4 MATERIAL ACCOUNTING POLICY INFORMATION
4.1. Revenue recognition
The Company’s operating revenues are comprised
principally of service revenues such as Interest income
on financial assets i.e. loans advanced, membership
fee earned, transaction revenue earned on interchange
including target incentives offered by network partners.
Other fee and charges include cheque bounce charge, late
fees, over limit fees etc. The Company also earns income
from investments made.
Revenue is measured, as set out in Ind AS 115, at the fair
value of the consideration received or receivable, taking
into account contractually defined terms of payment
and excluding taxes or duties collected on behalf of the
government. Revenue is recognised when transfer control
of promised goods or services to customers is completed,
to the extent that it is probable that the economic benefits
will flow to the Company and the revenue can be reliably
measured, regardless of when the payment is being made.
Amounts disclosed are net of returns, trade discounts,
rebates, value added taxes.
4.1.1.Interest income
Interest income includes
a. Interest income on dues from credit card holders
including EMI based advances.
b. Interest Income from Fixed Deposit.
c. Interest Income from Investment.
The Company recognises Interest income in line with Ind
AS 109 for all financial assets, except those classified as
held for trading or designated at fair value are recognised
in ‘Interest income’ in the statement of profit and loss
using the effective interest rate method (EIR) which
allocates interest, and direct and incremental fees and
costs, over the expected lives of the assets. The Company
calculates interest income by applying the EIR to the gross
carrying amount of financial assets other than credit-
impaired assets by considering processing fees and other
transaction costs that are an integral part of the EIR of
financial instruments, attributable to acquisition of such
financial assets. EIR represents a rate that exactly discount
estimated future cash flows through the expected life
of the financial asset to the gross carrying amount of a
financial asset.
In case of credit-impaired financial assets, the Company
recognises interest income on the amortised cost net of
impairment loss of the financial asset at EIR.
4.1.2.Income from fees and services
The Company sells credit card memberships to card
holders, where the company offers multiple membership
benefits including reward points, promotional discounts,
lounge access etc, that represent a single stand-ready
performance obligation. If the services offered by the
company contains distinct performance obligations,
the corresponding transaction price is allocated to each
performance obligation based on the estimated stand¬
alone selling prices.
Income earned from the provision of membership services
is recognised as revenue over the membership period
consisting of 12 months at fair value of the consideration
net of expected reversals/ cancellations. The unamortised
revenue from membership fees is recognised under other
non-financial liabilities.
Other service revenue consists of value-add services
provided to the card holders. Other service revenues
are recognised in the same period in which related
transactions occur or services rendered.
Interchange fees are collected from acquirers and paid to
issuers by network partners to reimburse the issuers for
a portion of the costs incurred for providing services that
benefit all participants in the system, including acquirers
and merchants. As the Company acts as a principal in
applicable transactions, revenue from interchange income
is recognised on gross basis when related transaction
occurs, or service is rendered.
4.1.3.Sale of services
The Company enters into contracts with co-brand
partners and other service providers for marketing, sales
and promotional activities on behalf of such co-brand
partners and other service providers. Commission income
arising therefrom is recognised on net basis at an agreed
rate in the same period in which related performance is
done as per the terms of the business arrangements.
I ncome from business process management services
is recognised when (or as) the company satisfies
performance obligation by transferring promised services
to the customer.
4.1.4.Business Development Incentive
The Company enters into long-term target based contracts
with network partners for various programs designed to
build payments volume, increase product acceptance.
Revenue recognition is based on estimated performance
by considering agreed incentive and the budgeted target
in comparison to actual performance achieved. As
and when the contracts are completed adjustment to
revenue is made to reflect the actual performance and
consequently revenue is recognised on actual basis.
4.1.5.insurance Commission Income
The Company acts as corporate insurance agent for
selling insurance policies to credit card customers on
behalf of the insurance companies. Commission arising
therefrom is recognised on net basis at an agreed rate on
completion of sale of insurance policies.
4.1.6. Dividend income and income from Sale of
investments
Dividend income is recognised when the right to receive
the dividend is established.
Excess of sale price over purchase price of mutual fund
units is recognised as income at the time of sale.
4.1.7. Unidentified receipts & Stale cheques
The total unidentified receipts which could not be
credited or adjusted in the customers’ accounts for lack of
complete & correct information is considered as liability
in balance sheet. The unresolved unidentified receipts
aged more than three years are written back as other
income on balance sheet date.
The liability for stale cheques aged for more than three
years is written back as other income.
