34 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
Risk management framework
The Company's Board of Directors holds the ultimate responsibility for establishing and overseeing a robust risk management
framework. This framework is designed to identify, assess, and manage the various risks that may impact the Company's operations
and financial performance.
The risk management policies adopted by the Company are aimed at ensuring a structured and consistent approach to risk
identification, setting appropriate risk limits and controls, and continuously monitoring risk exposures in alignment with the Company's
strategic objectives. These policies and procedures are reviewed periodically to incorporate evolving market dynamics and changes in
the Company's operational environment.
The Audit Committee of the Board plays an active role in overseeing the effectiveness of the risk management framework. It reviews the
Company's risk management practices and ensures that appropriate systems and controls are in place to mitigate significant risks. The
Audit Committee is supported in this role by the Internal Audit function, which conducts regular and independent assessments of the
adequacy and effectiveness of risk controls and procedures. Key observations, recommended action plans, and the status of their
implementation are periodically reported to the Audit Committee for review and guidance.
The Company has exposure to following risks arising from financial instruments:
A) Credit risk
B) Liquidity risk
C) Market risk
D) Operational risk
A) Credit risk:
Credit risk is the risk of suffering financial loss due to customers or counterparties failing to fulfil their contractual obligations which can
result in losses for the company. This could be either because of wrong assessment of the borrower's payment capabilities or due to
uncertainties in his future earning potential.
Credit risk primarily arises due to:
a) Default Risk - Borrower fails to repay
b) Credit worthiness risk - Borrowed s credit profile deteriorates
c) Concentration Risk - over exposure to an industry or borrower or geography
Credit quality analysis / Expected credit loss measurement
The Company prepares its financial statements in accordance with the Ind AS framework. As per the RBI
notification, on adoption of IndAS for regulatory reporting, the Company computes provision as per Ind
AS 109 as well as per extant prudential norms on Income Recognition, Asset Classification and Provisioning
(IRACP). Where impairment allowance in aggregate for the Company under Ind AS 109 is lower than the
provisioning required under IRACP (including standard asset provisioning) for the Company, the difference is
appropriated from net profit or loss after tax, to a separate 'Expected loss allowance '. Any withdrawals from this reserve shall be made
only with prior permission from the RBI.
Mechanics of ECL model:
The Company measures expected credit losses (ECL) in accordance with its impairment methodology duly adopted by the Board. The 12-
month ECL is determined by multiplying the 12-month probability of default (PD), loss given default (LGD), and exposure at default
(EAD). Similarly, lifetime ECL is calculated by multiplying the lifetime PD, LGD, and EAD.
The 12-month PD represents the probability of default occurring over the next 12 months, whereas the lifetime PD reflects the probability
of default over the remaining expected life of the financial instrument. The EAD represents the expected outstanding balance at the point
of default, incorporating the impact of principal and interest repayments from the reporting date to the date of default, along with any
expected drawdowns on committed facilities.
The LGD represents the expected credit loss on the EAD in the event of default, taking into consideration, among other factors, the value
of collateral expected to be realised and the timing of such realisation, adjusted for the time value of money.
The Company classifies its financial assets in three stages having the following characteristics:
i) Stage 1: The loans which are 0 to 30 DPD. These financial assets are without significant increase in credit risk since initial recognition
and hence a 12 month ECL is recognised on them.
ii) Stage 2: The loans which are 31 to 90 days DPD. Though these loans show significant increase in credit risk but they are not credit
impaired on which a lifetime ECL is recognised.
iii Stage 3: The loans which are more than 90 DPD. These loans showobjective evidence of impairment and therefore considered to be in
default or otherwise credit impaired on which a lifetime ECL is recognised.
34 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
Assumptions and Estimation Techniques
The key elements for measurement of ECL are as follows:
(i) Probability of default (PD)
(ii) Loss given default (LGD) and
(ii) Exposure at default (EAD)
The Company's policies for computation of expected credit loss (ECL) are set out below:
ECL on loans and advances
ECL is computed for loans and investments portfolio of the Company. The loans and advances portfolio comprises of the following:
(i) Demand loans
(ii) Term loans
Investments measured at amortised cost is subjected to ECL.
