SIGNIFICANT ACCOUNTING POLICIES
2.01 Basis of preparation and presentation of financial
statements
These standalone financial statements have been
prepared in accordance with Indian Accounting
Standards ("Ind AS") notified under Section 133 of
the Companies Act 2013 ("the Act"), read with the
Companies (Indian Accounting Standards) Rules,
2015 as amended.
The financial statements have been prepared in
accordance with Indian Accounting Standards
(Ind AS) under the historical cost convention on
the accrual basis except for certain financial
instruments which are measured at fair values,
and on the basis of accounting principle of a going
concern in accordance with generally accepted
accounting principles (GAAP). Accounting policies
have been consistently applied except where
a newly issued accounting standard is initially
adopted or a revision to an existing accounting
standard requires a change in the accounting
policy hitherto in use.
The financial statements have been presented in
accordance with schedule III-Division III General
Instructions for Preparation of financial statements
of a Non-Banking Financial Company (NBFC) that
is required to comply with Ind AS.
All amounts included in the financial statements
are reported in lakhs of Indian rupees (in lakhs)
except share and per share data, unless
otherwise stated. Due to rounding off, the numbers
presented throughout the document may not add
up precisely to the totals and percentages may
not precisely reflect the absolute figures. Previous
year figures have been regrouped/re-arranged,
wherever necessary.
2.02 Functional and presentation currency
Items included in the financial statements of
Company are measured using the currency of
the primary economic environment in which the
Company operates (the functional currency).
Indian rupee is the functional currency of the
Company.
2.03 Use of estimates
The preparation of financial statements in
conformity of Ind AS requires management to
make judgments, estimates and assumptions
that affect the application of accounting policies
and the reported amounts of assets, liabilities, the
disclosures of contingent assets and contingent
liabilities at the date of financial statements,
income and expenses during the year. Actual
results may differ from these estimates. Estimates
and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates
are recognized in the period in which the
estimates are revised and in future periods which
are affected.
Application of accounting policies that require
critical accounting estimates and assumption
having the most significant effect on the amounts
recognized in the financial statements are:
- Valuation of financial instruments
- Measurement of defined employee benefit
obligation
- Useful life of property, plant and equipment
- Useful life of investment property
- Provisions
2.04 Fair value measurement
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
The principal or the most advantageous market
must be accessible by the Company.
The fair value of an asset or a liability is measured
using the assumptions that market participants
would use when pricing the asset or liability,
assuming that market participants act in their
economic best interest.
A fair value measurement of a non-financial asset
takes into account a market participant's ability to
generate economic benefits by using the asset in
its highest and best use or by selling it to another
market participant that would use the asset in its
highest and best use.
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.
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.
Level 3 -Valuation techniques for which the
lowest level input that is significant to the fair value
measurement is unobservable.
For assets and liabilities that are recognized in
the financial statements on a recurring basis, the
Company determines whether transfers have
occurred between levels in the hierarchy by re¬
assessing categorization (based on the lowest
level input that is significant to the fair value
measurement as a whole) at the end of each
reporting period.
The Company's Management determines the
policies and procedures for both recurring
fair value measurement, such as derivative
instruments and unquoted financial assets
measured at fair value, and for non-recurring
measurement, such as assets held for distribution
in discontinued operations.
At each reporting date, the Management analyses
the movements in the values of assets and
liabilities which are required to be remeasured or
re-assessed as per the Company's accounting
policies. For this analysis, the Management varies
the major inputs applied in the latest valuation
by agreeing the information in the valuation
computation to contracts and other relevant
documents.
The Management also compares the change
in the fair value of each asset and liability with
relevant external sources to determine whether
the change is reasonable.
For the purpose of fair value disclosures, the
Company has determined classes of assets and
liabilities on the basis of the nature, characteristics
and risks of the asset or liability and the level of the
fair value hierarchy as explained above.
2.05 Revenue recognition
Revenue from contracts with customers is
recognized when control of the goods or services
are transferred to the customer at an amount that
reflects the consideration to which the Company
expects to be entitled in exchange for those goods
or services.
Ind AS 115 "Revenue from contracts with
Customers" provides a control-based revenue
recognition model and provides a five step
application approach to be followed for revenue
recognition.
A) Identify the contract(s) with a customer;
B) Identify the performance obligations;
C) Determine the transaction price;
D) Allocate the transaction price to the
performance obligations;
E) Recognize revenue when or as an entity
satisfies performance obligation.
Revenue from operations
Sale of Services
Merchant banking fees
Revenue from merchant banking fees includes
arranger fees, advisory fees, lead manager fees
are recognized when the Company satisfies
performance obligation. Lead manager fees are
recognized over a point of time. The Company
measures its progress towards satisfaction of
performance obligation based on output method
i.e. milestone basis. Revenue from arranger
services and advisory services are recognized
point in time.
Brokerage
Revenue from brokerage is recognized point in
time.
Interest Income
Under Ind AS 109, Interest income is recognized
by applying the Effective Interest Rate (EIR) to the
gross carrying amount of financial assets other
than credit-impaired assets and financial assets
classified as measured at fair value through Profit
and loss (FVTPL).
The EIR in case of a financial asset is computed
a. As the rate that exactly discounts estimated
future cash receipts through the expected
life of the financial asset to the gross carrying
amount of a financial asset.
b. By considering all the contractual terms of
the financial instruments in estimating the
cash flows
c. Including all fees received between parties
to the contract that are an integral part of the
effective interest rate, transaction costs, and
all other premium or discounts.