4.1.8. Recovery from bad debts
Recovery from bad debts written off and sale of written
off portfolio is recognised as other income based
on actual realisations. Any recovery over and above
the actual written-off amount is accounted for as
miscellaneous income.
4.2. Expenditure
Expenses are recognised on accrual basis. Expenses
incurred on behalf of other companies, for sharing
personnel, etc. are allocated to them at cost and reduced
from respective expense classifications. Similarly, expense
allocation received from other companies is included
within respective expense classifications.
4.3. Finance cost
Finance costs represents interest expense recognised by
applying the Effective interest rate method (EIR) to the
gross carrying amount of financial liabilities other than
financial liabilities classified as fair value.
I nterest 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 arranger fees,
stamp duty fees, listing fees and other expenses, provided
these are incremental costs that are directly related to the
issue of a financial liability.
I nterest expense in the nature of borrowing cost as per
Ind AS 23 also include exchange differences to the extent
regarded as an adjustment to the borrowing costs.
4.4. Property, Plant and Equipment
4.4.1. Recognition and Derecognition
Property, Plant and equipment including capital work in
progress are stated at cost net of recoverable taxes, less
accumulated depreciation and accumulated impairment
losses, if any. The cost comprises of purchase price, taxes,
duties, freight and other incidental expenses directly
attributable and related to acquisition and installation
of the concerned assets. When significant parts of plant
and equipment are required to be replaced at intervals,
the Company depreciates them separately based on their
respective useful lives. Likewise, when a major inspection
is performed, its cost is recognised in the carrying amount
of the plant and equipment as a replacement if the
recognition criteria are satisfied. Subsequent costs are
capitalised if these result in enhancement of the asset.
All other repair and maintenance costs are recognised
in profit or loss as incurred. The present value of the
expected cost for the decommissioning of an asset after
its use is included in the cost of the respective asset if the
recognition criteria for a provision are met.
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 derecognition of the asset (calculated as the
difference between the net disposal proceeds and the
carrying amount of the asset) is included in the statement
of profit & loss when the asset is derecognised. The
assets are fully depreciated over the life and residual
value of the assets is considered as NIL, for the purpose
of depreciation computation.
Capital work- in- progress includes cost of property, plant
and equipment under installation / development as at the
balance sheet date.
The residual values, useful lives and method of depreciation
of property, plant and equipment are reviewed at each
financial year end and adjusted accordingly, if appropriate.
4.4.2. Depreciation on Property, plant and equipment
Depreciation on property, plant and equipment is provided
on straight line method using the useful lives of the assets
estimated by management and in the manner prescribed
I improvements of leasehold property are depreciated
over the period of the lease term or useful life, whichever
is shorter.
Useful life of assets different from prescribed in Schedule
II has been estimated by management supported by
technical assessment.
Depreciation on asset(s) acquired / sold during the year
is recognized on a monthly straight line method basis
to the Statement of Profit and Loss from the month of
acquisition of asset(s).
Right-of-use assets - Refer note 4.8.
4.5 Intangible assets
I ntangible assets are measured on initial recognition
at cost. Following initial recognition, intangible assets
are carried at cost less accumulated amortization and
accumulated impairment losses, if any.
Intangible assets acquired separately comprise of
purchase of software with finite useful life that are
initially recognised at cost. Amortisation is recognised
on a straight line method over a period of three years.
The estimated useful life and amortisation method are
reviewed at the end of each reporting period, with the
effect of any changes in estimate being accounted for on
a prospective basis.
In case of internally generated intangible assets,
expenditure on research activities is recognised as an
expense in the period in which it is incurred.
An internally generated intangible asset arising from
development (or from the development phase of an
internal project) is recognised on satisfaction of the
recognition criteria.
Where no internally generated intangible asset can be
recognised, development expenditure is recognised in
profit or loss in the period in which it is incurred.
Internally developed projects are recognised at cost and
amortised using the straight line method over period of
two to five years based on management’s estimate of its
useful life. Useful life of Intangible assets represents the
period over which the Company expects to derive the
economic benefits from the use of the asset.
I ntangible assets under developments are intangible
assets that are not ready for the intended use as on the
balance sheet date and are disclosed as Intangible assets
under development.
Derecognition of Intangible assets
An item of intangible assets 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 derecognition
of the asset (calculated as the difference between the net
disposal proceeds and the carrying amount of the asset)
is included in the statement of profit & loss when the
asset is derecognised.
4.6 Impairment of non-financial assets
The Company assesses, at each reporting date, whether
there is an indication that an asset may be impaired. If any
indication exists, or when annual impairment testing for
an asset is required, the Company estimates the asset’s
recoverable amount. An asset’s recoverable amount is
the higher of an asset’s or cash-generating unit’s (CGU)
fair value less costs of disposal and its value in use.
