2A. Material Accounting Policies
(1) Statement of compliance
The financial statements have been prepared in accordance with the provisions of the Companies Act, 2013 and the Indian
Accounting Standards (Ind AS) notified under the Companies (Indian Accounting Standards) Rules, 2015 (as amended from time to
time) issued by the Ministry of Corporate Affairs in exercise of the powers conferred by Section 133 of the Companies Act, 2013. In
addition, the guidance notes/ announcements issued by the Institute of Chartered Accountants of India (ICAI) are also applied along
with compliance with other statutory promulgations which require a different treatment. Any directions issued by the RBI or other
regulators are implemented as and when they become applicable.
The Company has complied with the disclosures as required by the Master Direction - Reserve Bank of India (Non-Banking
Financial Company - Scale Based Regulation) Directions, 2023 issued by the Reserve Bank of India (RBI) vide their Notification No.
RBI/DoR/2023-24/106 DoR.FIN.REC.No.45/03.10.119/2023-24 dated October 19, 2023, as updated on March 21, 2024.
Accounting policies have been consistently applied except where a newly issued accounting standard is initially adopted or a
revision to the existing accounting standard requires a change in the accounting policy hitherto in use.
(2) Basis of preparation
The financial statements have been prepared on a historical cost convention on the accrual basis except for certain financial
instruments which are measured at fair values as at the end of each reporting period as explained in the accounting policies below.
Historical cost is generally based on the fair value of the consideration given in exchange for goods and services. 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, regardless of whether that price is directly observable or estimated using another valuation technique.
In estimating the fair value of an asset or a liability, the Company considers the 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 for
measurement and/ or disclosure purposes in these financial statements is determined on this basis.
Fair value measurements are categorised into Level 1, 2, or 3 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.
• Level 1: Level 1 hierarchy includes financial instruments measured using quoted prices;
• Level 2: The fair value of financial instruments that are not traded in an active market is determined using valuation techniques
which maximise the use of observable market data and place limited reliance on entity specific estimates. If all significant
inputs required to fair value an instrument are observable, the instrument is included in level 2; and
• Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.
(3) Presentation of financial statements
The Balance Sheet, the Statement of Changes in Equity and the Statement of Profit and Loss are prepared and presented in the
format prescribed in the Division III to Schedule III to the Companies Act, 2013 (the 'Act') applicable for Non-Banking Financial
Companies (“NBFC”). The Statement of Cash Flows has been prepared and presented as per the requirements of Ind AS 7,
Statement of Cash Flows. The disclosure requirements with respect to items in the Balance Sheet and Statement of Profit and Loss,
as prescribed in Division III of Schedule III to the Act, are presented by way of notes forming part of the financial statements along
with the other notes required to be disclosed under the notified accounting standards and the Stock Exchange Board of India (Listing
Obligations and Disclosure Requirements) Regulations, 2015, as amended from time to time.
(4) Functional and presentation currency
These financial statements are presented in Indian rupees (Rs.) which is also the Company's functional currency. All accounts are
rounded-off to the nearest lakh with two decimals, unless otherwise stated.
(5) Use of estimates and judgements
The preparation of financial statements in conformity with Ind AS requires management to make estimates, judgements and
assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities (including contingent
liabilities) and disclosures as of the date of the financial statements and the reported amounts of revenue and expenses for the
reporting period. Actual results could differ from these estimates. Accounting estimates and underlying assumptions are reviewed
on an ongoing basis and could change from period to period. Appropriate changes in estimates are recognised in the periods
in which the Company becomes aware of the changes in circumstances surrounding the estimates. Any revisions to accounting
estimates are recognised prospectively in the period in which the estimate is revised and future periods.
(6) Key accounting judgements and key sources of estimation uncertainty
The preparation of financial statements in conformity with Ind AS requires that the management of the Company makes estimates
and assumptions that affect the reported amounts of income and expenses of the period, the reported balances of assets and
liabilities and the disclosures relating to contingent liabilities as of the date of the financial statements. The estimates and underlying
assumptions are reviewed on an ongoing basis. Revisions to accounting estimates include useful lives of property, plant and
equipment and intangible assets, expected credit loss on loan books, future obligations in respect of retirement benefit plans, fair
value measurement etc. Difference, if any, between the actual results and estimates is recognised in the period in which the results
are known.
