3. Material accounting policies
3.1 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 and there
exists reasonable certainty of its recovery.
A. Interest Income
Interest income on financial instrument is recognized
on a time proportion basis taking into account the
amount outstanding and the effective interest rate
applicable.
EIR method
Under Ind AS 109, interest income is recorded using the
effective interest rate method for all financial instruments
measured at an amortized cost. The EIR is the rate that
exactly discounts estimated future cash receipts
through the expected life of the financial instrument, or
when appropriate, a shorter period to the net carrying
amount of the financial asset.
The EIR (and therefore, the amortized cost of the asset)
is calculated by taking into account any discount or
premium on acquisition, fees and cost that are an
integral part of the EIR. The company recognizes interest
income using a rate of return that represents the best
estimate of a constant rate of return over the expected
life of financial instrument.
If expectations regarding the cash flow on the financial
assets are revised for reasons other than credit risk, the
adjustment is booked as a positive or negative
adjustment to the carrying amount of the asset in the
balance sheet with an increase or reduction in interest
income. The adjustment is subsequently amortized
through interest income in the statement of profit and
loss.
The company calculate the interest income by applying
EIR to the gross carrying amount of financial assets
other than credit impaired assets.
When a financial asset becomes credit impaired and is,
therefore, regarded as‘Stage-3', the company calculate
interest income on the net basis. If the financial asset
cures and is no longer credit impaired, the company
reverts to calculating interest income on gross basis.
B. Fee and Commission Income
Fee and commission income include fees other than
those that are an integral part of EIR. The company
recognizes the fee and commission income in
accordance with the terms of the relevant contracts /
agreements and when it is probable that the Company
will collect the consideration.
C. Other Income
Other Income represents income earned from the
activities incidental to the business and is recognized
when the right to receive the income is established as
per the terms of the contract. During the current year
the other income predominantly consist of online
(through company's website) marketing and branding
of some parties.
D. Income from Transfers through direct assignment
transaction
The Company transfers loans through direct assignment
transactions. The transferred loans are derecognised,
and gains/losses are accounted for, only if the Company
transfers substantially all risks and rewards specified in
the underlying assigned loan contract. In accordance
with the Ind AS 109, on derecognition of a financial
asset under assigned transactions, the difference
between the carrying amount and the consideration
received are recognised in the Statement of Profit and
Loss.
3.2 Financial instrument-initial recognition
A. Date of recognition
Financial assets and liabilities, with the exception of
loans, debt securities, deposits and borrowings are
initially recognized on the trade date, i.e., the date that
the company becomes a party to the contractual
provisions of the instrument. Loans are recognized
when fund transfer is initiated, or disbursement cheque
is issued to the customer. The Company recognizes
debt securities, deposits and borrowings when funds
are received by the Company.
B. Initial measurement of financial instruments
The classification of financial instruments at initial
recognition depends on their purpose and characteristics
and the management's intention when acquiring them.
All financial assets are recognized initially at fair value
plus, in the case of financial assets not recorded at fair
value through profit or loss, transaction costs that are
attributable to the acquisition of the financial asset.
C. Measurement categories of financial assets and
liabilities
The company classifies all of its financial assets based
on the business model for managing the assets and the
asset's contractual terms, measured at amortized cost.
3.3 Financial assets and liabilities
A. Financial assets
Business model assessment
The company determines its business model at the
level that best reflects how it manages group of financial
assets to achieve its business objective.
The company's business model is not assessed on an
instrument-by-instrument basis; but at a higher level
of aggregated portfolio and is based on observable
factors such as: -
a) How the performance of the business model and the
financial assets held within that business model are
evaluated and reported to the company's key
management personnel.
b) The risk that affects the performance of the business
model (and the financial assets held within that
business model) and in particular, the way those risks
are managed.
c) The expected frequency, value and timing of sales
are also important aspects of the company's assessment
SPPI test (Solely Payment of Principal and Interest)
As a second step of its classification process, the company
assesses the contractual terms of financial asset to
identify whether they meet SPPI test.