Recoverable amount is determined for an individual
asset, unless the asset does not generate cash inflows
that are largely independent of those from other assets
or Company’s assets. Where the carrying amount of
an asset or CGU exceeds its recoverable amount, the
asset is considered impaired and is written down to its
recoverable amount.
Company also regularly assesses collectability of dues
and creates appropriate impairment allowance based
on internal provision matrix. Impairment losses are
recognised in the statement of profit and loss. After
impairment, depreciation is provided on the revised
carrying amount of the asset over its remaining useful life.
4.7 Financial Instruments
Initial Recognition
Financial assets and liabilities are recognized when the
Company becomes a party to the contractual provisions
of the instrument. Financial assets and liabilities are
initially measured at fair value except for trade receivables
(without a significant financing component) which are
initially recognised at transaction price. Transaction
costs that are directly attributable to the acquisition or
issue of financial assets and financial liabilities (other
than financial assets and financial liabilities at fair value
through profit or loss) are added to or deducted from the
fair value measured on initial recognition of financial asset
or financial liability. Transaction costs directly attributable
to the acquisition of financial assets or financial liabilities
at fair value through profit or loss are recognised
immediately in statement of profit and loss.
Subsequent Recognition
(I) Non -derivative financial instruments
Financial Assets
Classification of financial assets
The classification depends on the contractual terms of the
financial assets’ cash flows and the Company’s business
model for managing financial assets.
The Company determines its business model at the level
that best reflects how it manages groups of financial
assets to achieve its business objective.
The Company classifies its financial assets into the
following measurement categories:
1. Financial assets to be measured at amortised cost
2. Financial assets to be measured at fair value through
other comprehensive income
3. Financial assets to be measured at fair value through
profit or loss account
Financial assets are carried at amortized cost
using Effective Interest rate method (EIR):
A financial asset is subsequently measured at amortized
cost if it is held within a business model whose objective
is to hold the asset to collect contractual cash flows and
the contractual terms of the financial asset give rise on
specified dates to cash flows that are solely payments
of principal and interest [SPPI] on the principal amount
outstanding. However, considering the economic viability
of carrying the delinquent portfolios on the books of the
Company, it may enter into immaterial and infrequent
transactions to sell these portfolios to banks and/or asset
reconstruction companies without affecting the business
model of the Company.
Financial assets at amortised costs comprises of
Investment in government securities, investment in
treasury bills, bank balances, trade receivables, loans and
other financial assets.
Effective Interest Rate (EIR) method:
The effective interest rate method is a method of
calculating the amortised cost of financial asset and of
allocating interest income over the expected life. Interest
Income is recognised in the Statement of Profit and Loss
on an effective interest rate basis for financial assets
other than those classified as at fair value through profit
or loss (FVTPL).
For financial assets the effective interest rate is the rate
that exactly discounts estimated future cash receipts
(including any fees or cost that form an integral part of the
effective interest rate) excluding expected credit losses,
through the expected life of the financial instrument.
EIR is determined at the initial recognition of the financial
asset. EIR is subsequently updated for financial assets
having floating interest rate, at the respective reset date,
in accordance with the terms of the respective contract.
Once the terms of financial assets are renegotiated, other
than market driven interest rate movement, any gain/ loss
measured using the previous EIR as calculated before the
modification, is recognised in the Statement of Profit and
Loss in period during which such renegotiations occur.
Financial assets at fair value through other
comprehensive income [FVOCI]:
A financial asset is subsequently measured at fair value
through Other Comprehensive Income if it is held within
a business model whose objective is achieved by both
collecting contractual cash flows and selling financial
assets and the contractual terms of the financial asset
give rise on specified dates to cash flows that are solely
payments of principal and interest on the principal amount
outstanding [SPPI].
Financial assets at fair value through profit or
loss (FVTPL):
A financial asset that do not meet the criteria for being
measured at amortised cost or FVOCI are measured
at FVTPL.
Financial assets at FVTPL are measured at fair value at the
end of each reporting period, with any fair value gains or
losses recognised in profit or loss to the extent they are
not part of a designated hedging relationship (see hedge
accounting policy).
However, in cases where the Company has made an
irrevocable election for particular investments in equity
instruments that would otherwise be measured at fair
value through profit or loss, the subsequent changes in
fair value are recognized in Other Comprehensive Income.
Investment in mutual funds are classified by the company
at FVTPL.