2B. Other Accounting Policies:
(1) Revenue recognition
Revenue (other than those items to which Ind AS 109, Financial Instruments is applicable) is measured based on the consideration
specified in the contracts with the customers. Amounts disclosed as revenue are net of goods and services tax ('GST') and amounts
collected on behalf of third parties. Ind AS 115, Revenue from Contracts with Customers outlines a single comprehensive model of
accounting for revenue arising from contracts with customers.
The Company recognizes revenue from contracts with customers based on a five-step model as set out in Standard.
Specific policies for the Company's different sources of revenue are explained below:
(a) Interest income:
Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the Company and
the amount of income can be measured reliably. Interest income is accrued on a time proportionate basis, by reference to the
principal outstanding and at the effective interest rate applicable. The effective interest rate is the rate that exactly discounts
the estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount on initial
recognition.
The interest income is calculated by applying the Effective Interest Rate (EIR) Method to the gross carrying amount of non¬
credit impaired financial assets (i.e. at the amortised cost of the financial asset before adjusting for any expected credit loss
allowance). For credit-impaired financial assets the interest income is calculated by applying the Effective Interest Rate (EIR)
Method to the amortised cost of the credit-impaired financial assets (i.e. the gross carrying amount less the allowance for
expected credit losses (ECLs)).
(b) Other financial charges:
Cheque bouncing charges, pre- payment charges, foreclosure charges and initial margin money etc. are recognised on a point-
in-time basis and are recorded when realised, since the probability of collecting such monies is established when the customer
pays.
(c) Dividend income:
Dividend Income is recognised once the unconditional right to receive the dividend is established (provided that it is probable
that the economic benefits will flow to the Company and the amount of income can be measured reliably).
(d) Net gain or loss on fair value change:
Any differences between the fair values of the financial assets classified as fair value through the profit or loss, held by the
Company on the balance sheet date is recognised as an unrealised gain/ loss in the statement of profit and loss. In cases there
is a net gain in aggregate, the same is recognised 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.
(e) Advisory fees and other income:
Advisory fees and Other Income are recognised when services are provided and it is highly probable that a significant reversal
of revenue is not expected to occur. The Company recognises such revenue from contracts with customers based on a five-
step model as set out in Ind AS 115.
(f) Income from de-recognition of assets:
Gains arising out of de-recognition transactions comprise the difference between the interest on the loan portfolio and the
applicable rate at which the transaction is entered into with the transferee, also known as the right of excess interest spread
(EIS). The future EIS basis the scheduled cash flows on execution of the transaction, discounted at the applicable rate entered
into with the transferee is recorded upfront in the statement of profit and loss. EIS is evaluated and adjusted for ECL and
expected prepayment.
(2) Property, plant and equipment (PPE)
Tangible property, plant and equipment are stated at cost less accumulated depreciation and impairment, if any. The cost of an
item of property, plant and equipment is recognised if it is probable that future economic benefits associated with the item will flow
to the company and the cost thereof can be measured reliably. All property, plant and equipment are initially recognised at cost.
Cost comprises the purchase price and any directly attributable cost to bring the asset to its working condition for its intended use.
Subsequent expenditure incurred on assets put to use is capitalised only when it increases the future economic benefits/ functioning
capability from/ of such assets. Advances paid towards acquisition of property, plant and equipment, outstanding at each balance
sheet date is classified as capital advances under other non-financial assets and the cost of assets not put to use before such date
are disclosed under Capital work-in-progress.
Depreciation is recognised so as to write-off the cost of assets less their residual values over their useful lives, using the straight-line
method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each financial year, with
the effect of any changes in estimate accounted for on a prospective basis. Assets purchased during the year are depreciated on
the basis of actual number of days the asset has been put to use in the year. Assets individually costing Rs. 5,000 or less are fully
depreciated in the year of purchase.
Changes in the expected useful life are accounted for by changing the depreciation period or methodology, as appropriate and
treated as changes in accounting estimates.
The management believes that these estimated useful lives are realistic and reflect fair approximation of the period over which the
assets are likely to be used.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise
from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment
is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in the statement
of profit and loss.
(3) Intangible assets
Intangible assets are recognised when it is probable that the future economic benefits that are attributable to the asset will flow
to the enterprise and the cost of the asset can be measured reliably. Intangible assets are stated at original cost net of tax/ duty
credits availed, if any, less accumulated amortization, and cumulative impairment. Direct expenses (including salary costs) and
administrative and other general overhead expenses that are specifically attributable to acquisition of intangible assets are allocated
and capitalised as a part of the cost of the intangible assets.