Principal for the purpose of this test is defined as the fair
value of the financial asset at initial recognition and may
change over the life of financial assets (for example, if
there are repayments of principal or amortization of the
premium/discount).
The most significant elements of interest within a
lending arrangement are typically the consideration for
the time value of money and credit risk. To make the
SPPI assessment, the company applies judgment and
considers relevant factors such as the period for which
the interest rate is set.
In contrast, contractual terms that introduce a more than
de minims exposure to risks or volatility in the contractual
cash flows that are unrelated to a basic lending
arrangement that do not give rise to contractual cash
flows that are solely payments of principal and interest
on the amount outstanding. In such cases, the financial
asset is required to be measured at FVTPL.
Accordingly, financial assets are measured as follows:
I) Financial assets carried at amortized cost (AC)
A ‘Financial asset' is measured at the amortised cost if
both the following conditions are met:
The asset is held within a business model whose objec¬
tive is to hold assets for collecting contractual cash flows,
and Contractual terms of the asset give rise on specified
dates to cash flows that are solely payments of principal
and interest (SPPI) on the principal amount outstanding.
After initial measurement, such financial assets are
subsequently measured at amortised cost using the
effective interest rate (EIR) method less impairment.
Amortised cost is calculated by taking into account any
discount or premium on acquisition and fees or costs that
are an integral part of the EIR. The EIR amortisation is
included in interest income in the statement of profit or
loss. The losses arising from impairment are recognised
in the statement of profit and loss.
II) Financial assets at fair value through other
comprehensive income (FVTOCI)
A ‘Financial asset' is classified as at the FVTOCI if both of
the following criteria are met:
The objective of the business model is achieved both by
collecting contractual cash flows and selling the financial
assets, and the asset's contractual cash flows represent SPPI.
Financial assets included within the FVTOCI category are
measured initially as well as at each reporting date at fair
value. Fair value movements are recognized in the other
comprehensive income (OCI). However, the Company
recognizes interest income, impairment losses &
reversals and foreign exchange gain or loss in the P&L.
On de-recognition of the asset, cumulative gain or loss
previously recognised in OCI is reclassified from the
equity to P&L. Interest earned whilst holding FVTOCI
financial asset is reported as interest income using the
EIR method.
III) FVTPL is a residual category for debt financial
asset.
Any financial assets, which does not meet the criteria for
categorization as at amortized cost or as FVTOCI, is
classified as at FVTPL. In addition, the company may
elect to designate a financial asset, which otherwise
meets amortized cost or FVTOCI criteria, as at FVTPL.
However, such election is allowed only if doing so
reduces or eliminates a measurement or recognition
inconsistency (referred to as ‘accounting mismatch').
Financial asset included within the FVTPL category are
measured at fair value with all changes recognized in the P&L
Financial assets: subsequent measurement and
gains and losses
I) Financial assets at fair value through profit and
loss (FVTPL)
These assets are subsequently measured at fair value.
Net gains and losses, including any interest or dividend
income, are recognized in statement of profit or loss.
II) Financial assets carried at amortized cost (AC)
These assets are subsequently measured at amortized cost
using the effective interest method. The amortized cost is
reduced by impairment losses. Interest income, foreign
exchange gains and losses and impairments are recognized
in statement of profit and loss. Any gains and losses on de
recognition is recognized in statement of profit and loss.
B. Financial liability
I) Initial recognition and measurement
Financial liabilities are classified and measured at
amortised cost or FVTPL. A financial liability is classified
as at FVTPL if it is classified as held-for trading or it is
designated as on initial recognition. All financial liabilities
are recognised initially at fair value and, in the case of
loans and borrowings and payables, net of directly
attributable transaction costs. The company's financial
liabilities include trade and other payables, loans and
borrowings including bank overdrafts and derivative
financial instruments.
