3.11 Provisions, Contingent Liabilities and Contingent Assets
Provisions are recognised when the company has a present obligation (legal or constructive) as a result of past events, and it is probable that an 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.
When the effect of the time value of money is material, the Company determines the level of provision by discounting the expected cash flows at a pre¬
tax rate reflecting the current rates specific to the liability. The expense relating to any provision is presented in the statement of profit and loss net
of any reimbursement.
Contingent liabilities are recognised only when there is a possible obligation arising from past events, due to occurrence or non-occurrence of one or more
uncertain future events, not wholly within the control of the Company, or where any present obligation cannot be measured in terms of future outflow of
resources, or where a reliable estimate of the obligation cannot be made. Obligations are assessed on an ongoing basis and only those having a largely
probable outflow of resources are provided for.
Contingent assets are not disclosed in the financial statements unless an inflow of economic benefits is probable.
3.12 Dividends on ordinary shares
The Company recognises a liability to make cash distributions to equity holders when the distribution is authorised and the distribution is no longer at
the discretion of the Company. As per the Companies Act, 2013 in India, a distribution is authorised when it is approved by the shareholders. A
corresponding amount is recognised directly in equity.
3.13 Determination of Fair value
The Company measures financial instruments at fair value at each balance sheet date.
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. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place
either:
• In the principal market for the asset or liability, or
• In the absence of a principal market, in the most advantageous market for the asset or liability
The principal or the most advantageous market must be accessible by the company.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming
that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its
highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value,
maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
In order to show how fair values have been derived, financial instruments are classified based on a hierarchy of valuation techniques, as summarised
below:
• Level 1 financial instruments - Those where the inputs used in the valuation are unadjusted quoted prices from active markets for identical assets or
liabilities that the Company has access to at the measurement date. The Company considers markets as active only if there are sufficient trading
activities with regards to the volume and liquidity of the identical assets or liabilities and when there are binding and exercisable price quotes available
on the balance sheet date.
• Level 2 financial instruments - Those where the inputs that are used for valuation and are significant, are derived from directly or indirectly observable
market data available over the entire period of the instrument's life. Such inputs include quoted prices for similar assets or liabilities in active markets,
quoted prices for identical instruments in inactive markets and observable inputs other than quoted prices such as interest rates and yield curves, implied
volatilities, and credit spreads. In addition, adjustments may be required for the condition or location of the asset or the extent to which it relates to
items that are comparable to the valued instrument. However, if such adjustments are based on unobservable inputs which are significant to the entire
measurement, the Company will classify the instruments as Level 3.
• Level 3 financial instruments - Those that include one or more unobservable input that is significant to the measurement as whole.
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Company determines whether transfers have occurred
between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole)
at the end of each reporting period.
The company evaluates the levelling at each reporting period on an instrument-by-instrument basis and reclassifies instruments when necessary based on
the facts at the end of the reporting period.
3.14 Recognition of Income
Revenue (other than for those items to which Ind AS 109 Financial Instruments are applicable) is measured at fair value of the consideration received or
receivable.
3.14.1 Interest on Overdue Balances and Other Charges
Overdue interest in respect of loans is recognised upon realisation.
3.14.2 Fee Income & Sale of Service
a) Fee income from loans are recognised upon satisfaction of following:
i) Completion of service
ii) and realisation of the fee income.
b) Servicing and collections fees on assignment are recognised upon completion of service.
3.15 Dividend Income
Dividend income (including from FVOCI investments) is recognised when the Company's right to receive the payment is established, it is probable that
the economic benefits associated with the dividend will flow to the entity and the amount of the dividend can be measured reliably. This is generally when
the shareholders approve the dividend.
3.16 Earnings Per Share
Basic Earnings Per Share is calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number
of equity shares outstanding during the period.
The weighted average number of equity shares outstanding during the period and for all periods presented is adjusted for events, such as bonus shares,
other than the conversion of potential equity shares, that have changed the number of equity shares outstanding, without a corresponding change in
resources. For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the
weighted average number of shares outstanding during the period is adjusted for the effects of all dilutive potential equity shares.