Intangible assets not ready for the intended use on the date of the balance sheet are disclosed as Intangible assets under
development.
Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortisation and
accumulated impairment losses. Amortisation is recognised on a straight-line basis over their estimated useful lives. The estimated
useful life and amortisation method are reviewed at the end of each financial year, with the effect of any changes in estimate being
accounted for on a prospective basis.
The estimated useful life of Softwares is considered as 5 years.
An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or disposal. Gains or
losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the
carrying amount of the asset, and are recognised in the statement of profit or loss when the asset is derecognised.
(4) Impairment of tangible and intangible assets
The Company assesses at each balance sheet date whether there is any indication that an asset may be impaired. If any such
indication exists, the Company estimates the recoverable amount of the asset.
The recoverable amount is the higher of an asset's net selling price and its value in use. If such recoverable amount of the asset or
the recoverable amount of the cash generating unit to which the asset belongs is less than its carrying amount, the carrying amount
is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognised in the statement of profit
and loss. A previously recognised impairment loss is increased or reversed depending on changes in circumstances. However, the
carrying value after reversal is not increased beyond the carrying value that would have prevailed by charging usual depreciation/
amortisation if there were no impairment.
(5) Leases
The Company follows Ind AS 116, Leases for accounting for contracts which are in the nature of leases. Lease liabilities are
measured at the present value of the contractual payments due to the lessor over the lease term, with the discount rate determined
by reference to the rate inherent in the lease unless (as is typically the case) this is not readily determinable, in which case the
Company's incremental borrowing rate on commencement of the lease is used. Variable lease payments are only included in the
measurement of the lease liability if they depend on an index or rate. In such cases, the initial measurement of the lease liability
assumes the variable element will remain unchanged throughout the lease term. Other variable lease payments are expensed in
the period to which they relate.
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.
Company as a lessee
The Company accounts for each lease component within the contract as a lease separately from non-lease components of the
contract 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.
The Company recognises right-of-use asset representing its right to use the underlying asset for the lease term at the lease
commencement date. The right-of-use assets are depreciated using the straight-line method from the commencement date over
the lease term. Right-of-use assets are tested for impairment whenever there is any indication that their carrying amounts may not
be recoverable. Impairment loss, if any, is recognised in the statement of profit and loss.
The Company measures the lease liability at the present value of the lease payments that are not paid at the commencement date
of the lease. The lease liability is subsequently remeasured by increasing the carrying amount to reflect interest on the lease liability,
reducing the carrying amount to reflect the lease payments made and remeasuring the carrying amount to reflect any reassessment
or lease modifications or to reflect revised in-substance fixed lease payments.
The Company recognises the amount of the re-measurement of lease liability as an adjustment to the right-of-use asset. Where the
carrying amount of the right-of-use asset is reduced to zero and there is a further reduction in the measurement of the lease liability,
the Company recognises any remaining amount of the re-measurement in the statement of profit and loss.
The Company has elected not to apply the requirements of the Standard to short-term leases of all assets that have a lease term of
12 months or less and leases for which the underlying asset is of low value. The lease payments associated with these leases are
recognized as an expense on a straight-line basis over the lease term.
Finance lease
The Company does not have leases that were classified as finance leases. Hence, there is no impact on application of this standard.
As a lessor
The Company does not have any lease agreement in which it is a lessor. Hence, there is no impact on application of this standard.
(6) Income taxes
Income tax expense represents the sum of the tax currently payable, deferred tax and any excess/ short provision of earlier years.
(a) Current tax
Current Tax is determined at the amount of tax payable in respect of taxable profit for the year as per the Income tax Act, 1961.
Taxable profit differs from 'profit before tax' as reported in the financial statement of profit and loss because of items of income
or expense that are taxable or deductible in other years and items that are never taxable or deductible. The entity's current tax is
calculated using tax rate that has been enacted by the end of the reporting period.
(b) Deferred tax
Deferred tax is recognised 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 are generally recognised for all
taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent
that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised.
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 realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting
period.
The measurement of deferred tax liabilities and assets reflect the tax consequences that would follow from the manner in which the
Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set-off the current income tax assets
against the current income tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.
