(a) Terms of loans:
(i) Working Capital Demand Loan (WCDL) are secured by way of first pari-passu charge on all receivables and current assets to the tune of 1.75 times to 2 times of the outstanding facility amount. Bank overdraft secured against Bank deposit Please refer to note 31 for details of asset pledged.
(ii) Loan from related parties are unsecured.
(b) Tenor of repayment :
(i) For WCDL it varies from 7 days to 365 days of each tranche, principal amount of each tranche is to be paid as bullet payment on maturity date.
(ii) For bank overdraft the same is repayable on demand.
(iii) For loan from related parties the same is repayable on demand.
(c) Interest Rate
(i) For WCDL the rate of interest is fixed (Lending banks MCLR rate Spread varies (0.90% to 1.85%), Interest is payable monthly basis on the last date of each month.
(ii) For Bank Overdraft Interest rate is FD rate Spread varies (0.75% to 1.00%), Interest is payable monthly basis on the last date of each month.
(iii) For related parties interest rate is in the range of 11.00% to 11.50% p.a. as approved by the board.
* During the year 5,55,405 equity shares has been issued to the employees of the Company under employee stock option scheme. (In Previous year 18,250 equity shares has been issued to the employees of the Company under employee stock option scheme & 12,00,000 shares have been issue on prefrential basis).
c. Terms/rights attached to equity shares
The Company has only one class of shares referred to as equity shares having a par value of ' 10/- each. Each holder of equity shares is entitled to one vote per share.
In the event of liquidation of company, the holder of equity shares will be entitled to receive 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 shareholders.
g. During the period of five years immediately precedings the balance sheet date, the Company has not issued any shares without payment being received in cash or by any way of bonus shares or shares bought back.
h. Shares reserved for issue under options and contracts / commitments for sale of shares / disinvestments, including the terms and amount, refer note 35 other equity for details of shares reserved for issue under Employee Stock Option Plan of the Company.
* Securities Premium reserve of ' 151.77 million (P.Y. ' 590.97 million) is created during the year due to issue of shares under equity stock
option scheme & preferential issue.
Footnotes: Nature and purpose reserves
i) Share Warrant : 12,00,000 Share Warrant exercisable (convertible) in one or more tranches, anytime within period of eighteen months into equal number of equity shares of face value of ' 10/- each of the Company on a preferential basis for cash.
The Capital Raising Committee of the Board of Directors of the Company in its meeting held on August 02, 2022 allotted 1,200,000 Equity Shares pursuant to exercise of options attached to the convertible warrants by the Mr. Nirmal Jain, Mrs. Madhu Jain & Mr. Venkataraman Rajamani, Promoters of the Company, consequent to the receipt of notice for exercise, along with the balance 75% of the application money (being 375/- per share) due on the Warrants, i.e. ' 450,000,000 (INR Forty-Five Crore only)
ii) Capital reserves : Capital reserve is created as per scheme of arrangement where undertaking including all assets and liabilities of undertaking were transferred to and vested by IIFL Finance Limited (previously known as IIFL Holding Limited).
iii) Securities premium : Securities premium represents the surplus of proceeds received over the face value of shares, at the time of issue of shares.
iv) Retained earnings : The balance in retained earnings primarily represents the surplus/deficit after payment of dividend (including tax on dividend) and transfer to reserves.
v) General Reserve : General reserve is created on account on employee stock option lapsed/exercised, in accordance with the Companies Act, 2013.
vi) Employee stock option reserve : Employee stock option reserve accounts represents reserve created on fair value of options against the options to be granted by the Company and outstanding as at balance sheet date.
(a) The estimate of future salary increase, considered in the actuarial valuation, takes into account inflation, seniority, promotion, increments and other relevant factors.
(b) The Expected Rate of Return on Plan Assets is determined considering several applicable factors, mainly the composition of Plan Assets held assessed risks, historical results of return on Plan Assets and the Company’s policy for Plan Assets management.
(viii) Sensivity analysis :
Significant Actuarial Assumptions for the determination of the defined benefit obligation are discount trade ,expected salary increase and employee turnover. The sensitivity analysis below, have been determined based on reasonably possible changes of the assumptions occurring at end of the reporting year , while holding all other assumptions constant. The result of Sensitivity analysis is given below:
These plans typically expose the Company to following risks:
Investment risk :- 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. If the return on plan asset is below this rate, it will create a plan deficit. Currently, for the plan in India, it has a relatively balanced mix of investments in government securities, and other debt instruments.