II) Subsequent measurement
Financial liabilities are carried at amortized cost using the
effective interest method.
3.4 Reclassification of financial assets and liabilities
The company does not reclassify its financial assets
subsequent to their initial recognition, apart from the
exceptional circumstances in which the Company
acquires, disposes of, or terminates a business line.
Financial liabilities are never reclassified. The company
did not reclassify any of its financial assets or liabilities in
the year ended 31st March 2025
3.5 De-recognition of financial assets and liabilities
A. De-recognition of financial assets due to
substantial modification of terms and conditions.
The company derecognizes a financial asset, such as a
loan to a customer, when the terms and conditions have
been renegotiated to the extent that, substantially it
becomes a new loan, with the difference recognized as a
de-recognition gain or loss, to the extent that an
impairment loss has not already been recorded. The
newly recognized loans are classified as Stage 1 for ECL
measurement purposes.
B. De-recognition of financial Instruments other
than due to substantial modification
I) Financial assets
A financial asset (or, where applicable, a part of a finan¬
cial asset or part of a group of similar financial assets) is
derecognized when the contractual right to the cash
flow from the financial assets expire or it transfers the
rights to receive the contractual cash flows in a
transaction in which substantially all the risks and
rewards of ownership are transferred and it does not
retain control of the financial asset.
On de-recognition of a financial asset in its entirety, the
difference between the carrying amount (measured at
the date of de-recognition) and the consideration
received (including any new asset obtained less any new
liability assumed) is recognized in the statement of profit
and loss.
Accordingly, gain on sale or de-recognition of assigned
portfolio are recorded upfront in the statement of profit
and loss as per Ind AS 109. Also, the company recognizes
servicing income as a percentage of interest spread over
tenure of loan in cases where it retains the obligation to
service the transferred financial asset.
II) Financial liability
A financial liability is derecognized when the obligation
under the liability is discharged, cancelled or expires.
Where 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 a
de-recognition of the original liability and the recognition
of a new liability. The difference between the carrying
value of the original financial liability and the
consideration paid is recognized in the statement of
profit and loss.
3.6 Impairment of financial assets
A. Overview of ECL principles
In accordance with Ind AS 109, the company uses ECL
model, for evaluating impairment of financial assets
other than those measured at fair value through profit
and loss (FVTPL) Expected credit losses are measured at
fair value through a loss allowance at an amount equal to:
i) the 12 months expected credit losses that result from
those default events on the financial instrument that are
possible within 12 months after the reporting date or,
ii) Full lifetime expected credit losses that result from all
possible default events over the life of the financial
instrument.
The Company measures ECL on an individual basis, or on
a collective basis for portfolios of loans that share similar
economic risk characteristics. The measurement of the
loss allowance is based on the present value of the asset
expected cash flows using the asset's original EIR,
regardless of whether it is measured on an individual
basis or a collective basis.
Based on the above, the company categorizes its loans
into stage 1, stage 2 and stage 3, as described below:
Stage 1:
When loans are first recognized, the company recognizes
an allowance based on 12 months ECL. Stage 1 (loans
which are current (on time) or past due for less than or
equal to 30 days) loans include those loans where there
is no significant credit risk observed and also includes
facilities where the credit risk has been improved, and
the loan has been reclassified from stage 2 or stage 3.
Stage 2:
When a loan (loans which are past due for more than 30
days and less than or equal to 90 days) has shown a
significant increase in credit risk since origination, the
company recreates an allowance for the lifetime ECL.
Stage 2 loans also include facilities where the credit risk
has improved, and the loan has been reclassified from
stage 3.
Stage 3:
Loans considered credit impaired is the loans which are
past due for more than 90 days. The company records an
allowance for lifetime ECL.
Loan commitments:
When estimating ECL for undrawn loan commitments,
the company estimates the expected portion of the loan
commitment that will be drawn down over its expected
life. The ECL is then based on the present value of the
expected shortfalls in cash flows if the loan is drawn
down.
