1. Corporate Informations
m/s PAISALO DIGITAL LIMITED is a Middle Layer, as per RBI scale-based Regulation, Systemically Important Non¬
Deposit Taking Non-Banking Financial Company engaged in providing loans.
Paisalo Digital Limited having experience of more than 30 years, primarily focusing on financing self-employed
borrowers, a segment which is still untapped / unserved, driven by rising affluence, aspirations and favorable
demographics.
The Company's successful digital mode of financing self - employed underserved / unserved, using state of art
technology, has enabled to register significant growth. The Company is able to scale up its business operations
through its intranet model of financing from more than 350 branches as on date and still growing. The Company
has cumulatively served more than 1 million satisfied customers. While remaining focused on growth, Company
consistently maintains high asset quality level and continues to build the institution on the strong pillars of ethics,
values and corporate governance.
The equity of the company is listed on BSE since 2007 and on NSE since 2009. The registered office of the Company
is situated at CSC, Pocket 52, Chitranjan Park, Delhi 110019 and the head office at Paisalo House, 74, Gandhi Nagar,
NH-2, Agra 282003.
2. Functional and Presentation Currency
These Financial Statements are presented in Indian rupees (value in Lakhs up to two decimal), which is the functional
currency of the Company. All financial information is presented in Indian rupees.
3. Basis of Preparation of Financial Statements
These financial statements are prepared in accordance with Indian Accounting Standards (Ind AS) under the
historic cost convention on an accrual basis, except where the same is considered at fair market value as required
by Ind AS, the provisions of the Companies Act , 2013 ('the Act') (to the extent notified) and guidelines issued by the
Securities and Exchange Board of India (SEBI).
The Ind AS are prescribed under Section 133 of the Act read with Rule 3 of the Companies (Indian Accounting
Standards) Rules, 2015 and the relevant amendment rules issued thereafter.
Financial statements have been presented in accordance with format prescribed for Non-Banking Financial
Companies under Companies (Indian Accounting Standards) Rules, 2015 in Division III as per the notification No.
G.S.R. 1022(E) dated 11.10.2018 as amended vide notification dated 24th March, 2021.
4. Use of Estimates and Judgments
The preparation of the Financial Statements in conformity with Ind AS requires the Management to make estimates,
judgments and assumptions. These estimates, judgments and assumptions affect the application of accounting
policies and the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the
date of the Financial Statements and reported amounts of revenues and expenses during the period. The application
of accounting policies that require critical accounting estimates involving complex and subjective judgments and
the use of assumptions in the Financial Statements have been disclosed in further notes. Accounting estimates
could change from period to period. Actual results could differ from those estimates. Appropriate changes in
estimates are made as the Management becomes aware of changes in circumstances surrounding the estimates.
Changes in estimates are reflected in the Financial Statements in the period in which changes are made and, if
material, their effects are disclosed in the notes to the financial statements.
4.1 Revenue Recognition
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company
and the revenue can be reliably measured. Company follows accrual basis for all revenue recognition.
Interest income is recognized on due basis and penal income is recognized on receipt basis. For recognition
of revenue, the valuation of listed shares is considered at market price and that of security receipts as per the
valuation report as at Balance Sheet date.
4.2 Income Taxes
The Company's major tax jurisdiction is India. Significant judgments are involved in determining the provision
for income taxes, including the amount expected to be paid or recovered in connection with uncertain tax
positions.
Income tax expense comprises current and deferred tax. It is recognized in the statement of profit and loss
except to the extent that it relates items recognized directly in equity or in OCI.
4.3 Property, Plant and Equipment
Property, plant and equipment represent a small proportion of the asset base of the Company. The charge
in respect of periodic depreciation is derived after determining an estimate of an asset's expected useful life
and the expected residual value at the end of its life. Useful lives of PPE and intangible assets are based on the
life prescribed in Schedule II of the Companies Act, 2013. In cases where the useful lives are different from that
prescribed in Schedule II, they are based on technical advice, taking into account the nature of the asset, the
estimated usage of the asset, the operating conditions of the asset, past history of replacement, anticipated
technological changes, manufacturers' warranties and maintenance support.
4.4 Provision
Provision is recognized when the Company has a present obligation as a result of past event and it is probable
that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate
can be made. Provisions are not discounted to its present value and are determined based on best estimate
required to settle the obligation as at the Balance Sheet date. These are reviewed at each Balance Sheet date
and adjusted to reflect the current best estimates.