Staging criteria:
Following staging criteria is used for Loans and investments :
(i) standard and 0 - 30 days past due (DPD) as Stage I;
(ii) 31- 90 DPD as Stage II; and
(iii) outstanding > 90 DPD as Stage III.
Probability of Default (PD%)
PD represents the likelihood of a borrower defaulting on its financial obligation, either over the next 12 months (12M PD), or over the
remaining lifetime (Lifetime PD) of the obligation.
The PD% is computed as follows:.
In the case of both demand loans and term loans lending portfolio, the PD% is computed as follows
i) Borrower Count Segmentation
For each reporting month, the Company classifies borrowers into Days Past Due (DPD) buckets (e.g., 0 DPD, 1-30 DPD, 31-60 DPD, 61¬
90 DPD, 90 DPD) and computes the count of borrowers in each bucket cohort
ii) Monthly Forward Flow Rates
The movement of borrowers from one DPD cohort to the next is tracked monthly. The forward flow rate is calculated as the ratio of
borrowers migrating to the next DPD bucket in the current month to the count in the preceding bucket as at the prior month-end.
iii) Annual Probability of Default (PD)
The monthly forward flow rates for each cohort are averaged over the period. The annual PD for a cohort is derived by multiplying these
average forward flow rates across all stages (conditional PD) leading to default (e.g., 0 to 1-30, 1-30 to 31-60, 31-60 to 61-90, 61-90 to 90 ).
iv) Through-The-Cycle PD (TTC PD)
The annual PDs calculated over multiple years up to the reporting date are averaged to determine the TTC PD for each DPD cohort. This
provides a stable, long-term estimate of default probability that smoothens out cyclical variations.
Loss Given Default (LGD%)
The Loss Given Default 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 realisation of any collateral.
It is usually expressed as a percentage of the EAD. It is also expressed as (1 - Rate of Recovery). A Secured loan shall have a lower LGD
than an Unseured loan since the rate of recovery is higher given that there is collateral secured for the recovery proceedings.
Exposure At Default (EAD)
Exposure at Default (EAD) represents the estimated amount outstanding that a company or financial institution is exposed to at the time
of a borrower's default. It includes the expected balance of principal and interest from the reporting date up to the default date, as well as
any anticipated drawdowns on committed but undrawn facilities. For performing loans (Stage 1 and Stage 2), EAD reflects the projected
exposure at a future default date, considering scheduled repayments, accrued interest, and expected additional utilization of credit lines.
For non-performing loans (Stage 3), EAD corresponds to the exposure outstanding at the actual time of default. This estimate is a critical
input in calculating expected credit losses and regulatory capital requirements. The compant considered the outstanding balance at the
reporting date as the EAD for the purpose of calculating the ECL provison.
Write off policy
The Company writes off financial assets, either in full or in part, when it has concluded that there is no reasonable expectation of
recovery. This determination is made after all reasonable courses of action to recover the outstanding amounts have been exhausted.
Such write-offs typically occur when the financial asset is no longer subject to enforcement activity, including legal or other recovery
processes, or when the asset is considered irrecoverable due to the borrowed s financial position.
Financial assets that have been written off continue to be subject to enforcement activities, where appropriate, in order to comply with the
Company's procedures for recovery of amounts due. Any subsequent recoveries of amounts previously written off are recognised in the
statement of profit and loss under impairment on financial instruments, in the period in which such recovery is made.
B) Liquidity risk:
Liquidity risk is defined as the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities
that are settled by delivering cash or another financial asset. Liquidity risk arises because of the possibility that the Company might be
unable to meet its payment obligations when they fall due as a result of mismatches in the timing of the cash flows under both normal
and stress circumstances.
Maturity profile of undiscounted cash flows for financial liabilities as on balance sheet date have been provided below:
C) Market risk:
Market risk is the risk that the fair value or future cash flows of financial instruments will fluctuate due to changes in market variables
such as interest rates, equity prices, security prices etc.