Investment which are classified as current and falls under
the classification of current quoted investments in line
RBI master directions as applicable to the Company are
evaluated at each reporting period to account for the
impact of depreciation through the statement of profit
and loss account.
Equity Investments designated under [FVOCI]
The classification is made on initial recognition and is
irrevocable. All fair value changes of equity instruments
excluding dividend are recognised in OCI and are not
available for reclassification to the statement of profit
and loss.
The equity investments in Online PSB Loans Limited held
by the company are designated as at FVOCI.
Derecognition of Financial Assets
A financial asset (or, where applicable, a part of a financial
asset or part of a Company of similar financial assets) is
primarily derecognised (i.e., removed from the Company’s
statement of financial position) when:
• the rights to receive cash flows from the asset have
expired, or
• the Company has transferred its rights to receive
cash flows from the asset or has assumed an
obligation to pay the received cash flows in full
without material delay to a third party under a “pass
through" arrangement and either;
• the Company has transferred the rights to receive
cash flows from the financial assets, or
• the Company has retained the contractual right to
receive the cash flows of the financial asset but
assumes a contractual obligation to pay the cash
flows to one or more recipients.
Where the Company has transferred an asset, the Company
evaluates whether it has transferred substantially all the
risks and rewards of the ownership of the financial assets.
In such cases, the financial asset is derecognised.
Where the entity has not transferred substantially all
the risks and rewards of the ownership of the financial
assets, the financial asset is not derecognised. Where the
Company has neither transferred a financial asset nor
retains substantially all risks and rewards of ownership
of the financial asset, the financial asset is derecognised
if the Company has not retained control of the financial
asset. Where the Company retains control of the financial
asset, the asset is continued to be recognised to the
extent of continuing involvement in the financial asset.
On derecognition of a financial asset measured at
amortised cost, the difference between the asset's
carrying amount and the sum of the consideration
received and receivable is recognised in profit or loss. In
addition , on derecognition of an investment in an equity
instrument which the company has elected on initial
recognition to measure at FVTOCI, the cumulative gain or
loss previously accumulated in a separate component of
equity is not reclassified to profit or loss, but is transferred
to retained earnings.
Impairment of financial assets
In accordance with IND AS 109, the Company applies
expected credit losses (ECL) model for measurement and
recognition of impairment loss on the following financial
asset and credit risk exposure;
• Financial assets measured at amortized cost;
• Financial assets measured at fair value through other
comprehensive income (FVTOCI);
For recognition of impairment loss on Loans to customers,
where no significant increase in credit risk [SICR] has
been observed, such assets are classified in “Stage 1" and
a 12 months ECL is recognized. Loans that are considered
to have significant increase in credit risk are considered
to be in “Stage 2" and those which are in default or for
which there is an objective evidence of impairment are
considered to be in “Stage 3". Lifetime ECL is recognized
for stage 2 and stage 3 Loans. At every reporting date, the
historical observed default rates are updated and changes
in the forward-looking estimates are analyzed.
To calculate ECL, the Company estimate the risk of a
default occurring on the financial instrument during its
expected life. ECLs are estimated based on the present
value of all cash shortfalls over the remaining expected
life of the financial asset i.e., the difference between
the contractual cash flows that are due to the Company
under the contract, and the cash flows that the Company
expects to receive are discounted at the yield of the last
completed quarter.
Further, for corporate portfolio, the Company’s credit
risk function also segregates loans with specific risk
characteristics based on trigger events identified using
sufficient and credible information available from internal
sources supplemented by external data. Loans that are
considered to have significant increase in credit risk are
considered to be in Stage 2 and those which are in
default or for which there is an objective evidence of
impairment are considered to be in “Stage 3". Lifetime
ECL is recognized for stage 2 and stage 3 Loans. For
further details refer to note 37.1.2.
For trade receivables and other financial assets, the
Company uses a provision matrix (simplified approach)
to determine impairment loss allowance on the portfolio
of receivables. The provision matrix is based on its
historically observed default rates and management
judgement/ estimates over the expected life of receivable.
ECL impairment loss allowance (or reversal) during the
period is recognized as income/ expense in the statement
of profit and loss. This amount is reflected under the head
‘Impairment on financial instruments’ in the Statement
of Profit and Loss. On the other side, for financial assets
measured as at amortized cost, ECL is presented as an
allowance, i.e., as an integral part of the measurement of
those assets in the balance sheet. The allowance reduces
the net carrying amount. Until the asset meets write¬
off criteria, the Company does not reduce impairment
allowance from the gross carrying amount.