The mechanics of ECL calculations are outlined
below and the key elements are as follows:
PD:
Probability of default (“PD”) is an estimate of the
likelihood of default over a given time horizon. A default
may only happen at a certain time over the assessed
period, if the facility has not been previously derecog¬
nized and is still in the portfolio.
EAD:
Exposure at default (“EAD”) is an estimate of the expo¬
sure at a future default date, taking into account expect¬
ed changes in the exposure after the reporting date,
including repayment of principal and interest.
LGD:
Loss given default (“LGD”) is an estimate of the loss
arising in the case where a default occurs at a given time.
It is based on the difference between the contractual
cash flows due and those that the lender would expect
to receive, including from the realization of any collateral.
It is usually expressed as a percentage of the EAD.
The company has calculated PD, EAD and LGD to
determine impairment loss on the portfolio of loans and
discounted at an approximation to the EIR. At every
reporting date, the above calculated PDs, EAD and LGDs
are re-viewed and changes in the forward-looking
estimations are analysed.
The mechanics of the ECL method are summarized
below:
Stage 1:
The 12 months ECL is calculated on the portion of ECL
that represent the ECLs that result from default events
on a financial instrument that are possible within 12
months after the reporting date. The company calculates
the 12 months following the reporting date. These
expected 12 months default probabilities are applied to
forecast EAD and multiplied by the expected LGD and
discounted by an approximation to the original EIR.
Stage 2:
When a loan has shown a significant increase in credit
risk since origination (if financial asset is more than 30
days past due), the company records an allowance for
the LTECLs. The mechanics are similar to those explained
above, but PDs and LGDs are estimated over the lifetime
of the instrument. The expected cash shortfalls are
discounted by an approximation to the original EIR.
Stage 3:
For loans considered credit impaired (if financial asset is
more than 90 days past due), the company recognizes
the lifetime expected credit losses for these loans. The
method is similar to that for stage 2 assets, with the PD
set at 100%.
B. Loans and advances measured at FVTOCI
The ECLs for loans and advances measured at FVTOCI do
not reduce the carrying amount of these financial assets
in the balance sheet, which remains at fair value. Instead,
an amount equal to the allowance that would arise if the
assets were measured at amortized cost is recognized in
OCI as an accumulated impairment amount, with a
corresponding charge to profit or loss. The accumulated
loss recognized in OCI is recycled to the profit and loss
upon de-recognition of the assets.
C. Forward looking information
While estimating the expected credit losses, the company
reviews macro-economic developments occurring in the
economy and market it operates in. On a periodic basis,
the Company analyses if there is any relationship
between key economic trends like GDP, Property Price
Index, Unemployment rates, Benchmark rates set by the
Reserve Bank of India, inflation etc. with the estimate of
PD, LGD determined by the Company based on its internal
data. While the internal estimates of PD, LGD rates by
the Company may not be always reflective of such
relationships, temporary overlays are embedded in the
methodology to reflect such macro-economic trends
reasonably.
3.7 Presentation of allowance for expected credit
losses in the balance sheet
Loss allowance for financial assets measured at
amortized cost are deducted from the gross carrying
amount of the assets.
3.8 Write-offs
Financial assets are written off when the company has
stopped pursuing recovery. If the amount to be written
off is greater than the accumulated loss allowance,
difference is first treated as an addition to the allowance
that is then applied against the gross carrying amount.
Any subsequent recoveries are credited to impairment
on financial instruments in the statement of profit and
loss.
3.9 Determination of fair value
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 participation at the
measurement date, regardless of whether that price is
directly observable or estimated using another valuation
technique. In estimating the fair value of an asset or
liability, the company has taken into account
characteristics of the asset or liability if market
participants would take those characteristics into
account when pricing the asset or liability at the
measurement date.