3.17 Cash Flow Statement
Cash flows are reported using the indirect method, where by profit / (loss) before tax is adjusted for the effects of transactions of non-cash nature and any
deferrals or accruals of past or future cash receipts or payments
For the purpose of the Statement of Cash Flows, cash and cash equivalents as defined above, net of outstanding bank overdrafts as they are considered an
integral part of cash management of the company.
3.18 Cash and Cash equivalents
Cash and cash equivalent in the balance sheet comprise cash at banks and on hand and short-term deposits with an original maturity of three months or
less, which are subject to an insignificant risk of changes in value.
3.19 Leases
The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement at the inception of the lease. The
arrangement is, or contains, a lease if fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a
right to use the asset or assets, even if that right is not explicitly specified in an arrangement.
Operating Lease
Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased assets are classified as operating leases.
Operating lease payments are recognised as an expense in the Statement of Profit and Loss on a straight line basis over the lease term.
4. Significant accounting judgements, estimates and assumptions
The preparation of the Company's financial statements requires management to make judgements, estimates and assumptions that affect the reported
amount of revenues, expenses, assets and liabilities, and the accompanying disclosures, as well as the disclosure of contingent liabilities. Uncertainty about
these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in
future periods.
In the process of applying the Company's accounting policies, management has made the following judgements, which have a significant risk of causing a
material adjustment to the carrying amounts of assets and liabilities within the next financial year.
4.1 De-recognition of Financial instruments
The Company enters into securitisation transactions where financial assets are transferred to a structured entity for a consideration. The financial assets
transferred qualify for derecognition only when substantial risk and rewards are transferred.
This assessment includes judgements reflecting all relevant evidence including the past performance of the assets transferred and credit risk that the
Company has been exposed to. Based on this assessment, the Company believes that the credit enhancement provided pursuant to the transfer of
financial assets under securitisation are higher than the loss incurred on the similar portfolios of the Company hence it has been concluded that
securitisation transactions entered by the Company does not qualify de-recognition since substantial risk and rewards of the ownership has not been
transferred. The transactions are treated as financing arrangements and the sale consideration received is treated as borrowings.
4.2 Fair value of Financial Instruments
The fair value of financial instruments is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction in the
principal (or most advantageous) market at the measurement date under current market conditions (i.e., an exit price) regardless of whether that price is
directly observable or estimated using another valuation technique. When the fair values of financial assets and financial liabilities recorded in the balance
sheet cannot be derived from active markets, they are determined using a variety of valuation techniques that include the use of valuation models. The
inputs to these models are taken from observable markets where possible, but where this is not feasible, estimation is required in establishing fair values.
Judgements and estimates include considerations of liquidity and model inputs related to items such as credit risk (both own and counterparty), funding
value adjustments, correlation and volatility. For further details about determination of fair value please see Fair value note in Accounting policy.
4.3 Impairment of Financial Asset
The measurement of impairment losses across all categories of financial assets requires judgement, in particular, the estimation of the amount and timing
of future cash flows and collateral values when determining impairment losses and the assessment of a significant increase in credit risk. These estimates
are driven by a number of factors, changes in which can result in different levels of allowances.
The Company's ECL calculations are outputs of complex models with a number of underlying assumptions regarding the choice of variable inputs and their
interdependencies. Elements of the ECL models that are considered accounting judgements and estimates include:
• The Company's criteria for assessing if there has been a significant increase in credit risk and so allowances for financial assets should be measured on a
LTECL basis and the qualitative assessment
• The segmentation of financial assets when their ECL is assessed on a collective basis
• Development of ECL models, including the various formulas and the choice of inputs
• Determination of temporary adjustments as qualitative adjustment or overlays based on broad range of forward looking information as economic inputs
It has been the Company's policy to regularly review its models in the context of actual loss experience and adjust when necessary.
4.4 Provisions and other contingent liabilities
When the Company can reliably measure the outflow of economic benefits in relation to a specific case and considers such outflows to be probable, the
Company records a provision against the case. Where the probability of outflow is considered to be remote, or probable, but a reliable estimate cannot be
made, a contingent liability is disclosed.