(c) Current and deferred tax for the year
Current and deferred tax are recognised in the statement of profit and loss, except when they relate to items that are recognised
in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other
comprehensive income or directly in equity respectively.
(d) Minimum alternate tax (MAT)
Minimum alternate tax (MAT) paid in accordance with the tax laws, is recognised as an asset in the balance sheet when it is
probable that the future economic benefits associated with it will flow to the Company.
(7) Employee Benefits
(a) Retirement benefit costs and termination benefits
Defined contribution plans -
Payments to defined contribution retirement benefit plans are recognised as an expense when employees have rendered service
entitling them to the contributions.
The state governed Provident Fund Scheme, Employee State Insurance Scheme and National Pension Scheme (NPS) are defined
contribution plans.
Defined benefit plans -
For defined benefit plans in the form of gratuity, the cost of providing benefits is determined using the projected unit credit method, with
actuarial valuations being carried out half yearly. Re-measurement, comprising actuarial gains and losses is reflected immediately
in the balance sheet with a charge or credit recognised in other comprehensive income in the period in which they occur. Re¬
measurement recognised in other comprehensive income is reflected immediately in retained earnings and is not reclassified to
profit or loss. Past service cost is recognised in the statement of profit and loss in the period of a plan amendment. Net interest is
calculated by applying the discount rate at the beginning of the period to the net defined benefit liability or asset. Defined benefit
costs are categorised as follows:
• service cost (including current service cost, past service cost, as well as gains and losses on curtailments and settlements);
• net interest expense or income; and
• re-measurement
The Company presents the first two components of defined benefit costs in the statement of profit and loss in the line item 'Employee
benefits expense'. Curtailment gains and losses are accounted for as past service costs.
The present value of the defined benefit plan liability is calculated using a discount rate which is determined by reference to market
yields at the end of the reporting period on government bonds.
(b) Short term and other long-term employee benefits
A liability is recognized for benefits accruing to employees in respect of salaries and annual leave in the period the related service
is rendered at the undiscounted amount of the benefits expected to be paid in exchange for that service.
Liabilities recognized 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.
Liabilities recognized in respect of other long-term employee benefits are measured at the present value of estimated future cash
outflows expected to be made by the Company in respect of services provided by employees up to the reporting date.
The cost of short-term compensated absences is accounted as under:
(i) in case of accumulated compensated absences, when employees render the services that increase their entitlement of future
compensated absences; and
(ii) in case of non-accumulating compensated absences, when the absences occur.
(c) Compensatory Payments (Loss of Earned Bonus)
The company amortizes the compensatory payments over the period of twelve months, since the amount is recoverable if an
employee leaves the organization within a year.
(d) Share-based Payment
The Company recognizes compensation expense relating to share-based payments in the statement of profit and loss using fair
value in accordance with Ind AS 102, Share-based payment. The estimated fair value of the award is charged to income on a
straight-line basis over the requisite service period for each separately vesting portion of the award as if the award was in-substance
multiple awards with a corresponding increase to share options outstanding amount. The share price of the Company was simulated
using a binomial model. The simulation was done from each valuation date to maturity of the ESOP.
Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the
equity instruments at the grant date.
The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the
vesting period, based on the Company's estimate of equity instruments that will eventually vest, with a corresponding increase in
equity. At the end of each reporting period, the Company revises its estimate of the number of equity instruments expected to vest.
The impact of the revision of the original estimates, if any, is recognised in the 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. If a grant
lapses after the vesting period, the cumulative discount recognised as expense in respect of such grant is transferred to the retained
earnings within equity and if the grant lapses before the vesting period, the cumulative discount recognised as expense in respect
of such grant is credited to the statement of profit and loss.
Equity-settled share-based payment transactions with parties other than employees are measured at the fair value of the goods or
services received, except where that fair value cannot be estimated reliably, in which case they are measured at the fair value of the
equity instruments granted, measured at the date the entity obtains the goods or the counterparty renders the service.
(8) Finance costs
Finance costs include interest and other ancillary borrowing costs. Ancillary costs include issue costs such as loan processing fees,
arranger fees, stamping expense and rating expense etc. The Company recognizes interest expense and other ancillary costs on
the borrowings as per Effective Interest Rate Method (EIR) which is calculated by considering any ancillary costs incurred and any
premium payable on its maturity.
Finance costs are charged to the statement of profit and loss.
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