In terms of the requirement as per RBI notification
no. RBI/DoR/2023-24/106 DoR.FIN.REC.
No.45/03.10.119/2023-24 dated 19th October, 2023
on Implementation of Indian Accounting Standards,
Non-Banking Financial Companies (NBFCs) are required
to create an impairment reserve for any shortfall in
impairment allowances under Ind AS 109 and Income
Recognition, Asset Classification and Provisioning (IRACP)
norms (including provision on standard assets).
The impairment allowances under Ind AS 109 made by
the company exceeds the total provision required under
IRACP (including standard asset provisioning), as at 31st
March, 2025 and accordingly, no amount is required to
be transferred to impairment reserve.
Write off policy:
Loans are written off when the Company has no reasonable
expectation of recovering the financial asset (either in
its entirety or a portion of it). A write off constitutes a
derecognition event.
The Company estimates such write off to get triggered
on accounts which are overdue for 191 days or more
from payment due date. Further, for certain commercial
accounts carrying specific provision and for certain
categories of retail accounts in Stage 3, where the
likelihood of recovery of the outstanding is remote, the
Company may trigger an early charge off. Recoveries
resulting from the Company’s enforcement activities will
result in other income.
Impairment of financial assets: A number of significant
judgements are also required in applying the accounting
requirements for measuring ECL such as;
• Establishing groups of similar financial assets for the
purposes of measuring ECL (Portfolio segmentation)
• Defining default
• Determining criteria for significant increase in
credit risk.
• Choosing appropriate models and assumptions for
measurement of ECL.
• Use of significant judgement in estimating future
economic scenario to calculate management overlay
over base ECL model.
Financial liabilities
The Company’s financial liabilities include debt securities,
borrowings, trade and other payables. Financial liabilities
are subsequently carried at amortized cost using the
effective interest rate method. Gains and losses are
recognised in Statement of Profit and Loss when the
liabilities are derecognised as well as through the EIR
amortisation process.
Amortised cost is calculated by taking into account
arranger fees, stamp duty fees, listing fees and other
expenses 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 of financial liabilities
A financial liability is derecognised when the obligation
under the liability is discharged or 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
derecognition of the original liability and the recognition
of a new liability. The difference in the respective carrying
amounts is recognised in the statement of profit and loss.
(II) Derivative financial instruments
The Company holds derivative financial instruments such
as foreign exchange forward contracts to mitigate the
risk of changes in exchange rates on foreign currency
exposures. The Company does not use derivative financial
instruments for speculative purposes. The counterparty
to the Company's foreign currency forward contracts is
generally a bank.
Derivatives are initially recognised at fair value at the
date the derivative contracts are entered into and are
subsequently re-measured to their fair value at the
end of each reporting period. The resulting gain or
loss is recognised in the Statement of Profit and Loss
immediately unless the derivative is designated and
effective as a hedging instrument, in which event the
timing of the recognition in the Statement of Profit and
Loss depends on the nature of the hedging relationship
and the nature of the hedged item.
Hedge accounting
At the inception of a hedge relationship, the Company
formally designates and documents the hedge relationship
to which the Company wishes to apply hedge accounting
and the risk management objective and strategy for
undertaking the hedge. The Company designates certain
foreign exchange forward contracts as cash flow hedges
to mitigate the risk of foreign exchange exposure on
booked exposures. The documentation includes the
Company’s risk management objective and strategy for
undertaking hedge, the hedging/ economic relationship,
the hedged item or transaction, the nature of the risk
being hedged, hedge ratio and how the entity will assess
the effectiveness of changes in the hedging instrument’s
fair value in offsetting the exposure to changes in the
hedged item’s fair value or cash flows attributable to the
hedged risk.
Cash flow hedge
Hedging instruments are initially measured at fair value
and are re-measured at subsequent reporting dates. The
Company designates only the change in fair value of the
forward contract related to the spot component as the
hedging instrument. The forward points of the currency
forward contracts are therefore excluded from the hedge
designation. The designated forward element is amortized
in profit or loss account over a systematic basis. The
change in forward element of the contract that relates
to the hedge item is recognised in other comprehensive
income in the cost of hedging reserve within equity.
Amounts accumulated in other comprehensive income
is reclassified to profit or loss in the period in which
the hedged item hits profit or loss. When a hedged
transaction occurs or is no longer expected to occur,
the net cumulative gain or loss recognized in cash flow
hedging reserve is transferred to the Statement of Profit
and Loss.
