized on a straight-line basis over the estimated useful economic life. Management estimates useful life of intangible
assets as following:
Amortization is calculated on pro rata basis over the expected useful life of the intangible assets The residual values, useful lives and method
of amortisation are reviewed at the end of each financial year The amortization expense on intangible assets is recognized in the Statement
of Profit and Loss unless such expenditure forms part of carrying value of another asset
De-recognition of Intangible Assets
An intangible asset is derecognized 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 recognized in the Statement of Profit and Loss when the asset is derecognized
3.4 Finance Costs
Finance costs represent interest expense recognised by applying the EIR to the gross canying amount of financial liabilities Interest expense
includes issue costs that are initially recognized as part of the carrying value of the financial liability and amortized over the expected life
using the effective interest method These include fees and commissions payable to advisers and other expenses, provided these are
incremental costs that are directly related to the issue of a financial liability.
3.5 Fair value measurement
The Company measures financial instruments at fair value at the balance sheet date 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 The fair value measurement
is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
• in the principal market for the asset or liability, or
• in the absence of a principal market, in the most advantageous market for the asset or liability,
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 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities.
Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly
observable; and
Level 3- Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable
The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure
fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of nature, characteristics
and risks of the asset or liability and the level of the fair value hierarchy as explained above.
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Company determines whether transfers
have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair
value measurement as a whole) at the end of each reporting year
3.6 Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another
entity
Financial assets:
Initial recognition and measurement
Financial assets are classified, at initial recognition, and subsequently measured at amortized cost, fair value through other comprehensive
income (OCI), and fair value through profit or loss.
The classification of financial assets at initial recognition depends on the financial asset’s contractual cash flow characteristics and the
Company’s business model for managing them With the exception of trade receivables that do not contain a significant financing component
or for which the Company has applied the practical expedient, the Company initially measures a financial asset at its fair value plus, in the
case of a financial asset not at fair value through profit or loss, transaction costs Trade receivables that do not contain a significant financing
component or for which the Company has applied the practical expedient are measured at the transaction price determined under Ind AS
1 15
In order for a financial asset to be classified and measured at amortized cost or fair value through OCI, it needs to give rise to cash flows that
are ‘solely payments of principal and interest (SPPI)’ on the principal amount outstanding. This assessment is referred to as the SPPr test
and is performed at an instrument level Financial assets with cash flows that are not SPPI are classified and measured at fair value through
profit or loss, irrespective of the business model
The Company’s business model for managing financial assets refers to how it manages its financial assets in order to generate cash flows.
The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both.
Financial assets classified and measured at amortized cost are held within a business model with the objective to hold financial assets in
order to collect contractual cash flows.
Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the
marketplace (regular way trades) are recognized on the trade date, i.e , the date that the Company commits to purchase or sell the asset.
Subsequent measurement
Financial assets carried at amortized cost-a financial asset is measured at the amortized cost if both the following conditions are met:
• The asset is held within a business model whose objective is to hold assets for collecting contractual cash flows, and
• Contractual terms of the 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, such financial assets are subsequently measured at amortized cost using the effective interest rate (EIR) method
and are subject to impairment as per the accounting policy applicable to ‘Impairment of financial assets’ Amortized 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 amortization is
included in interest income in the Statement of Profit and Loss
Financial assets carried at fair value through profit and loss-
Financiat assets in this category are those that are held for trading and have been either designated by management upon initial recognition
or are mandatorily required to be measured at fair value under Ind AS 109 i e they do not meet the criteria for classification as measured
at amortized cost or FVTOCI Management only designates an instrument at FVTPL upon initial recognition, if the designation eliminates,
or significantly reduces, the inconsistent treatment that would otherwise arise from measuring the assets or liabilities or recognizing gains
or losses on them on a different basis Such designation is determined on an instrument-by-instrument basis
For the Company, this category includes investments in quoted mutual funds
Financial assets at fair value through profit or loss are carried in the balance sheet at fair value with net changes in fair value recognized in
the statement of profit and loss
Dividend income on listed equity investments are recognized in the statement of profit and loss as other income when the right of payment
has been established
De-recognition of financial assets
Financial assets (or where applicable, a part of financial asset or part of a Company of similar financial assets) are derecognized (i.e
removed from the Company’s balance sheet) when the contractual rights to receive the cash flows from the financial asset have expired, or
when the financial asset and substantially all the risks and rewards are transferred. Further, if the Company has not retained control, it shall
also derecognize the financial asset and recognize separately as assets or liabilities any rights and obligations created or retained in the
transfer.