Given the subjectivity and uncertainty of determining the probability and amount of losses, the Company takes into account a number of factors including
legal advice, the stage of the matter and historical evidence from similar incidents. Significant judgement is required to conclude on these estimates.
b) Terms/rights attached to Equity shares
The Company has only one class of equity shares having a par value of ' 10 per share. Each holder of equity shares is entitled to one vote
per share. In the event of liquidation of the Company, the holders of equity shares will be entitled to receive the remaining assets of the
Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the
share holders. Dividend declared towards equity shares will be subject to the approval of shareholder in the Annual General Meeting.
Note:
A. 1. The members of the promoter and promoter group of Frontier Capital Limited ("Company") i.e., Inimitable Capital Finance
Private Limited ("Seller 1"), and Anirudh Bhuwalka ("Seller 2"), collectively holding 1,24,93,510 equity shares had agreed to sell: (a)
77,05,600 equity shares of the Company held by Seller 1; and (b) 9,26,900 equity shares of the Company held by Seller 2, in
aggregate to Swapnil Madiyar ("Purchaser"). In this regard, Seller 1 and Seller 2 had executed separate share purchase agreement
dated 6 February 2025 ("SPA") for sale of their respective shareholding (ie., 45.97% held by Seller 1 and 5.55% held by Seller 2) to
the Purchaser.
2. The directors of the company at board meeting held on 13th February 2026 considered and approved the following:
(a) Termination of Share Purchase Agreement 1 (SPA 1) dated 6th February 2025 entered into between Inimitable Capital Finance
Private Limited ("Seller 1") and Mr. Swapnil Madiyar ("Purchaser")
(b) Termination of Share Purchase Agreement (SPA 2) dated 6th February 2025 entered into between Mr. Anirudh Bhuwalka
("Seller 2") and Mr. Swapnil Madyar ("Purchaser").
B. As on 31st March 2026, the net owned funds of the company (NOF) is Rs. 2.85 Crores. The company had required to attain
minimum NOF of Rs. 5 Crores as on 31st March 2025. As of 31th March 2026, the company has not attained the Net Owned Fund
requirement. To comply with the new regulatory requirement and strengthen its financial position, the Board of Directors has
approved raising capital through a rights issue of up to Rs. 6 Crores. This decision was made on 28/03/2025, and the funds raised
will be used to meet the new minimum NOF requirement.
a) Statutory reserve represents the reserve created as per Section 45IC of the RBI Act, 1934, pursuant to which a Non-Banking Financial
Company shall create a reserve fund and transfer therein a sum not less than twenty per cent of its net profit every year as disclosed in the
Statement of Profit and Loss account, before any dividend is declared.
b) The general reserve is a free reserve, retained from Group's profits and can be utilized upon fulfilling certain conditions in accordance
with statute of the relevant Act.
c) Equity Component of Compound Financial Instrument represents the amount of equity part of the Convertible Preference Shares which
had been converted into Equity Shares during the Financial Year 2019-20.
d) Retained Earnings are the profits and losses that the company has earned / incurred till date, less any transfers to the Statutory
Reserves and General Reserves.
29 SEGMENT INFORMATION
Operating segments are reported in a manner consistent with the internal reporting provided to the chief
operating decision maker (CODM).
The Board of Directors (BOD) of the Company assesses the financial performance and position of the Company,
and makes strategic decisions. The BOD, has been identified as being the chief operating decision maker. The
Company is engaged in the business of i) Lending finance and ii) Fees income. The said business are aggregated
for the purpose of review of performance by CODM. Accordingly, the Company has concluded that the business
of lending finance and fees income to be the only reportable segment.
Information about Major Customers as Required by Para 34
Revenue from Customer 1 of the company is Rs. 29.02 Lakhs (Previous Year Rs. 19.76 Lakhs) which amounts to
45% of the company's total revenue.
Revenue from Customer 2 of the company is Rs. 27.00 Lakhs (Previous Year Rs. 27.00 Lakhs) which amounts to
42% of the company's total revenue.
Revenue from Customer 3 of the company is Rs. 7.94 Lakhs (Previous Year Rs. 7.27 Lakhs) which amounts to
13% of the company's total revenue.
