2.14 Provisions, Contingent Liabilities and Contingent Assets
2.14.1 Provisions
a. Provisions are recognized when the company has present obligation (legal or
constructive) as a result of past event and it is probable that outflow of resources
embodying economic benefits will be required to settle the obligation and a
reliable estimate can be made of the amount of the obligation. The expense related
to a provision is presented in the statement of profit and loss net of any
reimbursement/contribution towards provision made.
b. If the effect of the time value of money is material, estimate for the provisions are
discounted using a current pre-tax rate that reflects, when appropriate, the risks
specific to the liability. When discounting is used, the increase in the provision due
to the passage of time is recognized as a finance cost.
c. Provisions are reviewed at each balance sheet date and adjusted to reflect the
current best estimates.
d. When some or all the economic benefits required to settle a provision are expected
to be recovered from a third party, a receivable is recognized as an asset if it is
virtually certain that reimbursement will be received and the amount of receivable
can be measured reliably.
2.14.2 Contingent liability
a. Contingent liability is disclosed in the case;
• When there is a possible obligation which could arise from past event and
whose existence will be confirmed only by the occurrence or non-occurrence of
one or more uncertain future events not wholly within the control of the
Company or;
• A present obligation that arises from past events but is not recognized as
expense because it is not probable that an outflow of resources embodying
economic benefits will be required to settle the obligation or;
• The amount of the obligation cannot be measured with sufficient reliability.
b. Commitments
Commitments include the value of the contracts for the acquisition of the assets net
of advances.
2.14.3 Contingent assets
Contingent asset is disclosed in case a possible asset arises from past events and
whose existence will be confirmed only by the occurrence or non-occurrence of one or
more uncertain future events not wholly within the control of the Company.
Contingent liabilities, contingent assets and commitments are reviewed at each
balance sheet date.
2.15 Cash flow statements
Cash flows are reported using the indirect method, whereby net profit before tax is adjusted
for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future
operating cash receipts or payments.
33 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
Risk management framework
The Company's Board of Directors has overall responsibility for the establishment and oversight of the Company's risk
management framework which is responsible for developing, implementing and monitoring Company's risk management
policies.
The Company's risk management policies are established to identify and analyse the risks faced by the Company, to set
appropriate risk limits and controls, and to monitor risks and adherence to limits. The risk management policies and systems
are reviewed regularly to reflect changes in market conditions and the Company's activities. The Company, through its
training and management standards and procedures, aims to develop a disciplined and constructive control environment in
which all employees understand their roles and obligations.
The Audit Committee oversees how management monitors compliance with the Company's risk management policies and
procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Company. The
Audit Committee is assisted in its oversight role by Internal Audit. Internal Audit undertakes regular reviews of risk
management controls and procedures. The observations, management action plans and adherence to those action plans are
reported to Audit Committee from time to time.
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 financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its
contractual obligations, and arises principally from the Company's loans and advances to customers and investment debt
securities.
Management of credit risk
The Company has put in place well defined product programs with credit policy parameters defining the credit appetite for
each product. The credit policy gets administered through credit underwriting managers for each product across branches. In
order to retain the independence of the credit function, functional reporting of the credit managers is separated from sales. The
Company has put in place review mechanisms to identify and measure credit risk arising out of customer acceptance as well as
credit behaviour. Further, collections teams are responsible for managing credit impaired customers with usage of appropriate
tools including negotiations, legal actions and recovery proceedings. The Company has put in place a collections policy
defining the role and responsibilities of collections function. The Company has also put in place mechanisms to identify risk
indicator signals and take appropriate actions to address the concerns arising out of the risk indicator signals.
Credit quality analysis / Expected credit loss measurement
Ind AS 109 outlines a 'three-stage' model for impairment based on changes in credit quality since initial recognition as
summarised below. The objective of the impariment requirements is to recognise lifetime expected credit losses for all financial
instruments for which there have been significant increases in credit risk since initial recognition - whether assessed on an
individual or collective basis - considering all reasonable and supportable information, including that which in forward¬
looking.
A financial instrument that is not credit-impaired on initial recognition is classifed in 'Stage I' and has its credit risk
continiously monitored by the Company.
If significant increases in credit risk ('SICR') since initial recognition is identified, the financial instrument is moved to 'Stage 2'
but is not yet deemed to be credit-impaired.
If the financial instrument is credit-impaired, the financial instrument is then moved to 'Stage 3'. Financial instruments in
'Stage 1' have their ECL measured at an amount equal to 12 months ECLs. Instruments in Stage 2 or 3 have their ECL measured
based on expected credit losses on a lifetime basis. Purchased or originated credit-impaired financial assets are those financial
assets that are credit impaired on initial recognition. Their ECL is always measured on a lifetime basis (Stage 3).
The measurement of ECL is calculated using three main components:
(i) Probability of default (PD)
(ii) Loss given default (LGD) and
(ii) Exposure at default (EAD)
Credit quality analysis / Expected credit loss measurement contd...
The 12 month ECL is calculated by multiplying the 12 month PD, LGD and the EAD. The 12 month and lifetime PDs represent
the PD occuring over the next 12 months and the remaining maturity of the instrument respectively. The EAD represents the
expected balance at default, taking into account repayment of principal and interest from the balance sheet date to the default
event together with any expected drawdowns of committed facilites. The LGD represents expected credit losses on the EAD
given the event of default, taking into account, among other attributes, the mitigating effect of collateral value at the time it is
expected to be realised and the time value of money.
