1. Summary of material accounting policies and
other explanatory information
a) Corporate information
Muthoot Microfin Limited (the ‘Company’) was incorporated
as a private limited company in the year 1992 under the
erstwhile Companies Act, 1956, having it's registered
office at 13th Floor, Parinee Crescenzo, Bandra Kurla
Complex, Bandra East, Mumbai, Maharashtra - 400051.
Effective 18 March 1998, the Company was registered
as a non-deposit accepting Non-Banking Financial
Company ('NBFC-ND') as defined under section 45-IA of
the Reserve Bank of India (RBI) Act, 1934. The Company
is classified under “Middle Layer” pursuant to Master
Direction- Reserve Bank of India (Non-Banking Financial
Company- Scale Based Regulation) Directions, 2023 and
is registered as a Non-Banking Financial Company - Micro
Finance Institution ('NBFC-MFI') with the Reserve Bank
of India (“RBI”), w.e.f. 25 March 2015. The Company’s
non-convertible debentures are listed on the Bombay
Stock Exchange (‘BSE’). During the year ended March
31, 2024, the Company has completed Initial Public Offer
(IPO) of its shares. Pursuant to IPO, shares were listed on
National Stock Exchange (NSE) and BSE Limited (BSE)
on December 26, 2023. The Company has secured
a corporate agent license on June 18, 2024 from the
Insurance Regulatory and Development Authority of India
(IRDAI) with Registeration Number - CA0953.
The operations of the Company are based on the
Grameen model of lending. It is designed to promote
entrepreneurship among women and inclusive growth.
The Company is primarily engaged in providing financial
assistance through micro loans to women engaged in
small income generating activities.
Financial statements were subject to review and
recommendation of the Audit Committee and approval
of the Board of Directors. On 8 May 2025, the Board of
Directors of the Company approved and recommended
the financial statements for consideration and adoption by
the shareholders in its Annual General Meeting.
b) Basis of preparation
(i) Statement of compliance with Indian Accounting
Standards (Ind AS)
These financial statements (“the Financial
Statements”) have been prepared in accordance
with the Indian Accounting Standards (‘Ind AS’)
as notified by Ministry of Corporate Affairs (‘MCA’)
under Section 133 of the Companies Act, 2013
(‘Act’) read with the Companies (Indian Accounting
Standards) Rules, 2015, as amended and other
relevant provisions of the Act, circulars, guidelines
and directions issued by the Reserve Bank of India
("RBI") from time to time. The Company has uniformly
applied the accounting policies for all the periods
presented in this financial statements.
(ii) Historical cost convention
The financial statements have been prepared on
going concern basis in accordance with accounting
principles generally accepted in India. Further, the
financial statements have been prepared on historical
cost basis except for certain financial assets and
financial liabilities, share based payments which are
measured at fair values, and employee benefit plans
which are measured using actuarial valuation, as
explained in relevant accounting policies.
(iii) Presentation of financial statements
The financial statements of the Company are
presented as per Schedule III (Division III) of the
Companies Act, 2013, applicable to NBFCs as
notified by the Ministry of Corporate Affairs (MCA).
The financial statements are presented in Indian
Rupees (H) in millions except otherwise, which
is also the functional currency of the Company,
with rounding off to two decimals as permitted by
Schedule III to the Act, indicated. Financial assets
and financial liabilities are generally reported on a
gross basis except when, there is an unconditional
legally enforceable right to offset the recognised
amounts without being contingent on a future event
and the parties intend to settle on a net basis in the
following circumstances:
a. The normal course of business
b. The event of default
c. The event of insolvency or bankruptcy of the
Company and/ or its counterparties
c) Summary of material accounting policies
The financial statements have been prepared using
the material accounting policies and measurement
bases summarised as below. These policies are applied
consistently for all the periods presented in the financial
statements, except where newly issued accounting
standard is initially adopted.
i. Property, plant and equipment
Recognition and initial measurement
Property, plant and equipment are stated at their cost
of acquisition. The cost comprises purchase price,
borrowing cost if capitalization criteria are met and
directly attributable cost of bringing the asset to its
working condition for the intended use. Any trade
discount and rebates are deducted in arriving at the
purchase price.
Subsequent costs are included in the asset’s
carrying amount or recognised as a separate asset,
as appropriate, only 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. All other repair and maintenance
costs are recognised in statement of profit and loss.