Hedge accounting is discontinued when the hedging
instrument expires, terminated, or exercised, without
replacement or rollover (as part of the hedging strategy),
or if its designation as a hedge is revoked, or when it
no longer qualifies for hedge accounting. Any gain or
loss recognised in Other Comprehensive Income and
accumulated in other equity at that time remains in other
equity and is recognised when the forecast transaction is
ultimately recognised in Statement of Profit and Loss.
Offsetting of financial instruments:
Financials 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 recognised
amounts and there is an intention to settle on a net basis, to
realize the assets and settle the liabilities simultaneously.
4.8. Leases
The determination of whether an arrangement is,
or contains, a lease is based on the substance of
the arrangement at the inception of the lease. The
arrangement is, or contains, a lease if fulfilment of the
arrangement is dependent on the use of an identified
asset or assets or the arrangement conveys a right to
use the asset or assets, even if that right is not explicitly
specified in an arrangement.
Company as a lessee
The Company’s lease asset classes primarily consist of
Computer server and Building. The Company assesses
whether a contract contains a lease, at inception of a
contract. A contract is, or contains, a lease if the contract
conveys the right to control the use of an identified asset
for a period of time in exchange for consideration. To
assess whether a contract conveys the right to control the
use of an identified asset, the Company assesses whether:
(i) the contract involves the use of an identified asset
(ii) the Company has substantially all of the economic
benefits from use of the asset through the period of
the lease and
(iii) t he Company has the right to direct the use of
the asset.
At the date of commencement of the lease, the
Company recognizes a right-of-use asset (“ROU") and a
corresponding lease liability for all lease arrangements in
which it is a lessee, except for leases with a term of twelve
months or less (short-term leases) and low value leases.
For these 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.
The Company accounts for each lease component
within the contract as a lease separately from non-lease
components of the contract in accordance with Ind AS
116 and allocates the consideration in the contract to
each lease component on the basis of the relative stand¬
alone price of the lease component and the aggregate
stand-alone price of the non-lease components.
Certain lease arrangements include the options to extend
or terminate the lease before the end of the lease term.
Lease term includes these options when it is reasonably
certain that they will be exercised. The right-of-use assets
are initially recognized at cost, which comprises the
initial amount of the lease liability adjusted for any lease
payments made at or prior to the commencement date
of the lease plus any initial direct costs less any lease
incentives. They are subsequently measured at cost less
accumulated depreciation and impairment losses.
Right-of-use assets are depreciated from the
commencement date on a straight-line basis over the
shorter of the lease term and useful life of the underlying
asset. Right of use assets are evaluated for recoverability
whenever events or changes in circumstances indicate
that their carrying amounts may not be recoverable. The
right-of-use assets is presented as a separate line item in
the balance sheet.
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.
The lease liability is initially measured at amortized cost at
the present value of the future lease payments. The lease
payments include fixed payments (including in-substance
fixed payments) less any lease incentives receivable,
variable lease payment that depends on index or a rate,
and amount to be paid under residual value guarantees.
The lease payments are discounted using the interest rate
implicit in the lease or, if not readily determinable, the
Company uses incremental borrowing rates.
The interest cost on lease liability (computed using
effective interest method), is expensed off in the statement
of profit and loss and the lease liability is subsequently
measured by increasing the carrying amount to reflect
interest on the lease liability (using the effective interest
method) and by reducing the carrying amount to reflect
the lease payments made.
The lease liability is presented as a separate line item in
the other financial liability as part of the balance sheet.
When the lease liability is remeasured, a corresponding
adjustment is made to the carrying amount of the ROU
asset, or is recorded in the income statement if the
carrying amount of the ROU asset has been reduced to nil.
4.9. Income-tax expense
Current Tax
The tax currently payable is based on taxable profit for
the year. Taxable profit differs from net profit as reported
in profit or loss because it excludes items of income or
expense that are taxable or deductible in other years
and it further excludes items that are never taxable
or deductible.
Current income tax, assets and liabilities are measured at
the amount expected to be paid to or recovered from the
taxation authorities in accordance with the Income Tax
Act, 1961 and the Income Computation and Disclosure
Standards (ICDS) enacted in India by using tax rates
prescribed therein. The tax rates and tax laws used
to compute the amount are those that are enacted or
substantively enacted, at the reporting date
Current income tax relating to item recognised outside the
statement of profit and loss is recognised outside profit
or loss (either in other comprehensive income or equity).
Current tax items are recognised in correlation to the
underlying transactions either in OCI or directly in equity.
Deferred Tax
Deferred tax is provided using the liability method on
temporary differences between the tax bases of assets
and liabilities and their carrying amounts for financial
reporting purposes at the reporting date. Deferred
tax liabilities are recognised for all taxable temporary
differences. Deferred tax assets are recognised to the
extent that it is probable that taxable profit will be available
against which the deductible temporary differences, and
the carry forward of unused tax credits and unused tax
losses can be utilised.
