No trade or other receivable are due by directors or other officers of the NBFC or any of them either severally or jointly with any person, or debts due by firms including LLP, private companies respectively in which any director is a partner, ora director or a member.
Trade receivables are non-interest bearing and are generally on terms of 30 to 60 days.
The Company does not felt necessary to provide for Expected credit loss on trade receivables, as historic credit lossover the preceding three to five years on the total balance of non-credit impaired trade receivables is close to Nil
Cred it q ua lity of assets
The table below shows the credit quality and the maximum exposure to credit risk based on the Company's internalpolicy and year end stage classification. The amount presented are gross of impairment allowances. Company's internal guidelines on ECL allowances are set out in Note no 5.2 (f) and Note no. 34(1)
Terms / rights / restrictions attached to equity shares
(d) The Company has only one class of equity shares. The holders of equity shares are entitled to receive dividend as declared from time to time and are entitled to one vote per share.
(e) In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential dues. The distribution will be in proportion to the numberof equity shares held by the shareholders.
(f) Shareholders holding more than 5 % of the equity shares in the Company
(j) There were no securities issued having a term for conversion into equity / preference shares.
(k) There are no calls unpaid in respect of Equity Shares issued by the Company
(l) There are no forfeited shares by the Company
Nature and purpose of Reserves
1) Securities Premium
Securities Premium reserves is used to record the premium on issue of shares. The reserve can be utilized only for limited purposes such as issuance of bonus shares, writing off the preliminary expenses in accordance with the provisions of the Companies Act, 2013.
2) Capital Reserve
Capital reserve represents the amount received on reissue of forfeited shares and are not the free reserves and cannot be used to pay dividends to shareholders.
3) Statutory Reserve (Pursuant to Section 45-IC of the Reserve Bank of India Act. 1934 (RBI Act. 1934)
Statutory reserve (Statutory Reserve pursuant to Section 45-IC of The RBI Act, 1934) defines that every non banking finance institution which is a Company shall create a reserve fund and transfer therein a sum not less than twenty percent of its net profit every year as disclosed in the statement of profit and loss before any dividend is declared.
- utULLiuivnniANUt uiviutu
Since for the current financial year the Company reported net loss, hence a sum of twenty percent as required by Section 45-IC of the RBI Act, 1934 has not been transferred to such reserve fund
4) Retained earnings
Retained earnings are the profits that the Company has earned till date, less any transfers to/from other comprehensive income income, or other distributions paid to shareholders if any
5) Other Comprehensive reserve
Items of Other Comprehensive income represents the fair value changes (both realised/unrealised and net of income tax) in equity instruments irrevocably designated at FVTOCI as per the business model assessment of the Company and are not recycled to profit and loss However the same can be transferred within equity as permitted by the I nd AS
Note No.: 32 Other disclosures
1) Contingent liabilities and commitments (to the extent not provided for)
a) Contingent liabilities:
NIL
b) Commitments:
There are no capital commitments contracted by the Company during the period under review
c) Other Statutory & Legal Matters
There has been no significant and/ or material order(s) passed by any Regulators/Courts/Tribunals impacting the status of the Company
2) There are no Micro, Small and Medium Enterprises, to whom the Company owes dues, which are outstanding for more than 45 days from the date they become due. This information as required to be disclosed under the Micro, Small and Medium Enterprises Development Act, 2006 has been determined to the extent such parties have been identified on the basis of information available with the Company.
3) Disclosures as required by Indian Accounting Standard (Ind AS) 37:- Provisions, Contingent liabilities and Contingent assets
(I) Nature of provision Provision for contingencies
Provision for contingencies represent provision towards various claims made/anticipated in respect of duties and taxes and otherlitigation claims against the Company,based cri the Management's assessment
5) Segment Reporting:
The Company's primary business segments are reflected based on the principal business carried outi.e. Investments & Financing. All other activities of the Company revlove around the main business. The risk and returns of the business of the Company is not associated with geographical segmentation, hence there is no secondary segment reporting based on geographical segment. As such, there are no separate reportable segments as per the Indian Accounting Standard 108.
* The said amount does not includes amount in respect of gratuity and leave as the same are not ascertainable
d) The transactions with related parties have been entered at an amount which are not materially different from those on normal commercial terms.
e) The amounts outstanding are unsecured and will be settled in cash. No guarantees have been given or received. No expense has been recognised in current year and previous year for bad or doubtful debts in respect of the amounts owed by related parties.
f) The remuneration of directors is determined by the Nomination & Remuneration Committee having regard to the performance of individuals and market trends.
Note No.: 33 Other disclosures
1) Financial instruments-Accounting, Classification and Fair value measurements
This section gives an overview of the significance of financial instruments for the Company and provides additional information on balancesheet items that contain financial instruments.
The details of significant accounting policies, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised in respect of each class of financial asset, financial liability and equity instrument are disclosed in Note 2 and Note 5 to the financial statements.
B. Fairvalue hierarchy
(1) The fair value of the financial assets and financial liabilities areUncluded 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
(2) The Company uses the following fair value hierarchy for determining and disclosing the fair value of financial instrument:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities. This category consists of investment in quoted equity shares
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Level 2: Inputs other than quoted prices inciudedWjtfiin Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3: Inputs for the assets or liabilities that e re not based on observable market data (unobservable inputs). Fair values are determined in whole or in part,using a valuation model based on assumptions that are neither supported by prices from observable current market transactions in the same instrument nor are they based on available market data. This level of hierarchy includes Company's investment in equity shares which are unquoted or for which quoted prices are not available at the reporting dates. Carrying value of investments in unquoted shares approximates cost at which they are purchased.