Any subsequent changes in the estimation of the
future cash flows is recognized in interest income
with the corresponding adjustment to the carrying
amount of the assets.
Net gain on Fair value changes
Any differences between the fair values of financial
assets classified as fair value through the profit or
loss held by Company on the balance sheet date is
recognized as an unrealized gain / loss. In cases
there is a net gain in the aggregate, the same is
recognized in "Net gains on fair value changes"
under revenue from operations and if there is a net
loss the same is disclosed under "Expenses" in the
statement of Profit and Loss.
Similarly, any realized gain or loss on sale of
financial instruments measured at FVTPL and debt
instruments measured at Fair value through Other
Comprehensive Income ("FVTOCI") is recognized
in net gain\loss on fair value changes.
However, net gain / loss on derecognition of
financial instruments classified as amortized is
presented separately under the respective head
in the Statement of Profit and Loss.
Dividend Income
Dividend income is recognized
a. When the right to receive the payment is
established.
b. it is probable that the economic benefits
associated with the dividend will flow to the
entity and
c. the amount of the dividend can be measured
reliably
Rental Income
Rental income arising from operating leases
on investment properties is accounted for on a
straight-line basis over the lease terms and is
included in revenue in the statement of profit or
loss due to its operating nature.
2.06 Taxes
The tax expense for the period comprises of
current tax and deferred tax. Tax is recognized
in the Statement of Profit and Loss except to the
extent it relates to items recognized in the other
comprehensive income or equity. In which case,
the tax is also recognized in other comprehensive
income or equity.
Current tax
Current tax assets and liabilities are measured at
the amount expected to be recovered from or paid
to the taxation authorities, based on tax rates and
laws that are enacted or substantively enacted at
the Balance sheet date.
Current income taxes are recognized in profit or
loss except to the extent that the tax relates to
items recognized outside profit or loss, either in
other comprehensive income or directly in equity.
Management periodically evaluates position
taken in the tax returns with respect to situations in
which applicable tax regulations are subjected to
interpretation and establishes provisions, where
appropriate.
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 profit.
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
realized, based on tax rates (and tax laws) that
have been enacted or substantively enacted
by the end of the reporting period. The carrying
amount of Deferred tax liabilities and assets are
reviewed at the end of each reporting period.
The carrying amount of deferred tax assets is
reviewed at each reporting date and reduced to
the extent that it is no longer probable that sufficient
taxable profit will be available to allow all or part of
the deferred tax asset to be utilized. 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.
2.07 Property, plant and equipment
Property, plant and equipment are stated at cost, net
of recoverable taxes, trade discount and rebates
less accumulated depreciation and impairment
loss, if any. Such cost includes purchase price,
borrowing costs, and any cost directly attributable
to bringing the asset to its working condition for its
intended use, net charges on foreign exchange
contracts and adjustments arising from exchange
rate variations attributable to the assets.
Subsequent Cost
Subsequent costs are included in the asset's
carrying amount or recognized as a separate
asset, as appropriate, only when it is probable that
future economic benefits associated with the item
will flow to the entity and the cost can be measured
reliably.
Depreciation
Depreciation is calculated as per the estimated
useful life of assets prescribed by the Schedule II to
the Companies Act 2013.
Leasehold improvements are amortized over the
lease period.
The residual values, useful lives and methods of
depreciation of property, plant and equipment are
reviewed at each financial year end and adjusted
prospectively, if appropriate.
Derecognition
An item of property plant & 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 derecognition of the asset is
included in the income statement when the asset
is derecognized.
Upon first time adoption of IND-AS, the Company
has elected to measure all its property, plant and
equipment at the Previous GAAP carrying amount
at its deemed cost on the date of transition to IND-
AS i.e. April 01, 2018.
2.08 Intangible assets
Intangible Assets are stated at cost of acquisition
net of recoverable taxes less accumulated
amortisation and impairment loss, if any.
The cost comprises purchase price, borrowing
costs, and any cost directly attributable to
bringing the asset to its working condition for the
intended use and net charges on foreign exchange
contracts and adjustments arising from exchange
rate variations attributable to the intangible assets.
The Company has elected to continue with the
previous GAAP carrying amount of all intangible
assets as deemed cost at the date of transition i.e.
April 01, 2018
Subsequent expenditure
Subsequent expenditure is capitalized only when it
increases the future economic benefits embodied
in the specific asset to which it relates. All other
expenditure, including expenditure on internally
generated goodwill and brands, are recognized in
profit or loss as incurred.
Derecognition
An item of intangible asset 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
derecognition of the asset is included in the income
statement when the asset is derecognized.
Intangible assets comprising of Software are
amortized on a straight line basis over its estimated
useful life or maximum 3 years, whichever is
shorter.
2.09 Borrowing costs
Borrowing costs directly attributable to the
acquisition, construction or production of an
asset that necessarily takes a substantial period
of time to get ready for its intended use or sale
are capitalized as part of the cost of the asset. All
other borrowing costs are expensed in the period
in which they occur. Borrowing costs consist of
interest and other costs that an entity incurs in
connection with the borrowing of funds. Borrowing
cost also includes exchange differences to the
extent regarded as an adjustment to the borrowing
costs.
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