Fair value measurements under Ind AS are categorised
into fair value hierarchy based on the degree to which
the inputs to the fair value measurements are observable
and the significance of the inputs to the fair value
measurement in its entirety, which are described as
follows:
- Level 1 quoted prices (unadjusted) in active markets
for identical assets or liabilities that the Company
can access on measurement date.
- Level 2 inputs, other than quoted prices included
within Level 1, that are observable for the asset or
liability, either directly or indirectly; and
- Level 3 where unobservable inputs are used for the
valuation of assets or liabilities.
3.10 Property, plant and equivalent
I. Recognition and measurement
Items of property, plant and equipment are measured at
cost, which includes capitalized borrowing costs, less
accumulated depreciation and accumulated impairment
losses, if any. Cost of an item of property, plant and
equipment comprises its purchase price, including import
duties and non-refundable purchase taxes, after deducting
trade discounts and rebates, any directly attributable
cost of bringing the item to its working for its intended
use and estimated costs of dismantling and removing
the item and restoring the site on which it is located.
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.
Any gain or loss on disposal of an item of property, plant
and equipment is recognized in profit and loss.
II. Subsequent expenditure
Subsequent expenditure is capitalized only if it is probable
that the future economic benefits associated with the
expenditure will flow to the company.
III. Depreciation
Depreciation is calculated on cost of items of property,
plant and equipment less their estimated residual values
over their estimated useful lives using the Written down
value method and is recognized in the statement of
profit and loss.
The company follows estimated useful lives which are
given under Part C of the schedule II of the Companies
Act, 2013. The estimated useful lives of items of property,
plant and equipment for the current and comparative
periods are as follows:
IV Non-Current Asset held for sale
The company classifies non-current assets or disposal
groups as held for sale if their carrying amounts will be
recovered principally through a sale transaction rather
than through continuing use. This classification is made
when the following criteria are met:
- The asset (or disposal group) is available for immediate
sale in its present condition, subject only to terms
that are usual and customary for sales of such assets;
- The sale is highly probable, with management
committed to a plan to sell the asset;
- An active program to locate a buyer and complete
the sale plan has been initiated;
- The asset is actively marketed for sale at a price that
is reasonable in relation to its current fair value; and
- The sale is expected to qualify for recognition as a
completed sale within one year from the date of
classification.
Once classified as held for sale, non-current assets (or
disposal groups) are measured at the lower of their
carrying amount and fair value less costs to sell.
Depreciation (or amortisation) on such assets ceases
from the date they are classified as held for sale. Assets
and liabilities classified as held for sale are presented
separately in the balance sheet under current assets and
current liabilities, respectively.
If the criteria for classification as held for sale are no
longer met, the Group ceases to classify the asset (or
disposal group) as held for sale. The asset is then
measured at the lower of:
- Its carrying amount before the asset (or disposal
group) was classified as held for sale, adjusted for any
depreciation, amortisation, or revaluations that would
have been recognized had the asset not been classified
as held for sale; and
- Its recoverable amount at the date of the subsequent
decision not to sell.
V Capital Work-in-Progress
Capital Work-in-Progress (CWIP) represents costs
incurred on assets that are under development and are
not yet ready for their intended use as at the reporting
date. This includes expenditure on intangible assets
under development, such as software. Expenditure
directly attributable to the acquisition or development of
an asset is capitalised as part of the cost of the asset
when it is probable that future economic benefits
associated with the asset will flow to the Company and
the cost of the asset can be measured reliably. Software
under development is also included under CWIP until the
development is complete and the software is ready for
its intended use. Upon completion, the cost is transferred
to Intangible Assets. Expenditure that does not meet the
recognition criteria under Ind AS 38 is charged to the
Statement of Profit and Loss. During the year, software
development expenditure of Rs. 213.56 lakhs were
reflected under CWIP as on the balance sheet date, out
of which Rs. 171.33 lakhs were capitalised to Intangible
Assets - Jaguar Software, and the balance of Rs. 42.23
lakhs were charged to the Statement of Profit and Loss.