The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while
optimizing the return.
i) Interest rate risk
Interest rate risk is the risk which arises from changes in market interest rates affecting the Company's earnings or economic value. This
can lead to shrinking of the interest margins which shall have an adverse impact on the profitability of the company.
Change in the interest rates shall have an impact on the company for servicing its borrowing as well as the company's interest income.
Since the company has its borrowings at fixed rates, hence any change in the interest rates shall not have any effect on its finance cost.
ii) Price Risk
Price risk is the financial risk associated with fluctuations in the value of stocks or securities. It represents the uncertainty an investor
faces regarding potential losses due to changes in prices of the securities, which can be influenced by various systematic or unsystematic
risks.
The company extends loans secured by shares, which inherently carry price risk. These loans are granted with substantial margins to
mitigate potential exposure. The company continuously monitors the market value of the shares held as collateral, and in the event that
the prescribed margin falls below the acceptable threshold, the company reserves the right to call for additional shares to be provided as
security.
The Company also holds investments in equity shares and mutual funds. To manage the price risk associated with these equity
investments, the Company periodically reviews the sectors in which it has invested, assesses the performance of the investee companies,
and evaluates its investment decisions.
35 CAPITAL MANAGEMENT
The Company's objectives when managing capital are to:
i. safeguard their ability to continue as a going concern, so that they can continue to provide returns for shareholders and benefits for other
stakeholders, and
ii. maintain an optimal capital structure to reduce the cost of capital.
The Company's assessment of capital requirement is aligned to its planned growth which forms part of an annual operating plan which is
approved by the Board and also a long range strategy. These growth plans are aligned to assessment of risks - which include credit,
liquidity and market. The funding requirements are met through loans and operating cash flows generated.
The company keeps a watch on the Debt Equity ratio and the CRAR Ratio which were 0.10 and 92.5% for the Year ended 31st March, 2025.
36 FAIR VALUE MEASUREMENT
A) The carrying value and Fair value of Financial assets and liabilities by categories are as follows :
Fair value of cash and cash equivalents, other bank balance, short term loans, trade receivables, trade payables, other
financial assets/liabilities approximate their carrying amounts largely due to the short term maturities of these instruments.
Methods and assumptions used to estimate the fair values are consistent with those used for the year ended March 31, 2024.
Risk management framework
The Company's Board of Directors holds the ultimate responsibility for establishing and overseeing a robust risk management framework. This
framework is designed to identify, assess, and manage the various risks that may impact the Company's operations and financial performance.
The risk management policies adopted by the Company are aimed at ensuring a structured and consistent approach to risk identification,
setting appropriate risk limits and controls, and continuously monitoring risk exposures in alignment with the Company's strategic objectives.
These policies and procedures are reviewed periodically to incorporate evolving market dynamics and changes in the Company's operational
environment.
The Audit Committee of the Board plays an active role in overseeing the effectiveness of the risk management framework. It reviews the
Company's risk management practices and ensures that appropriate systems and controls are in place to mitigate significant risks. The Audit
Committee is supported in this role by the Internal Audit function, which conducts regular and independent assessments ofthe adequacy and
effectiveness of risk controls and procedures. Key observations, recommended action plans, and the status of their implementation are
periodically reported to the Audit Committee for review and guidance.
The Company has exposure to following risks arising from financial instruments:
A) Credit risk
B) Liquidity risk
C) Market risk
D) Operational risk
A) Credit risk:
Credit risk is the risk of suffering financial loss due to customers or counterparties failing to fulfil their contractual obligations which can result
in losses for the company. This could be either because of wrong assessment of the borrower's payment capabilities or due to uncertainties in
his future earning potential.