Subsequent measurement (depreciation method,
useful lives and residual value)
Property, plant and equipment are subsequently
measured at cost less accumulated depreciation and
impairment losses. Depreciation on property, plant
and equipment is provided on the straight-line method
over the useful life of the assets as prescribed under
Part ‘C’ of Schedule II of the Companies Act, 2013.
Depreciation is calculated on pro rata basis from the
date on which the asset is ready for use or till the date
the asset is sold or disposed.
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 recognised is derecognised
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 carrying amount of the asset) is recognized
in the statement of profit and loss, when the asset
is derecognised.
ii. Intangible assets
Recognition and initial measurement
Intangible assets are stated at their cost of acquisition.
The cost comprises purchase price including any
import duties and other taxes (other than those
subsequently recoverable from taxation authorities),
borrowing cost if capitalization criteria are met and
directly attributable cost of bringing the asset to its
working condition for the intended use.
Subsequent measurement (amortisation method,
useful lives and residual value)
Intangible assets are amortised on a straight line
basisfrom the date when the assets are available for
use. Depreciation on intangible assets is provided
on the straight-line method over the useful life of the
assets as prescribed under Part ‘C’ of Schedule II of
the Companies Act, 2013.
iii. Revenue recognition
Interest and processing fee income on loans
Interest and processing fee income is recorded
on accrual basis using the effective interest
rate (EIR) method. Additional interest/overdue
interest/penal charges, if any, are recognised
only when it is reasonable certain that the ultimate
collection will be made.
Income from assignment transactions
Income from assignment transactions i.e., present
value of excess interest spread is recognised when
the related loan assets are de-recognised. Interest
income is also recognised on carrying value of assets
over the remaining period of such assets.
Commission income
Income from business correspondent services is
recognised as and when the services are rendered
as per agreed terms and conditions of the contract.
A receivable is recognised when the services
are delivered as this is the case of point in time
recognition where consideration is unconditional
because only the passage of time is required.
Miscellaneous income
All other income is recognized on an accrual
basis, when there is no uncertainty in the ultimate
realization/collection.
iv. Borrowing costs
All borrowing costs are charged to the Statement of
Profit and Loss as incurred basis the effective interest
rate method. Borrowing costs consists of interest and
other cost that the Company incurred in connection
with the borrowing of funds.
v. Taxation
Tax expense recognized in Statement of Profit and
Loss comprises the sum of deferred tax and current
tax except to the extent it recognized in other
comprehensive income or directly in equity.
Current tax comprises the tax payable or receivable
on taxable income or loss for the year and any
adjustment to the tax payable or receivable in
respect of previous years. Current tax is computed
in accordance with relevant tax regulations. The
amount of current tax payable or receivable is the
best estimate of the tax amount expected to be paid
or received after considering uncertainty related to
income taxes, if any. Current tax relating to items
recognised outside profit or loss is recognised
outside profit or loss (either in other comprehensive
income or in equity).
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 is recognised in respect of temporary
differences between carrying amount of assets
and liabilities for financial reporting purposes and
corresponding amount used for taxation purposes.
Deferred tax assets are recognised on deductible
temporary differences to the extent it is probable that
the future taxable profits will be available against which
they can be used. This is assessed based on the
Company’s forecast of future operating results, adjusted
for significant non-taxable income and expenses
and specific limits on the use of any unused tax loss.
Unrecognised deferred tax assets are re-assessed at
each reporting date and are recognised to the extent
that it has become probable that future taxable profits
will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at
the tax rates that are expected to apply in the year
when the asset is realised or the liability is settled,
based on tax rates (and tax laws) that have been
enacted or substantively enacted at the reporting
date. The measurement of deferred tax reflects the
tax consequences that would follow from the manner
in which the Company expects, at the reporting date
to recover or settle the carrying amount of its assets
and liabilities. Deferred 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 relating to items
recognised outside statement of profit and loss is
recognised outside statement of profit or loss (either
in other comprehensive income or in equity).
vi. Employee benefits
Short-term employee benefits
Short-term employee benefits including salaries,
short term compensated absences (such as a paid
annual leave) where the absences are expected
to occur within twelve months after the end of the
period in which the employees render the related
service, profit sharing and bonuses payable within
twelve months after the end of the period in which
the employees render the related services and
non-monetary benefits for current employees are
estimated and measured on an undiscounted basis.