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 utilised. 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 realized, or the liability is settled, based on tax rates
(and tax laws) that have been enacted or substantively
enacted at the reporting date. Deferred tax relating to
items recognised outside the statement of profit and
loss is recognised outside the statement of profit and
loss (either in other comprehensive income or in equity).
Deferred tax items are recognised in correlation to the
underlying transaction either in OCI or direct in equity.
4.10. Foreign currency
Initial recognition
Foreign currency transactions are recorded on initial
recognition in the functional currency, using the exchange
rate prevailing at the date of transaction.
Measurement of foreign currency items at the
Balance sheet date.
Foreign currency monetary assets and liabilities
denominated in foreign currencies are translated at
the functional currency spot rates of exchange at the
reporting date.
Non-monetary items that are measured in terms of
historical cost in a foreign currency are translated using
the exchange rates at the dates of the initial transactions.
Non-monetary items measured at fair value in a foreign
currency are translated using the exchange rates at the
date when the fair value is determined.
Exchange differences
Exchange differences arising on settlement or translation
of monetary items are recognised as income or expense
in the period in which they arise with the exception of
exchange differences on gain or loss arising on translation
of non-monetary items measured at fair value which is
treated in line with the recognition of the gain or loss
on the change in fair value of the item i.e., translation
differences on items whose fair value gain or loss is
recognised in OCI or profit or loss are also recognised in
OCI or profit or loss, respectively.
Forward exchange contracts are entered into, to hedge
foreign currency risk of an existing asset/ liability.
The Company enters into derivative contracts in the
nature of forward contracts with an intention to hedge
its existing liabilities. Derivative contracts being financial
instruments not designated in a hedging relationship are
recognised at fair value with changes being recognised in
profit & loss account.
4.11. Employee benefits
Short-term employee benefits
Liabilities for wages and salaries, including non-monetary
benefits that are expected to be settled wholly within
twelve months after the end of the period in which the
employees render the related services are recognised in
respect of employee service upto the end of the reporting
period and are measured at the amount expected to be
paid when the liabilities are settled. the liabilities are
presented as current employee benefit obligations in the
balance sheet.
Liabilities recognised in respect of short-term employee
benefits are measured at the undiscounted amount of
the benefits expected to be paid in exchange for the
related service.
Other long-term employee benefit obligations
Gratuity
The Employee’s Gratuity Fund Scheme, which is defined
benefit plan, is managed by Trust maintained with SBI Life
insurance Company limited. The liabilities with respect
to Gratuity Plan are determined by actuarial valuation
on projected unit credit method on the balance sheet
date, based upon which the Company contributes to the
Company Gratuity Scheme. The difference, if any, between
the actuarial valuation of the gratuity of employees at
the year end and the balance of funds is provided for as
assets/ (liability) in the books. 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 under
Employee benefit expense in statement of profit or loss:
• Service costs comprising current service costs, past-
service costs, gains and losses on curtailments and
non-routine settlements
• Net interest expense or income
• Remeasurements, comprising of actuarial gains and
losses, the effect of the asset ceiling, excluding
amounts included in net interest on the net defined
benefit liability and the return on plan assets
(excluding amounts included in net interest on the net
defined benefit liability), are recognised immediately
in the Balance Sheet with a corresponding debit
or credit to retained earnings through OCI in the
period in which they occur. Remeasurements are not
reclassified to profit or loss in subsequent periods.
Provident fund
Retirement benefit in the form of provident fund is
a defined contribution scheme. the Company has no
obligation, other than the contribution payable to the
provident fund. The Company recognizes contribution
payable through provident fund scheme as an expense,
when an employee renders the related services. If the
contribution payable to scheme for service received
before the balance sheet date exceeds the contribution
already paid, the deficit payable to the scheme is
recognised as liability after deducting the contribution
already paid. If the contribution already paid exceeds the
contribution due for services received before the balance
sheet date, then excesses recognised as an asset to the
extent that the prepayment will lead to, for example, a
reduction in future payment or a cash refund.
Long Service Award
The Company’s long service award is defined benefit
plan. The present value of obligations under such defined
benefit plan is determined based on actuarial valuation
carried out by an independent actuary using the Projected
Unit Credit Method, which recognises each period of
service as giving rise to additional unit of employee
benefit entitlement and measure each unit separately to
build up the final obligation. Remeasurements, comprising
of actuarial gains and losses are recognised immediately
in the Balance Sheet at the end of each reporting period
with a corresponding debit or credit to the statement of
profit and loss in the period in which they occur.