4.5 Cash Flow Statement
Cash flows are reported using the indirect method, whereby profit before tax is adjusted for the effect of
transactions of non-cash nature and any deferrals or accruals of past or future cash receipts or payments
and item of income or expenses associated with investing or financing cash flows. Cash flow from operating,
investing and financing activities are segregated.
5. Accounting Policies
5.1 Cash & Cash Equivalents
Cash and cash equivalents in the balance sheet comprise cash at bank and in hand and short-term
investments with an original maturity of three months or less.
5.2 Financial Instruments
The Company recognizes financial assets and financial liabilities when it becomes a party to the contractual
provisions of the instrument.
Company has a business model of 'Hold to collect' with sole purpose of collecting principal and interest from
loans, thus as per Ind AS 109- 'Financial Instruments' Loans are measured at amortized cost.
Other financial assets or liabilities maturing within one year from the balance sheet date are measured at the
carrying value as the same approximate the fair value due to the short maturity of these instruments.
The valuation of listed shares is considered at market price and that of security receipts as per the valuation
report as at Balance Sheet date. Monetary Assets and liabilities denominated in foreign currencies at the
reporting date are translated into the functional currency at the exchange rate at that date and valued at fair
value as on the balance sheet date.
5.3 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 of the financial assets on the basis of their credit risk exposure.
For the same, ECL is measured as per the management policy after performing due diligence of Company's
historical data in regards to the respective asset. Also, since company is a RBI registered ND-SI- NBFC and as
per RBI guidelines, a 0.4% provision for Standard Assets is created against Company's credit exposures.
The Company shows overdue installment amount of customers under trade receivables.
Expected Credit Loss model:
Company's Credit loss system is based on its credit risk function and the risk perceives. Under Ind AS, credit loss
provisioning is mainly based on past trends and judgment of the entity. Implementation of expected credit
losses not only consider historical data but also incorporates consideration to forward looking information.
Both 12 months ECL and life time ECL are calculated on individual and collective basis, depending on the
nature of the underlying portfolio of financial instrument.
Determining significant increase in credit risk
It is very judgmental to determine the significant increase in credit risk, which enable entity to move from
stage 1 to stage 2. i.e. to move from 12 month expected losses to life time expected losses. Entity need to
assess significant increase in credit risk as compared to its initial recognition level by considering significant
changes in financial position of a borrower, expected or current delay in payment, historical trend of the
repeat borrowers etc.
Company also has 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.
Forward looking information
ECL is based on history of financial asset and includes forward-looking statement; however, it is a forecast
about future conditions over the entire expected life of a financial instrument. The forward-looking information
is based on:
• Internal historical credit loss experience, and the period of time over which its historical data has been
captured and the corresponding economic conditions represented in the past.
• Effects that were not present in the past or to remove the effects that are not relevant for the future.
• Macroeconomic factors such as interest rates.
The Calculations of ECL
Company calculates ECL on the basis of probability-weighted average scenarios on the basis of historical
data.
The calculation of ECL has following key elements of Company's internal estimates:
Probability of default (PD):
It is an estimate of the likelihood of default over a given time horizon.
Exposure at default:
Estimate of an exposure at a future default date -expected changes in exposure after the reporting date.
Loss Given Default:
Estimate of the loss arising on default. It is based on the difference between contractual cash flows that are
due and expected to receive including from collateral. It is generally referred as a percentage of exposure at
default.
Discount rate:
Used to discount an expected loss to a present value at the reporting date using the effective interest rate.
ECL system:
Stage 1: At stage one 12 months ECL is recognized which is calculated as the portion of total outstanding
advances, that are overdue till 30 days, that result from a default event on the financial instrument
that are possible within 12 months after the reporting date. Company calculates the 12 months
ECL provision based on the expectation of default occurring in 12 months following the reporting
date. These expected 12 month default probabilities are applied to an EAD and multiplied by the
expected LGD.
Stage 2: When a loan has shown a significant increase in the credit risk, i.e., where the same is overdue till
90 days, PDL records a provision for life time ECL. PDs and LGDs in this case are estimated over life
span of the financial instrument.
Stage 3: When a loan is considered credit-impaired, i.e., where the same is overdue for past 90 days,
Company recognize the lifetime expected credit losses. In this scenario PD is estimated at 100%.