Post-employment benefit plans are classified into
defined benefits plans and defined contribution
plans as under:
Defined Contribution plans
The Company has a defined contribution plans
namely provident fund, pension fund and employees
state insurance scheme. The contribution made by
the Company in respect of these plans are charged
to the Statement of Profit and Loss.
Defined benefit plans
The Company has an obligation towards gratuity,
a defined benefit retirement plan covering eligible
employees, where in the benefit employee will receive
on retirement is defined by reference to employee's
length of service and last drawn salary. Under the
defined benefit plan, the amount that an employee
will receive on retirement is defined by reference to
the employee’s length of service and final salary.
The legal obligation for any benefits remains with
the Company, even if plan assets for funding the
defined benefit plan have been set aside. The liability
recognised in the statement of financial position
for defined benefit plans is the present value of the
Defined Benefit Obligation (DBO) at the reporting
date less the fair value of plan assets. Management
estimates the DBO quarterly with the assistance
of independent actuaries. Actuarial gains/losses
resulting from re-measurements of the liability/asset
are included in other comprehensive income.
Other long-term employee benefits
The Company also provides the benefit of
compensated absences to its employees which
are in the nature of long-term employee benefit
plan. Liability in respect of compensated absences
becoming due and expected to availed after one
year from the Balance Sheet date is estimated on
the basis of an actuarial valuation performed by an
independent actuary using the projected unit credit
method as on the reporting date. Actuarial gains and
losses arising from past experience and changes in
actuarial assumptions are charged to Statement of
Profit and Loss in the year in which such gains or
losses are determined.
vii. Share based payments
The Company has formulated an Employees Stock
Option Schemes to be administered through a Trust.
The fair value of options granted under Employee
Stock Option Plan is recognised as an employee
benefits expense with a corresponding increase
in other equity. The total amount to be expensed
is determined by reference to the fair value of the
options. The total expense is recognised over the
vesting period, which is the period over which all of
the specified vesting conditions are to be satisfied.
At the end of each period, the entity revises its
estimates of the number of options that are expected
to vest based on the non-market vesting and service
conditions. It recognises the impact of the revision to
original estimates, if any, in Statement of Profit and
Loss, with a corresponding adjustment to equity.
viii Impairment of financial assets
Loan assets
The Company follows a ‘three-stage’ model for
impairment based on changes in credit quality since
initial recognition as summarised as below:
a) Stage 1 (1-30 days) includes loan assets that
have not had a significant increase in credit risk
since initial recognition or that have low credit
risk at the reporting date.
b) Stage 2 (31-90 days) includes loan assets that
have had a significant increase in credit risk
since initial recognition but that do not have
objective evidence of impairment.
c) Stage 3 (more than 90 days) includes loan assets
that have objective evidence of impairment at
reporting date.
The Expected Credit Loss (ECL) is measured at
12-month ECL for Stage 1 loan assets and at lifetime
ECL for Stage 2 and Stage 3 loan assets. ECL is the
product of the Probability of Default, Exposure at
Default and Loss Given Default, defined as follows:
Probability of Default (PD) - The PD represents the
likelihood of a borrower defaulting on its financial obligation
(as per “Definition of default and credit-impaired” above),
either over the next 12 months (12 months PD), or over the
remaining lifetime (Lifetime PD) of the obligation.
Loss Given Default (LGD) - LGD represents
the Company’s expectation of the extent of loss
on a defaulted exposure. LGD varies by type of
counterparty, type and preference of claim and
availability of collateral or other credit support.
Exposure at Default (EAD) - EAD is based on the
amounts the Company expects to be owed at the
time of default. For a revolving commitment, the
Company includes the current drawn balance plus
any further amount that is expected to be drawn up
to the current contractual limit by the time of default,
should it occur.
Forward-looking economic information (including
management overlay) is included in determining
the 12-month and lifetime PD, EAD and LGD. The
assumptions underlying the expected credit loss are
monitored and reviewed on an ongoing basis.
Write-offs
Financial assets are written off either partially or in their
entirety to the extent that there is no realistic prospect
of recovery. Any subsequent recoveries are credited
to other income in statement of profit and loss.
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