Interest risk :- A fall in the discount rate which is linked to the G.Sec. Rate will increase the present value of the liability requiring higher provision. A fall in the discount rate generally increases the mark to market value of the assets depending on the duration of asset.
Salary risk :- The present value of the defined benefit plan liability is calculated by reference to the future salaries of members. As such, an increase in the salary of the members more than assumed level will increase the plan’s liability.
Asset Liability Matching Risk: The plan faces the ALM risk as to the matching cash flow. Since the plan is invested in lines of Rule 101 of Income Tax Rules, 1962, this generally reduces ALM risk.
Mortality risk: Since the benefits under the plan is not payable for life time and payable till retirement age only, plan does not have any longevity risk.
Concentration Risk: Plan is having a concentration risk as all the assets are invested with the insurance company and a default will wipe out all the assets. Although probability of this is very less as insurance companies have to follow regulatory guidelines.
* Consequent to on-site inspection for the period from April 2022 to December 2023, on March 7, 2024, MCX issued a show cause notice towards their observation of non-reporting of certain incidents as technical glitches to the Exchange. The company vide letter dated March 14, 2024 responded to the said show cause notice. However, MCX vide their letter dated March 14, 2024, restrained the company from admitting new clients with immediate effect for 15 days or till the submission of RCA, whichever is higher.
Aggrieved by the said order, the company filed a writ petition with the Hon’ble High Court Mumbai. The High Court vide its order dated March 15, 2024 disposed off the writ petition filed by the company, on the condition that MCX to give the company an opportunity of being heard and pass appropriate order in accordance with law. MCX also made a statement in the High Court that the impugned letter dated March 14, 2024 would not be given effect to by them.
Thereafter, MCX issued a supplementary show cause notice dated March 15, 2024, which was appropriately responded to by the company. The company is confident that the action proposed including the penalty amount would get reviewed suitably by the Committee. However, the assessment of this litigation & outcome estimation is not possible to quantify in amount as on the signing date of balance sheet.
Note 32 :- Financial Risk Management 32 A.1. Credit Risk
Credit risk refers to risk that a counterparty will default on its contractual obligations resulting in financial loss to the Company. Credit risk arises primarily from financial assets such as trade receivables, investments, derivative financial instruments, other balances with banks, loans and other receivables and other financial asset.
32 A.2. Collateral held
The Company holds collateral of securities and other credit enhancements against its credit exposures.
32 A.3. Measurement of Expected Credit Loss
The Company has applied the impairment requirements of Ind AS 109 and has used reasonable and supportable information on best efforts basis & that is available without undue cost or effort to determine the credit risk at the reporting date.
32 B. Liquidity risk
Liquidity risk arises from the Company’s inability to meet its cash flow commitments on time. Prudent liquidity risk management implies maintaining sufficient stock of cash and marketable securities and maintaining availability of standby funding through an adequate line up of committed credit facilities. It uses a range of products mix to ensure efficient funding from across well-diversified markets and investor pools. Treasury monitors rolling forecasts of the company’s cash flow position and ensures that the company is able to meet its financial obligation at all times including contingencies.
The table below analyse the company financial liability into relevant maturity companying based on their contractual maturity. The amount disclosed in the table are the contractual undiscounted cash flows. Balance due within 1 year equals their carrying balances as the impact of discounting is not significant.
32 C. Market risk
Market risk is the risk of any loss in future earnings, in realizable fair values or in futures cash flows that may result from a change in the price of a financial instrument.
32 C.1. Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Interest rate change does not affects significantly short term borrowing and current investment therefore the Company’s exposure to the risk of changes in market interest rates relates primarily to the Company’s longterm debt and Non current investment.
Company business is volatile and hence borrowings are done bases on requirement, generally borrowings are done for short term and are on market based interest rate.
32 C.2. Fair value sensitivity analysis for fixed-rate instruments
The Company does not have any fixed-rate instruments presented in financial liabilities.
32 C.3. Exposure to currency risks
The Company does not have any exposure to foreign exchange risk arising form foreign currency transaction.
32 C.4. Exposure to derivative risks
The Company does not have any long-term contracts including derivative contracts for which there are any material foreseeable losses.
32 D. Capital Management
The company’s objective when managing capital are to
- Safeguard their ability to continue as going concern, so that they can continue to provide returns for the share holders and benefits for other stake holders, and
- Maintain an optimal capital structure to reduce the cost of capital."
The Company manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements of the financial covenants. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. The Company monitors capital using debt equity ratio.