The obligation is measured at the present value of
estimated future cash flows. The discount rates used
for determining the present value of obligation under
defined benefit plans, is based on the market yields
on Government securities as at Balance Sheet date,
having maturity periods approximating to the terms of
related obligations.
Compensated Absences
Accumulated leaves which is expected to be utilised
within next 12 months is treated as 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 and is discharge
by the year end. Liability in respect of compensated
absences becoming due or expected to be availed within
one year from the balance sheet date is recognized based
on undiscounted value of estimated amount required
to be paid or estimated value of benefit expected to
be availed by the employees. Liability in respect of
compensated absences becoming due or expected to be
availed more than one year after the balance sheet date
is estimated based on an actuarial valuation performed
by an independent actuary using the projected unit
credit method.
The Company has a policy on compensated absences
which is by way of accumulating compensated absences
arising during the tenure of the service is calculated by
taking into consideration of availment of leave. Liability
in respect of compensated absences becoming due or
expected to be availed within one year from the balance
sheet date is recognized based on undiscounted value
of estimated amount required to be paid or estimated
value of benefit expected to be availed by the employees.
Liability in respect of compensated absences becoming
due or expected to be availed more than one year after
the balance sheet date is estimated based on an actuarial
valuation performed by an independent actuary using the
projected unit credit method.
National pension scheme (NPS)
The Company makes contributions to National Pension
System (NPS), for qualifying employees. Under the
Scheme, the Company is required to contribute a specified
percentage of the payroll costs to NPS. The contributions
payable to NPS by the Company are at rates specified in
the rules of the schemes.
Employee stock Option Plan
Employees of the Company receive remuneration in
the form of equity settled instruments, for rendering
services over a defined vesting period. Equity instruments
granted are measured by reference to the fair value of the
instrument at the date of grant in accordance with Ind
AS 102.
The cost of equity-settled transactions is determined by
the fair value at the date when grant is made using an
appropriate valuation model. Grant date is the date at
which date at which the entity and the employee have
a shared understanding of the terms and conditions of
the arrangement. If some of the significant terms and
conditions of the arrangement are agreed on a date, with
the remainder of the terms and conditions agreed on a
date later than the beginning of vesting period, then grant
date considered is on that later date, when all of the terms
and conditions have been agreed.
The expense is recognized in the statement of profit and
loss with a corresponding increase to the share-based
payment reserve, a component of equity. The equity
instruments generally vest in a graded manner over the
vesting period. The fair value determined at the grant
date is expensed over the vesting period of the respective
tranches of such grants. Where the grant date occurs on a
date later than beginning of vesting period, the expense is
recognised from beginning of vesting period till reporting
date, by estimating the fair value of the equity instruments
at the end of the reporting period. Once the grant date
occurs, the Company revises the earlier estimate so that
the expense recognised for services received in respect
of the grant are ultimately based on the grant date fair
value of the equity instruments.
The cumulative expense recognised for equity-settled
transactions at each reporting date until the vesting
date reflects the extent to which the vesting period has
expired, and the Company's best estimate of the number
equity instruments that will ultimately vest.
The far value excludes the effect of service and non¬
market- based vesting conditions. The likelihood of the
conditions being met is assessed as part of the Company’s
best estimate of the number of equity instruments that
will ultimately vest. Details regarding the determination
of the fair value of equity-settled share based transactions
are set out in Note 42.
The impact of the revision of the original estimates, if any,
is recognized in Statement of Profit and Loss such that the
cumulative expense reflects the revised estimate, with a
corresponding adjustment to the equity-settled employee
benefits reserve.
4.12. Earnings per share
Basic earnings per share is computed using the weighted
average number of equity shares outstanding during the
year. Diluted earnings per share is computed using the
weighted average number of equity and dilutive potential
equity shares outstanding during the year, except where
the results would be anti-dilutive.
Basic earnings per equity share is computed by dividing
the net profit attributable to the equity holders of the
Company by the weighted average number of equity share
outstanding during the period. Diluted earnings per equity
share is computed by dividing the net profit attributable
to the equity holders of the Company by the weighted
average number of equity shares considered for deriving
basic earnings per equity share and also the weighted
average number of equity shares that could have been
issued upon conversion of all dilutive potential equity
shares. The dilutive potential equity shares are adjusted
for the proceeds receivable had the equity shares been
actually issued at fair value (i.e. the average market value
of the outstanding equity shares).
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