3.11 Intangible assets
I. Recognition and measurement
Intangible assets include those acquired by the company
are initially measured at cost. Such intangible assets are
subsequently measured at cost less accumulated
mortization and any accumulated impairment losses.
II. 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, is recognized in profit or loss as incurred.
III. Amortization
Amortization is calculated to write off the cost of
intangible assets less their estimated residual values
over their estimated useful lives using the straight-line
method and is included in depreciation and amortization
in statement of profit and loss.
Amortization method, useful lives and residual values
are reviewed at the end of each financial year and
adjusted if appropriate.
3.12 Impairment of non-financial assets
The Company determines periodically whether there is
any indication of impairment in the carrying amount of
its non-financial assets. The recoverable amount (higher
of net selling price and value in use) is determined for an
individual asset, unless the asset does not generate cash
inflow that are largely independent of those from other
assets or group of assets. The recoverable amount of
such assets is estimated, if any indication exists and
impairment loss is recognized wherever the carrying
amount of the asset exceeds its recoverable amount.
Where it is not possible to estimate the recoverable
amount of an individual asset, the company estimates
the recoverable amount of the cash-generating unit to
which the asset belongs.
3.13 Employee benefits
I. Post employee benefits
Defined contribution plan
The Company's contribution to provident fund is
considered as defined contribution plan and is charged as
an expense as they fall due based on the amount of
contribution required to be made and when the services
are rendered by the employees.
Gratuity
A defined benefit plan is a post-employment benefit plan
other than a defined contribution plan. The Company's
net obligation in respect of defined benefit plans is
calculated separately for each plan by estimating the
amount of future benefit that employees have earned in
the current and prior periods, discounting that amount
and deducting the fair value of any plan assets. The
calculation of defined obligation is performed annually
by a qualified actuary using the projected unit credit
method. When the calculation results in a potential asset
for the Company, the recognized asset is limited to the
present value of economic benefits available in the form
of any future refunds from the plan or reductions in
future contributions to the plan (‘the asset celling') In
order to calculate the present value of economic benefits
consideration is given to any minimum funding
requirements.
Re-measurements of the net defined benefit liability,
which comprise actuarial gains and losses and the effect
of the asset ceiling (if any ,excluding interest ) are
recognized is OCI The Company Determines the net
interest expense (income) on the net defined benefit
liability (asset) for the period by applying the discount
rate used to measure the defined benefit obligation at
the beginning of the annual period to the then net
defined benefit liability (asset) taking into account any
changes in the net defined benefit liability (asset) during
the period as a result of contributions and benefit
payments . Net interest expense and other expenses
related to defined benefit plans are recognized in profit
and loss.
When the benefits of a plan are changed or when a plan
is curtailed, the resulting change in benefit that relates to
past services (‘past service cost or' past service gain) or
the gain or loss on curtailment is recognized gains and
losses on the settlement of a defined benefit plan when
the settlement occurs.
Short term employee benefit
The undiscounted amount of short-term employee
benefits expected to be paid in exchange for the services
rendered by employees are recognized during the year
when the employees render the service. These benefits
include performance incentive which are expected to
occur within 12 months after the end of the year in which
the employee renders the related service.
Share-based payments
Estimating fair value for share-based payment
transactions requires determination of the most
appropriate valuation model, which is dependent on the
terms and conditions of the grant. This estimate also
requires determination of the most appropriate inputs to
the valuation model including the expected life of the
share option, volatility and dividend yield and making
assumptions about them.
The fair value of the options determined at grant date is
accounted as employee compensation cost over the
vesting period on a straight-line basis over the period of
option, based on the number of grants expected to vest,
with corresponding increase in equity. On cancellation or
lapse of option granted to employees, the compensation
cost charged to statement of profit & loss is credited
with corresponding decrease in equity.
The dilutive effect of outstanding options is reflected as
additional share dilution in the computation of diluted
earnings per share.
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