Credit risk primarily arises due to:
a) Default Risk - Borrower fails to repay
b) Credit worthiness risk - Borrower's credit profile deteriorates
c) Concentration Risk - over exposure to an industry or borrower or geography
Credit quality analysis / Expected credit loss measurement
The Company prepares its financial statements in accordance with the Ind AS framework. As per the RBI
notification, on adoption of IndAS for regulatory reporting, the Company computes provision as per Ind
AS 109 as well as per extant prudential norms on Income Recognition, Asset Classification and Provisioning
(IRACP). Where impairment allowance in aggregate for the Company under Ind AS 109 is lower than the
provisioning required under IRACP (including standard asset provisioning) for the Company, the difference is
appropriated from net profit or loss after tax, to a separate 'Expected loss allowance '. Any withdrawals from this reserve shall be made only
with prior permission from the RBI.
Mechanics of ECL model:
The Company measures expected credit losses (ECL) in accordancewith its impairment methodology duly adopted by the Board. The 12-month
ECL is determined by multiplying the 12-month probability of default (PD), loss given default (LGD), and exposure at default (EAD). Similarly,
lifetime ECL is calculated by multiplying the lifetime PD, LGD, and EAD.
The 12-month PD represents the probability of default occurring over the next 12 months, whereas the lifetime PD reflects the probability of
default over the remaining expected life of the financial instrument. The EAD represents the expected outstanding balance at the point of
default, incorporating the impact of principal and interest repayments from the reporting date to the date of default, along with any expected
drawdowns on committed facilities.
The LGD represents the expected credit loss on the EAD in the event of default, taking into consideration, among other factors, the value of
collateral expected to be realised and the timing of such realisation, adjusted for the time value of money.
The Company classifies its financial assets in three stages having the following characteristics:
i) Stage 1: The loans which are 0 to 30 DPD. These financial assets are without significant increase in credit risk since initial recognition and
hence a 12 month ECL is recognised on them.
ii) Stage 2: The loans which are 31 to 90 days DPD. Though these loans show significant increase in credit risk but they are not credit impaired on
which a lifetime ECL is recognised.
iiil Stage 3: The loans which are more than 90 DPD. These loans showobjective evidence of impairment and therefore considered to be in default
or otherwise credit impaired on which a lifetime ECL is recognised.
Assumptions and Estimation Techniques
The key elements for measurement of ECL are as follows:
(i) Probability of default (PD)
(ii) Loss given default (LGD) and
(ii) Exposure at default (EAD)
The Company's policies for computation of expected credit loss (ECL) are set out below:
ECL on loans and advances
ECL is computed for loans and investments portfolio of the Company. The loans and advances portfolio comprises of the following:
(i) Demand loans
(ii) Term loans
Investments measured at amortised cost is subjected to ECL.
Staging criteria:
Following staging criteria is used for Loans and investments :
(i) standard and 0 - 30 days past due (DPD) as Stage I;
(ii) 31- 90 DPD as Stage II; and
(iii) outstanding > 90 DPD as Stage III.
Probability of Default (PD%)
PD represents the likelihood of a borrower defaulting on its financial obligation, either over the next 12 months (12M PD), or over the
remaining lifetime (Lifetime PD) of the obligation.
The PD% is computed as follows:.
In the case of both demand loans and term loans lending portfolio, the PD% is computed as follows
i) Borrower Count Segmentation
For each reporting month, the Company classifies borrowers into Days Past Due (DPD) buckets (e.g., 0 DPD, 1-30 DPD, 31-60 DPD, 61-90 DPD,
90 DPD) and computes the count of borrowers in each bucket cohort
ii) Monthly Forward Flow Rates
The movement of borrowers from one DPD cohort to the next is tracked monthly. The forward flow rate is calculated as the ratio of borrowers
migrating to the next DPD bucket in the current month to the count in the preceding bucket as at the prior month-end.
iii) Annual Probability of Default (PD)
The monthly forward flow rates for each cohort are averaged over the period. The annual PD for a cohort is derived by multiplying these
average forward flow rates across all stages (conditional PD) leading to default (e.g., 0 to 1-30, 1-30 to 31-60, 31-60 to 61-90, 61-90 to 90 ).
iv) Through-The-Cycle PD (TTC PD)
The annual PDs calculated over multiple years up to the reporting date are averaged to determine the TTC PD for each DPD cohort. This
provides a stable, long-term estimate of default probability that smoothens out cyclical variations.