Impairment of financial assets
In accordance with Ind AS 109, the Company applies Expected Credit Loss (ECL) model for measurement and recognition of impairment
loss on the following financial assets and credit risk exposure:
a) Financial assets that are debt instruments and are measured at amortized cost e.g. deposits,
b) Financial guarantee contracts which are not measured at Fair value through profit & loss account (FVTPL),
The Company recognizes an allowance for expected credit losses (ECLs) for all debt instruments not held at fair value through profit or loss,
ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the
Company expects to receive, discounted at an approximation of the original effective interest rate
ECLs are recognized in two stages For credit exposures for which there has not been a significant increase in credit risk since initial
recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12-months (a 12-month
ECL) For those credit exposures for which there has been a significant increase in credit risk since initial recognition, a loss allowance is
required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL).
Both Lifetime ECLs and 12-month ECLs are calculated on either an individual basis or a collective basis, depending on the nature of the
underlying portfolio of financial instruments 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 considering the change in the
risk of default occurring over the remaining life of the financial instrument The Company does the assessment of significant increase in
credit risk at a borrower level.
For trade receivables, the Company applies a simplified approach in calculating ECLs, Therefore, the Company does not track changes in
credit risk, but instead recognizes a loss allowance based on lifetime ECLs at each reporting date. The Company has established a provision
matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic
environment
Financial liabilities:
Initial recognition and measurement
All financial liabilities are recognized initially at fair value and, in the case of borrowings and payables, net of directly attributable transaction
costs. The Company’s financial liabilities include trade and other payables, borrowings etc
Trade and other payables are recognised at the transaction cost, which is the fair value and subsequently measured at amortised cost
The Company as a Lending Service Provider "LSP" enters into contractual agreements with Regulated Entities (REs), wherein it provides a
Default Loss Guarantee (DLG) in accordance with the Reserve Bank of India’s Guidelines on Default Loss Guarantee in Digital Lending,
dated May 8, 2025
The Company recognises a financial liability representing its estimated future obligations under the DLG arrangements This provision is
measured based on the expected outcomes attributable to the Company’s share, considering historical performance and other risk indicators
in the ECL methodology
Subsequent measurement
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the EIR method Gains
and losses are recognised in profit or 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.
De-recognition
Financial liability is de-recognized when the obligation under the liability is discharged, cancelled or expires. When 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 the de-recognition of the original liability and the recognition of a new liability
The difference in the respective carrying amounts is recognized in the Statement of Profit or Loss
Offsetting of financial instruments
F inancial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a currently enforceable legal
right to offset the recognized amounts and there is an intention to settle on a net basis, to realize the assets and settle the liabilities
simultaneously
Equity verses financial liability classification:
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 the Company are recognised at the proceeds received, net of direct issue costs The Company classifies a financial
instrument issued by it as equity instrument only if below conditions are met:
• The instrument includes no contractual obligation to deliver cash or another financial asset to another entity Nor it includes any
obligation to exchange financial assets or financial liabilities with another entity under conditions that are potentially unfavourable to
the issuer.
• tf the instrument will, or may, be settled in the Company’s own equity instruments, it is non-derivative instrument that includes no
contractual obligation for the Company to deliver a variable number of its own equity instruments If the instrument is derivative, then
it should be settled only by the Company exchanging a fixed amount of cash or another financial asset for a fixed number of its own
equity instruments
All other instruments are classified as financial liability and accounted for using the accounting policy applicable to the Financial
Liabilities
3.7 Employee benefits
The Company provides employment benefits through various defined contribution,defined benefit plans and short term employee benefits.
Defined contribution plans
A defined contribution plan is a plan under which the Company pays fixed contributions into an independent fund administered by the
government The Company has no legal or constructive obligations to pay further contributions after its payment of the fixed contribution
The Company’s contributions to defined contribution plans (provident fund) are recognized in profit or loss when the employee renders
related service
Defined benefit plans
The defined benefit plans sponsored by the Company define the amount of the benefit that an employee will receive on completion of services
by reference to length of service and last drawn salary. The legal obligation for any benefits remains with the Company.
The Company operates a defined benefit gratuity plan in India which is unfunded. The liability recognized in the financial statements in
respect of gratuity is the present value of the defined benefit obligation at the reporting date, together with adjustments for unrecognized
actuarial gains or losses and past service costs The defined benefit obligation is calculated at or near the reporting date by an independent
actuary using the projected unit credit method.
Re-measurements, comprising actuarial gains and losses, excluding amounts included in net interest on the net defined benefit liability, are
recognized immediately in the balance sheet with a corresponding debit or credit to statement of OCI in the period in which they occur Re-
measurements are not reclassified to profit or loss in subsequent periods
Past service costs are recognized in profit or loss on the earlier of:
• The date of the plan amendment or curtailment, and
• The date that the Company recognizes related restructuring costs
Net interest is calculated by applying the discount rate to the net defined benefit liability or asset The Company recognizes
the following changes in the net defined benefit obligation as an expense in the statement of profit and loss:
• Service costs comprising current service costs, past service costs, gains and losses on curtailments and non-routine
settlements; and
• Net interest expense or income
Accumulated leave, which is expected to be utilized within the next 12 months, is treated as a short-term employee benefit.