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 12 month PD% is computed as follows:.
In the case of both demand loans and term loans lending portfolio, the PD% is computed based on average percentage of PD
for last five quarters.
Loss Given Default (LGD%)
It is the part of an asset that is lost provided the asset defaults. The recovery rate is derived as a ratio of discounted value of
recovery cash flows (incoporating the recovery time) to total exposure amount at the time of default. Loss given default is
computed as (1-recovery rate) in percentage terms. LGD has been applied on the basis of past observable trend of recoveries
from the defaulted assets.
The following factors have been considered for computation of LGD:
(i) Time to recovery - Time taken to recover the dues
(ii) Amount recovered - Amount recovered against total dues (including interest accrued thereon along with any charges due)
(iii) Discounted value of recovery cash flows
Exposure At Default (EAD)
EAD is the total amount of an asset the entity is exposed to at the time of default. EAD is defined based on the characteristics of
the asset. EAD is dependent on the outstanding exposure of an asset, sanctioned amount of a loan and credit conversion factor
for non-funded exposures. The current outstanding balance of loans as on 31st March 2024 and 31st March 2023 are considered
for ECL computation purpose.
Write off policy
Financial assets are written off either partially or in their entirety only when the Company has stopped pursuing the recovery.
Any subsequent recoveries are credited to impairment on financial instrument in statement of profit and loss.
B) Liquidity risk:
Liquidity risk is the risk that Company may not be able to meet its present and future cash and collateral obligations without
incurring unacceptable losses. Company's objective is to, at all times maintain optimum levels of liquidity to meet its cash and
collateral requirements. Company closely monitors its liquidity position and deploys a robust cash management system.
Such scenarios could occur when funding needed for illiquid asset positions is not available to the Company on acceptable
terms. To limit this risk, management has arranged for diversified funding sources and has adopted a policy of managing
assets with liquidity in mind and monitoring future cash flows and liquidity on regular basis. The Company has developed
internal control processes and contingency plans for managing liquidity risk. This incorporates an assessment of expected cash
flows and the availability of cash, cash equivalents and high grade collateral which could be used to secure additional funding
if required.
The Company maintains a portfolio of highly marketable and diverse assets that are assumed to be easily liquidated in the
event of an unforeseen interruption in cash flow. In accordance with the Company's policy, the liquidity position is assessed
under a variety of scenarios, giving due consideration to stress factors relating to both the market in general and specifically to
the Company.
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. The Company primarily deploy funds in liquid securities as a part of its liquidity management
approach. The Company regularly reviews its average borrowing/lending cost including proportion of fixed and floating rate
borrowings/loans so as to manage the impact of changes in interest rates.
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 arises from the possibility that changes in interest rates will affect future cash flows or the fair values of
financial instruments. The Board has established limits on the interest rate gaps for stipulated periods. The Company monitors
on a regular basis to ensure positions are maintained within the established limits.
D) Operational and business risk:
Operational risk is the risk of loss arising from systems failure, human error, fraud or external events. When controls fail to
operate effectively, operational risks can cause damage to reputation, have legal or regulatory implications, or lead to financial
loss. The Company cannot expect to eliminate all operational risks, but it endeavours to manage these risks through a control
framework and by monitoring and responding to potential risks. Controls include maker-checker controls, effective
segregation of duties, access, authorisation and reconciliation procedures, staff education and assessment processes.
34 CAPITAL MANAGEMENT
(i) Capital management
Objective
The Company's objective is to maintain appropriate levels of capital to support its business strategy taking into account the
regulatory, economic and commercial environment. The Company aims to maintain a strong capital base to support the risks
inherent to its business and growth strategies. The Company endeavours to maintain a higher capital base than the mandated
regulatory capital at all times.
Planning
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 interest rate.
38 LEASES
Operating Lease: company as lessee
The Company has an existing lease agreement for taking on leave and license basis office premises which shall expire
on October 31, 2024 with no renewal option.
In respect of the said existing lease for which the lease term expires within 12 months from the date of initial application
of Ind AS 116, the company has elected to choose the exemption given in para C10 (c) of Ind AS 116 and chose to apply
the short-term lease exemption to it. Following are the disclosure requirements relating to leases treated as short term
lease:
44 Since Feb 2021, a Bank account of the Company having balance of Rs. 2,820.38 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.
45 CONTINGENT LIABILITY
There are no contingent liabilities.
46 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.
47 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.
48 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, 2023.
49 PREVIOUS YEAR FIGURES
Previous year's figures are regrouped / rearranged / recasted wherever considered necessary.
As per our report of even date For and on behalf of the board of directors of
For J. K. Shah & Co. Anupam Finserv Limited
Chartered Accountants CIN: L74140MH1991PLC061715
Firm Registration No. 109606W
CA Sanjay Dhruva Nirmala Gala Pravin Gala
Partner Managing Director Whole Time Director & CFO
Membership No : 038480 DIN: 00894497 DIN: 00786492
Sheetal Dedhia
Compay Secretary
M. No,: A52175
Place: Mumbai Place: Mumbai
Date : May 30, 2024 Date : May 30, 2024
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