Loss Given Default (LGD%)
The LossGiven Default isan estimate ofthe 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 realisation ofany collateral. It is usually
expressed as a percentage ofthe EAD. It is also expressed as (1 - Rate of Recovery). A Secured loan shall have a lower LGD than an Unseured
loan since the rate of recovery is higher given that there is collateral secured for the recovery proceedings.
Exposure At Default (EAD)
Exposure at Default (EAD) represents the estimated amount outstanding that a company or financial institution is exposed to at the time of a
borrower's default. It includes the expected balance of principal and interest from the reporting date up to the default date, as well as any
anticipated drawdowns on committed but undrawn facilities. For performing loans (Stage 1 and Stage 2), EAD reflects the projected exposure
at a future default date, considering scheduled repayments, accrued interest, and expected additional utilization of credit lines. For non¬
performing loans (Stage 3), EAD corresponds to the exposure outstanding at the actual time of default. This estimate is a critical input in
calculating expected credit losses and regulatory capital requirements. The compant considered the outstanding balance at the reporting date
as the EAD for the purpose of calculating the ECL provison.
Write off policy
The Company writes offfinancial assets, either in full or in part, when it has concluded that there is no reasonable expectation of recovery. This
determination is made after all reasonable courses of action to recover the outstanding amounts have been exhausted. Such write-offs typically
occur when the financial asset is no longer subject to enforcement activity, including legal or other recovery processes, or when the asset is
considered irrecoverable due to the borrower's financial position.
Financial assets that have been written off continue to be subject to enforcement activities, where appropriate, in order to comply with the
Company's procedures for recovery of amounts due. Any subsequent recoveries of amounts previously written off are recognised in the
statement of profit and loss under impairment on financial instruments, in the period in which such recovery is made.
C) Market risk:
Market risk is the risk that the fairvalue or future cash flows of financial instruments will fluctuate due to changes in market variables such as
interest rates, equity prices, security prices etc.
The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the
return.
i) Interest rate risk
Interest rate risk is the risk which arises from changes in market interest rates affecting the Company's earnings or economic value. This can
lead to shrinking of the interest margins which shall have an adverse impact on the profitability of the company.
Change in the interest rates shall have an impact on the company for servicing its borrowing as well as the company's interest income.
Since the company has its borrowings at fixed rates, hence any change in the interest rates shall not have any effect on its finance cost.
ii) Price Risk
Price risk is the financial risk associated with fluctuations in the value of stocks or securities. It represents the uncertainty an investor faces
regarding potential losses due to changes in prices of the securities, which can be influenced by various systematic or unsystematic risks.
The company extends loans secured by shares, which inherently carry price risk. These loans are granted with substantial margins to mitigate
potential exposure. The company continuously monitors the market value of the shares held as collateral, and in the event that the prescribed
margin falls below the acceptable threshold, the company reserves the right to call for additional shares to be provided as security.
The Company also holds investments in equity shares and mutual funds. To manage the price risk associated with these equity investments,
the Company periodically reviews the sectors in which it has invested, assesses the performance of the investee companies, and evaluates its
investment decisions.
35 CAPITAL MANAGEMENT
The Company's objectives when managing capital are to:
i. safeguard their ability to continue as a going concern, so that they can continue to provide returns for shareholders and benefits for other
stakeholders, and
ii. maintain an optimal capital structure to reduce the cost of capital.
The Company's assessment of capital requirement is aligned to its planned growth which forms part of an annual operating plan which is
approved by the Board and also a long range strategy. These growth plans are aligned to assessment of risks - which include credit, liquidity and
market. The funding requirements are met through loans and operating cash flows generated.
The company keeps a watch on the Debt Equity ratio and the CRAR Ratio which were 0.10 and 92.5% for the Year ended 31st March, 2025.
36 FAIR VALUE MEASUREMENT
A) The carrying value and Fair value of Financial assets and liabilities by categories are as follows :
Fair value of cash and cash equivalents, other bank balance, short term loans, trade receivables, trade payables, other
financial assets/liabilities approximate their carrying amounts largely due to the short term maturities of these instruments.