The Company measures the expected cost of such absences as the additional amount that it expects to pay as a result of the
unused entitlement that has accumulated at the reporting date The Company recognizes the expected cost of short-term
employee benefit as an expense, when an employee renders the related service
The Company treats accumulated leave expected to be carried forward beyond twelve months, as long-term employee benefit
for measurement purposes Such long-term compensated absences are provided for based on the actuarial valuation using the
projected unit credit method at the reporting date Remeasurement gains/losses are immediately taken to the statement of profit
and loss and are not deferred The obligations are presented as current liabilities in the balance sheet if the entity does not have
an unconditional right to defer the settlement for at least twelve months after the reporting date
Short-term employee benefits
All employee benefits falling due wholly within twelve months of rendering the services are classified as short-term employee
benefits, which include benefits like salaries, wages, short-term compensated absences and performance incentives and are
recognised as expenses in the period in which the employee renders the related service.
3.8 Leases
At inception of a contract, Company assesses whether the contract is, or contains, a lease A lease is defined as 'a contract, or part of a
contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration’.
Company as a Lessee
The Company applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value
assets. The Company recognizes lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying
assets The Company recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially
measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the
commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore
the underlying asset or the site on which it is located, less any lease incentives received.
Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease term and the estimated useful lives of the assets In
addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain re measurements of the lease
liability as follows:
• Office Building 5-10 years
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted
using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company’s incremental borrowing rate Generally,
the Company uses its incremental borrowing rate as the discount rate.
After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease
payments made In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a
change in the lease payments (e g,, changes to future payments resulting from a change in an index or rate used to determine such lease
payments) or a change in the assessment of an option to purchase the underlying asset
Short-term leases and leases of low value assets:
The Company applies the short-term lease recognition exemption to its short-term leases (i e , those leases that have a lease
term of 12 months or less from the commencement date and do not contain a purchase option).
The Company applies the low-value asset recognition exemption on a lease-by-lease basis, if the lease qualifies as leases
of low-value assets In making this assessment, the Company also factors below key aspects:
• The assessment is conducted on an absolute basis and is independent of the size, nature, or circumstances of the
lessee
• The assessment is based on the value of the asset when new, regardless of the asset's age at the time of the lease
• The lessee can benefit from the use of the underlying asset either independently or in combination with other
readily available resources, and the asset is not highly dependent on or interrelated with other assets
• If the asset is subleased or expected to be subleased, the head lease does not qualify as a lease of a low-value
asset
Lease payments on short-term leases and leases of low-value assets are recognized as expense on a straight-line basis over
the lease term
3.9 Taxation
Tax expense recognized in profit or loss comprises the sum of deferred tax and current tax It is recognized in Statement of Profit and Loss,
except when it relates to an item that is recognized in Other comprehensive income (OCI) or directly in equity, in which case, the tax is
also recognized in Other comprehensive income or directly in equity
Current tax:
Current tax is determined as the tax payable in respect of taxable income for the year, using tax rates enacted or substantively enacted and
as applicable at the reporting date, and any adjustments to tax payable in respect of previous years
Deferred Tax:
Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the financial statements and
the corresponding tax bases used in the computation of taxable income
Deferred tax liability is recognized for all taxable temporary differences, except:
• When the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a
business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss and does
not give rise to equal taxable and deductible temporary differences
• In respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures,
when the timing of the reversal of the temporary differences can be controlled, and it is probable that the temporary differences
will not reverse in the foreseeable future
A deferred tax asset is recognized for all deductible temporary differences to the extent that it is probable that future taxable profits will be
available against which the deductible temporary difference can be utilized, except:
• When the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or
liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit
nor taxable profit or loss and does not give rise to equal taxable and deductible temporary differences.
• In respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint
ventures, deferred tax assets are recognized only to the extent that it is probable that the temporary differences will reverse in the
foreseeable future and taxable profit will be available against which the temporary differences can be utilized.
Deterred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit
will be realized. Unrecognized deferred tax assets are re-assessed at each reporting date and are recognized to the extent that it has become
probable that future taxable profits will allow the deferred tax asset to be recovered
Changes in deferred tax assets or liabilities are recognized as a component of tax income or expense in profit or loss, except where they
relate to items that are recognized in other comprehensive income or directly in equity, in which case the related deferred tax is also
recognized in other comprehensive income or equity, respectively
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized, or the
liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date
The Company offsets deferred tax assets and deferred tax liabilities if and only if it has a legally enforceable right to set off current tax
assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation
authority on either the same taxable entity or different taxable entities which intend either to settle current tax liabilities and assets on a net
basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax
liabilities or assets are expected to be settled or recovered
|