33 CAPITAL MANAGEMENT
The company maintains an actively managed capital base to cover risks inherent in the business,
meeting the capital adequacy requirements of Reserve Bank of India (RBI), maintain strong credit
rating and healthy capital ratios in order to support business and maximise shareholder value. The
adequacy of the Company's capital is monitored by the Board using, among other measures, the
regulations issued by RBI.
The company manages its capital structure and makes adjustments to it according to changes in
economic conditions and the risk characteristics of its activities. In order to maintain or adjust the
capital structure, the Company may adjust the amount of dividend payment to shareholders, return
capital to shareholders or issue capital securities.
The company has complied in full with the capital requirements prescribed by RBI over the
reported period.
a) Risk Management
The company has put in place a robust risk management framework to promote a proactive
approach in reporting, evaluating and resolving risks associated with the business. Given the nature
of the business, the company is engaged in, the risk framework recognizes that there is uncertainty
in creating and sustaining value as well as in identifying opportunities. Risk management is
therefore made an integral part of the company's effective management practice.
Risk Management Framework: The company's risk management framework is based on (a) clear
understanding and identification of various risks (b) disciplined risk assessment by evaluating the
probability and impact of each risk (c) Measurement and monitoring of risks by establishing Key
Risk Indicators with thresholds for all critical risks and (d) adequate review mechanism to monitor
and control risks.
The company has a well-established risk reporting and monitoring framework. The in-house
developed risk monitoring tool, Composite Risk Index, highlights the movement of top critical risks.
This provides the level and direction of the risks, which are arrived at based on the two level risk
thresholds for the identified Key Risk Indicators and are aligned to the overall company's risk
appetite framework approved by the board. The company also developed such risk reporting and
monitoring mechanism for the risks at business / vertical level. The company identifies and
monitors risks periodically. This process enables the company to reassess the top critical risks in a
changing environment that need to be focused on.
Risk Governance structure: The Company's risk governance structure operates with a clearly laid
down charter and senior management direction and oversight. The board oversees the risk
management process and monitors the risk profile of the company directly as well as through a
board constituted risk management committee.
The risk management division has established a comprehensive risk management framework across
the business and provides appropriate reports on risk exposures and analysis in its pursuit of
creating awareness across the company about risk management. The key risks faced by the
company are credit risk, liquidity risk, interest rate risk, operational risk, reputational and
regulatory risk, which are broadly classified as credit risk, market risk, operational risk, and liquidity
risk.
b) Credit Risk
Credit risk arises when a borrower is unable to meet financial obligations to the lender. This could
be either because of wrong assessment of the borrower's payment capabilities or due to
uncertainties in future. The effective management of credit risk requires the establishment of
appropriate credit risk policies and processes.
The company has comprehensive and well-defined credit policies which encompass credit approval
process for all businesses along with guidelines for mitigating the risks associated with them. The
appraisal process includes detailed risk assessment of the borrowers, physical verifications and field
visits. The company has a robust post sanction monitoring process to identify credit portfolio trends
and early warning signals. This enables it to implement necessary changes to the credit policy,
whenever the need arises.
c) Market Risk
Market Risk is the possibility of loss arising from changes in the value of a financial instrument as a
result of changes in market variables such as interest rates, exchange rates and other asset prices.
The company's exposure to market risk is a function of asset liability management activities. The
company is exposed to interest rate risk and liquidity risk.
The Company continuously monitors these risks and manages them through appropriate risk limits.
d) Concentration of Risk/Exposure
Concentration of credit risk arise when a number of counterparties or exposures have comparable
economic characteristics, or such counterparties are engaged in similar activities or operate in same
geographical area or industry sector so that collective ability to meet contractual obligations is
uniformly affected by changes in economic, political or other conditions.
The Concentration of risk is managed by company for each product by its region and its
subsegments.
e) Operational Risk
Operational risk is the risk of loss resulting from inadequate or failed internal processes, people or
systems, or from external events.