Methods and assumptions used to estimate the fair values are consistent with those used for the year ended March 31, 2024.
46 CONTINGENT LIABILITY
Since Feb 2021, a Bank account of the Company having balance of Rs. 2,820.38 Thousands has been frozen by
the cybercell, Hyderabad, as the account was linked to its fintech partner Yomoyo Blossom Technology Private
Limited. The Company has not received any formal communication or summons for the same from the cybercell.
These funds cannot be used by the company, since they are blocked.
47 TRANSACTION WITH STRUCK-OFF COMPANIES
The Company doesn't have any transactions with companies struck off under section 248 of the Companies Act,
2013 or section 560 of the Companies Act, 1956.
48 REGISTRATION OF CHARGES OR SATISFACTION WITH REGISTRAR OF COMPANIES (ROC)
No charges were registered against the Company during the year. No charges or satisfactions are yet to be
registered with ROC beyond the statutory period.
49 COMPLIANCE WITH APPROVED SCHEME(S) OF ARRANGEMENTS
The Company has not entered into any new scheme of arrangements during the financial year ended March 31,
2025
50 UTILISATION OF BORROWED FUNDS AND SHARE PREMIUM
The Company as part of its normal business, grants loans and advances, makes investment, provides guarantees
to and accept deposits and borrowings from its customers, other entities and persons. These transactions are
part of Company's normal non-banking finance business, which is conducted ensuring adherence to all regulatory
requirements.
Other than the transactions described above, no funds have been advanced or loaned or invested (either from
borrowed funds or share premium or any other sources or kind of funds) by the Company to or in any other
persons or entities, including foreign entities (intermediaries) with the understanding, whether recorded in
writing or otherwise, that the intermediary shall lend or invest in party identified by or on behalf of the Company
(ultimate beneficiaries). The Company has also not received any fund from any parties (funding party) with the
understanding that the Company shall whether, directly or indirectly lend or invest in other persons or entities
identified by or on behalf of the funding party (ultimate beneficiaries) or provide any guarantee, security or the
like on behalf of the ultimate beneficiaries.
51 UNDISCLOSED INCOME
There are no transactions that are not recorded in the books of accounts for the financial years ended March 31,
2025 and March 31, 2024.
52 ITEMS OF INCOME AND EXPENDITURE OF EXCEPTIONAL NATURE
There are no items of income and expenditure of exceptional nature for the financial years ended March 31, 2025
and March 31, 2024.
53 DETAILS OF CRYPTO CURRENCY OR VIRTUAL CURRENCY
The Group has not traded or invested in crypto currency or virtual currency during the financial years ended
March 31, 2025 and March 31, 2024.
54 BENAMI PROPERTIES
There are no Benami properties held by the Company. Also, there has been no proceedings initiated or pending
against the Company for holding any benami property under the Benami Transactions (Prohibition) Act, 1988 (45
of 1988) and rules made thereunder.
55 WILFULL DEFAULTER
The Company has not been declared as a wilfull defaulter by any bank or financial institution or other lender in
the financial years ended March 31, 2024 and March 31, 2025.
56 PREVIOUS YEAR FIGURES
Previous year's figures are regrouped / rearranged / recasted wherever considered necessary.
These are the Notes referred to in our report of even date
For CGCA & Associates LLP For and on behalf of the board of directors of
Chartered Accountants Anupam Finserv Limited
Firm Registration No. 123393W/W100755 CIN: L74140MH1991PLC061715
SD/- SD/- SD/-
CA Champak K. Dedhia Siddharth Gala Pravin Gala
Partner Executive Director & CEO Chairman, Whole Time Director
& CFO
Membership No : 101769 DIN: 08128110 DIN: 00786492
SD/-
Sheetal Dedhia
Compay Secretary
M. No,: A52175
Place: Mumbai Place: Mumbai
Date : May 13, 2025 Date : May 13, 2025
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