32 E. Fair values of financial instruments
The company measures fair values using the following fair value hierarchy, which reflects the significance of the inputs used in making the measurements.
- Level 1: Inputs that are quoted market prices (unadjusted) in active markets for identical instruments.
- Level 2: Inputs other than quoted prices included within Level 1 that are observable either directly (i.e. as prices) or indirectly (i.e. derived from prices). This category includes instruments valued using: quoted market prices in active markets for similar instruments; quoted prices for identical or similar instruments in markets that are considered less than active; or other valuation techniques in which all significant inputs are directly or indirectly observable from market data.
- Level 3: Inputs that are unobservable. This category includes all instruments for which the valuation technique includes inputs that are not observable and the unobservable inputs have a significant effect on the instrument's valuation. This category includes instruments that are valued based on quoted prices for similar instruments for which significant unobservable adjustments or assumptions are required to reflect differences between the instruments."
The company uses widely recognised valuation models to determine the fair value of common and simple financial instruments, such as interest rate and currency swaps, that use only observable market data and require little management judgement and estimation. Observable prices or model inputs are usually available in the market for listed debt and equity securities, exchange-traded derivatives and simple OTC derivatives such as interest rate swaps. The availability of observable market prices and model inputs reduces the need for management judgement and estimation and also reduces the uncertainty associated with determining fair values.
The following table analyses financial instruments measured at fair value at the reporting date, by the level in the fair value hierarchy into which the fair value measurement is categorised. The amounts are based on the values recognised in the statement of financial position. The fair values include any deferred differences between the transaction price and the fair value on initial recognition when the fair value is based on a valuation technique that uses unobservable inputs.
32 E.3. Financial instruments not measured at fair value
The following table sets out the fair values of financial instruments not measured at fair value and analyses them by the level in the fair value hierarchy into which each fair value measurement is categorised.
Below are the methodologies and assumptions used to determine fair values for the above financial instruments which are not recorded and measured at fair value in the Company’s Financial Statement. These fair value is calculated for disclosures purpose only.
Note 33 Segment Reporting
In the opinion of the management, there is only one reportable business segment as envisaged by Ind AS 108 on 'Operating Segment’ issued by Institute of Chartered accountant of India. Accordingly, no separate disclosure for segment reporting is required to be made in the financial statements of the Company. Secondary segmentation based on geography has not been presented as the Company operates primarily in India and the Company perceives that there is no significant difference in its risk and returns in operating from different geographic areas within India.
(c) *The Company has granted 5,25,250 ESOP and 16,40,000 RSU (PY 2,31,600, Nil respectively) options during the year.
Fair Value Methodology
The fair value of the Options granted has been estimated using the Black-Scholes option pricing Model. Each tranche of vesting have been considered as a separate grant for the purpose of valuation.
Stock Price: The fair value of the underlying stock based on the latest available closing Market Price on NSE has been considered for valuing the grant.
Volatility: Volatility is a measure of the amount by which a price has fluctuated or is expected to fluctuate during the period. The measure of volatility is used in the Black Scholes option-pricing model is the annualized standard deviation of the continuously compounded rates of return on the stock over a period of time.
The period to be considered for volatility has to be adequate to represent a consistent trend in the price movements. It is also important that movement due to abnormal events get evened out. There is no research that demonstrates conclusively how long the historical period used to estimate expected long-term future volatility should be. However, informal tests and preliminary research tends to confirm that estimates of expected future long term volatility should be based on historical volatility for a period that approximates the expected life of the options being valued."
Risk-free rate of return: The risk-free rate being considered for the calculation is the interest rate applicable for a maturity equal to the expected life of the options based on the zero-coupon yield curve for Government Securities.
Exercise Price: The Exercise Price as communicated to us by the management of the Company have been considered in the valuation.
Time to Maturity: Time to Maturity / Expected Life of Options is the period for which the Company expects the Options to be live. The minimum life of a stock option is the minimum period before which the Options cannot be exercised and the maximum life is the period after which the Options cannot be exercised.
Expected dividend yield: The management's representation of the Expected dividend yield of 0% has been accepted for the purpose of this valuation.
NOTE 37 : CORPORATE SOCIAL RESPONSIBILITY
During the period ended March 31,2024 the Company has spent ' 6.72 million (P.Y. ' 2.16 million) out of the total amount of ' 6.72 million (P.Y. ' 2.16 million) required to be spent as per section 135 of the Companies Act 2013 in respect of Corporate Social Responsibility [CSR]. The aforementioned amount has been contributed to India Infoline Foundation.