For Company, stage 3 incorporates the loans which are due past 90 days but, in certain cases
where the internal assessment of the individual borrowers reflects that the overdue amount can
be recovered in the near future then the same is subjected to some additional provision other than
the prescribed provisioning.
Conclusion:
ECL concept is to recognize the expected loss on the defaulted advances on timely basis so as to present
a true and fair view of financial position of the Company. Also, Ind AS states that entity can adopt any ECL
model to present its historical trends adjusted for its forward-looking information. However, as per Company's
internal policy, the Company follows a policy of writing off 100% of Sub-Standard Assets in respect oof these
cases where possibility of recoveries are remote which does incorporate the requirements of Ind AS of better
presentation of financial position.
Company ECL model is subjected to review every year.
5.4 Derecognition Of Financial Instruments
The Company derecognises a financial asset when the contractual rights to the cash flows from the financial
asset expire or it transfers the financial asset and the transfer qualifies for derecognition under Ind AS 109. A
financial liability (or a part of a financial liability) is derecognised from the balance sheet when the obligation
specified in the contract is discharged or cancelled or expires.
5.5 Investments
Investments are carried at cost in the separate financial statements. Investments in subsidiary is measured
at the previous GAAP carrying amount as per the provisions of Ind AS 27 - 'Separate Financial Statements'.
5.6 Property, Plant and Equipment
Property, plant and equipment are stated at cost, less accumulated depreciation and impairment, if any or at
fair market value if the same present a better presentation of Company's financial position.
Costs directly attributable to acquisition are capitalized until the property, plant and equipment are ready for
use, as intended by the Management. If significant parts of an item of property, plant and equipment have
different useful lives, then they are accounted for as separate items (major components) of property, plant
and equipment. An item of property, plant and equipment is derecognized upon disposal or when no future
economic benefits are expected to arise from the continued use of the asset. Any gain or loss on disposal of
an item of property, plant and equipment is recognized in the statement of profit and loss.
Depreciation methods, useful lives and residual values are reviewed periodically, including at each financial
year end. Company has restated the useful life of Building as per the report of an independent valuer.
Advances, if any, paid towards the acquisition of property, plant and equipment outstanding at each Balance
Sheet date is classified as capital advances under other non-current assets and the cost of assets not ready
to use before such date are disclosed under 'Capital Work-in-Progress'. Subsequent expenditures relating
to property, plant and equipment are capitalized only when it is probable that future economic benefits
associated with these will flow to the Company and the cost of the item can be measured reliably. Repairs
and maintenance costs are recognized in the Statement of Profit and Loss when incurred. The cost and related
accumulated depreciation are eliminated from the Financial Statements upon sale or retirement of the asset
and the resultant gains or losses are recognized in the Statement of Profit and Loss.
5.7 Impairment of Tangible Assets
Property, plant and equipment 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 is determined on an individual asset basis unless the asset does not generate cash flows
that are largely independent of those from other assets. If such assets are considered to be impaired, the
impairment is to be recognized in the Statement of Profit and Loss and is measured by the amount by which
the carrying value of the assets exceeds the estimated recoverable amount of the asset. An impairment loss
is reversed in the Statement of Profit and Loss if there has been a change in the estimates used to determine
the recoverable amount. The carrying amount of the asset is increased to its revised recoverable amount,
provided that this amount does not exceed the carrying amount that would have been determined (net of
any accumulated depreciation) had no impairment loss been recognized for the asset in prior years.
5.8 Intangible Assets
Intangible assets are stated at cost less accumulated amortization and impairment or fair market value if
the same present a better presentation of Company's financial position. Intangible assets are amortized over
their respective individual estimated useful lives on a straight-line basis, from the date that they are available
for use. The estimated useful life of an identifiable intangible asset is based on a number of factors including
the effects of obsolescence, demand, competition, and other economic factors (such as the stability of the
industry, and known technological advances). Amortization methods and useful lives are reviewed periodically
including at each financial year end.
Software product development costs are also expensed as incurred unless technical and commercial
feasibility of the project is demonstrated, future economic benefits are probable. The cost during the
development phase shall be capitalized as the cost of the app. The costs which can be capitalized include
the cost of material, direct labour and overhead costs that are directly attributable to preparing the asset for
its intended use. Over the period of time the Company has developed its own ERP software which is a core
strength of the Company, the revaluation of which shall be taken up at later stage.
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