The operational risks of the company are managed through comprehensive internal control
systems and procedures and key back up processes. In order to further strengthen the control
framework and effectiveness, the company has established risk control self- assessment to identify
process lapses by way of exception reporting. This enables the management to evaluate key areas
of operational risks and the process to adequately mitigate them on an ongoing basis.
f) 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. 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 adopted a policy of availing funding
in line with the tenor and repayment pattern of its receivables and monitors future cash flows and
liquidity. The company has developed internal control processes and contingency plans for
managing liquidity risk.
The Management assessed that cash and cash equivalents, bank balance other than Cash and cash equivalents,
Loans, Other financial assets, payables, Borrowings and other financial liabilities approximates their carrying
amount largely due to short term maturities of these instruments.
The fair value of the financial assets and liabilities is included at the amount at which the instrument could be
exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The
following methods and assumptions were used to estimate the fair values of financial assets or liabilities
disclosed under level 2 category.
i) The fair value of loans have estimated by discounting expected future cash flows using discount rate equal to
the rate near to the reporting date of the comparable product.
ii) The fair value of borrowings other than debt securities and subordinated liabilities have estimated by
discounting expected future cash flows discounting rate near to report date based on comparable rate / market
observable data.
(i) The Company does not have any immovable property (other than properties where the company is the lessee and the lease
arrangements are duly executed in favour of the lessee) as at balance sheet date. Accordingly, disclosures as required
under this para is not applicable.
(ii) The Company does not have any investment property as at balance sheet date. Accordingly, disclosures as required under
this para is not applicable.
(iii) The Company has not revalued its Property, Plant and Equipment during the year. Accordingly, disclosures as required
under this para is not applicable.
(iv) The Company does not have any intangible assets as at balance sheet date. Accordingly, disclosures as required under this
para is not applicable.
(v) The Company has not granted any loans or advances in the nature of loan to promoters, directors, KMP and the related
parties (as defined under Companies Act, 2013), either severally or jointly with any other person, which are repayable on
demand or without specifying any terms or period of repayment during the curent and the previous year. Accordingly,
disclosures as required under this para is not applicable.
(vi) The Company does not have any capital work-in-progress as at balance sheet date. Accordingly, disclosures as required
under this para is not applicable.
(vii) The Company does not have any intagible asset under development as at balance sheet date. Accordingly, disclosures as
required under this para is not applicable.
(viii) There has been no proceeding initiated or pending against the Company for holding any benami property under the
Prohibition of Benami Property Transactions Act, 1988 and the rules made thereunder. Accordingly, disclosures as required
under this para is not applicable.
(ix) The Company has not taken any borrowings from banks or financial institutions on the basis of security of assets.
Accordingly, disclosures as required under this para is not applicable.
(x) The Company has not been declared as wilful defaulter by any bank or financial institution or other lender. Accordingly,
disclosures as required under this para is not applicable.
(xi) The Company has not entered into any transaction with companies struck off under section 248 of the Companies Act, 2013
or section 560 of Companies Act, 1956 during the current and previous year. Accordingly, disclosures as required under this
para is not applicable.
(xii) There are no charges or satisfaction pending for registration with the Registrar of Companies beyond the statutory period
by the Company. Accordingly, disclosures as required under this para is not applicable.
(xiii) The Company does not have any subsidiary/associate/joint venture and accordingly compliance with number of layers
prescribed under clause (87) of section 2 of the Companies Act, 2013 read with Companies (Restriction on Number of
Layers) Rules, 2017 is not applicable.
(xvi) (A) The company has not advanced or loaned or invested funds (either borrowed funds or share premium or any other
sources or kind of funds) to any other person(s) or entity(ies), including foreign entities (Intermediaries) with the
understanding (whether recorded in writing or otherwise) that the Intermediary shall:
(i) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of
the company (Ultimate Beneficiaries) or
(ii) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries.
(B) The Company has not received any fund from any person(s) or entity(ies), including foreign entities (Funding Party) with
the understanding (whether recorded in writing or otherwise) that the company shall:
(i) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of
the Funding Party (Ultimate Beneficiaries) or
(ii) provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
41 All amounts in the financial statements are in ^ lakhs unless otherwise stated.
|