Note 38 :-
1. The wholly owned subsidiary of the Company namely 5paisa P2P Limited ("the Company") was incorporated on December 17, 2017 with the objective to provide an online marketplace to the participants involved in peer to peer lending and also to act as a distributor of financial products. The company has received approval from RBI to commence its business as NBFC P2P and the company has started its P2P business operations.
2. The Wholly owned subsidiary of the Company namely 5paisa Insurance Brokers Limited was incorporated on Oct 27, 2018.
3. The wholly owned subsidiary of the Company namely 5paisa Trading Limited had incorporated on February 27,2020.
4. The wholly owned subsidiary of the Company namely 5Paisa International Securities (Ifsc) Limited had incorporated on Jun 15,2022.
Note 39 : -
The Company operates from and uses the premises, infrastructure and other facilities and services as provided to it by group companies which are termed as 'Shared Services’. Hitherto, such shared services consisting of administrative and other revenue expenses paid for by the company were identified and recovered from them based on reasonable management estimates, which are constantly refined in the light of additional knowledge gained relevant to such estimation. These expenses are recovered on an actual basis and the estimates are used only where actual were difficult to determine.
Note 40 Code on Social Security
The Code on Social Security, 2020 ('Code') relating to employee benefits during employment and postemployment received Indian Parliament approval and Presidential assent in September 2020. The Code has been published in the Gazette of India and subsequently on November 13, 2020 draft rules were published and invited for stakeholders' suggestions. The Central Government on 30th March 2021 has deferred the implementation of the said Code and the date on which the Code will come into effect has not been notified. The Company will assess the impact of the Code when it comes into effect and will account for the related impact in the period the Code becomes effective.
NOTE 41 : RATIOS
Additional regulatory information required under (WB)(xvi) of Division III of Schedule III amendment, disclosure of rations, is not applicable to the Company as it is in broking business and not an NBFC registered under Section 45-IA of Reserve Bank of India Act, 1934.
NOTE 42 : ADDITIONAL REGULATORY INFORMATION AS PER DIVISION III SCHEDULE III OF COMPANIES ACT, 2013
a) No funds have been advanced or loaned or invested 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, whether, 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 provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries."
b) No funds have been received by the company from any persons or entities, including foreign entities ("Funding Parties"), with the understanding, whether recorded in writing or otherwise, that the company shall, whether, 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 provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries
c) The Company does not have any long-term contracts including derivative contracts for which there are any material forseeable losses.
d) There were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company.
e) No proceedings have been initiated or pending against the company for holding any benami property under the Benami Transactions (Prohibition) Act, 1988 (45 of 1988).
f) The Company has not been declared as wilful defaulter by any bank or financial Institution or other lender.
g) During the year, the company has not entered into any transactions with companies struck off under section 248 of the Companies Act, 2013 or section 560 of Companies Act, 1956.
h) There are no transactions which have not been recorded in the books of accounts and which have been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961.
i) The quarterly returns / statements of current assets filed by the Company, with banks from whom borrowings have been availed on the basis of security of current assets, are in agreement with the books of account.
j) There are no charges or satisfaction yet to be registered with the registrar of companies beyond the statutory period.
k) The company does not have layers beyond the number prescribed under clause (87) of section 2 of the Act read with Companies (Restriction on number of Layers) Rules, 2017.
l) The company has not traded or invested in Crypto Currency or Virtual Currency during the financial year.
Note 43 - Acquistion of Online Retail Trading Business of IIFL Securities
The Board of Directors of the Company in their meeting held on December 6, 2022, had approved the Scheme of Arrangement between the Company and IIFL Securities Limited and their respective shareholders and creditors, which inter alia provided for the demerger of the Online Retail Trading Business of IIFL Securities Limited into the Company. Thereafter, the Stock Exchanges vide their respective letters dated November 20, 2023 (in case of BSE Limited) and December 01,2023 (in case of National Stock Exchange of India Limited) had returned the abovementioned application and requested the Company to refile the same with additional documents / clarifications.
The Board of Directors of the Company later noted that subsequent to its approval for the proposed Scheme in December 2022, there had been substantial changes in the business environment and considering the overall impact of change in business environment in detail, the Board was of the opinion that it is prudent and in the interest of the Company and its stakeholders, to withdraw the proposed Scheme. The Board thereafter vide its Circular Resolution dated January 22, 2024, withdrew the said proposed Scheme."
Note 44 :- Comparatives
Previous year figures are re-grouped, re-classified and re-arranged, wherever considered necessary to confirm to current year’s presentation.
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