The following methods and assumptions were used to estimate the fair values Financial instruments measured atfairvalue
(I) Investments carried at fair value are generally based on market price quotations. However in cases where quoted prices are not available than different valuation techniquerare used by the management for different investments.
Certain investments in equity instruments are not held for trading. Instead, they are held for long term strategic purposes, hence The Company has chosen to designate thiese-investments in equity instruments at FVOCI since, it provides a more meaningful presentation. Further/ifyvestmefits which are held for trading and company considers them as stock in trade are designated through FVTPL Level 1 investments are valued at the quoted closing price on stock exchange. Investments included in Level 3 of the fair value hierarchy have been valued using the cost approach to arrive at their fair value
Cost of unquoted equity instruments have been cbn&fjered as an appropriate estimate of fair value because of wide range of possible fair value measurements and cost represents the best estimate of fair value within that range.
As at 31st March, 2024 and, 31st March, 2023 the company did not hold any financial assets or financial liabilities which could have been categorized as Levei 2
Financial instruments not measured atfairvalue
(ii) Financial assets not measured at fair value include cash and cash equivalents, trade receivables, loans and other financial assets. These are financial assets whose carrying amounts approximate fair value, due to their shortterm nature.
Additionally, financial liabilities such as trade payables and other financial liabilities are not measured at FVTPL whose carrying amounts approximate fair value, because of their short-term nature.
(iii) Management uses its best judgement in estimating the fair value of its financial instruments. However, there are inherent limitations in any estimation technique. Therefore, for substantially all financial instruments, the fair value estimates presented above are not necessarily indicative of the amounts that the Company could have realised or paid in sale transactions as of respective dates. As such, fair value of financial instruments subsequent to the reporting dates may be different from the amounts reported at each reporting date.
Risk Management
2) Financial risk management
Risk is an integral part of the Company's business and sound risk management is critical to success. The Company's primary business are reflected based on the principal business carried out i.e. loans and investments (and all other activities of the company revolve around the main business), hence the company is exposed to risks that are particular to its lending and the environment within which it operates and primarily includes credit risk, liquidity risk and market risk.
Since the company is Systematically non-important and non-deposit taking NBFC, and also in terms of Sub -Regulation (5) of Regulation 21 of SEBI (Listing Obligation and Disclosure Requirement), Regulations 2015 as amended, the Company is not required to have Risk Management Committee, but as a prudence the Board of Directors of the Company oversees the overall risk management approach, risk management strategies, procedures and principles.
The senior management provides assurance that the Company's financial risks are identified, measured and managed in accordance with the Company's internal guidelines and risk objectives
a) Credit Risk
Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leadingto a financial loss to the Company.
The Company's main income generating activty inter-alia is lending to customers and therefore credit risk is a principal risk. Credit risk mainly arises from loans and advances which are in entirety payable on demand.
The credit risk management guideline of the company seeks to have following controls and key metrics that allows credit risks to be identified, assessed, monitored and reported in a timely and efficent manner in compliance with regulatory requirements.
> Standardise the process of identifying new risks and having in place appropriate controls for these risks
> Maintain an appropriate credit administration and loan review system
> Establish metrics for portfolio monitoring
> Minimize losses due to defaults or untimely payments by borrowers and implementing appropriate risk mitigation techniques.
In order to mitigate the impact of credit risk in the future profitability, the company makes reserves basis the Expected Credit Loss (ECL) Model for the outstanding loans including interest accrued but not due and interest overdue therein at balance sheet date.
Asset classification is as per Reserve Bank of India guidelines and provisions is as per Expected Credit Loss Methodology as per Ind AS, which ever is higher than the minimum required as per prudential norms.
The below discussion describes the Company's approach for assessing impairment as stated in the significant accounting policies.
The mechanics of ECL
Ind AS requires the company to calculate ECL based on probability-weighted scenarios to measure the expected cash shortfalls, discounted at an approximation to the EIR. A cash shortfall is the difference between the cash flows that are due to the Company in accordance with the contract and the cashflows that the company expects to receive. The mechanics of the ECLcalculations are outlined below and the key elements are, as follows:
Probability of default (PD) -The probability of default is an estimate of the likelihood of default over a given time horizon. A default may only happen at a certain time over the assessed period, if the facility has not been previously derecognised and is still in the portfolio.
Exposure at default (EAD) -The exposure at default is an estimate of the exposure at a future default date.
The outstanding balance (including the interest accrued but not due and interest overdue) at the reporting date is considered EAD by the Company.
Since all the loans given by the company are repayable on demand, in this specific of on-demand repayable loan there are two options
1) The borrower is able to pay immediately (if demanded) or
2) The borrower is not able to pay immediately
Hence the company examines whether the borrower has sufficient liquid assets to repay the loan immediately If the borrower has sufficient liquid assets (cash and cash equivalents) to repay the outstanding loan including interest accrued therein, then ECL is close to zero, because probablitv of default is zero. The Company considers a financial instrument defaulted and therefore Stage 3 (credit impaired) for ECL. Calculations in all cases when the borrower becomes 90 days past due on its contractual paymehte'. I
As a part of the qualitative assessment of whether a customer is in default, the company also considers a variety of instances that may indicate unlikeness to pay. When such events occur, the Company carefully considers whether the event should result in treating the customer as defaulted and therefore assessed as Stage 3 for ECL calculations or whether Stage 2 is appropriate.
Considering that the PD determined above factors in amount at default, there is no separate requirement to estimate EAD.
\ % However, the probability of loss (PD) is not zero, if the company assess that the borrower has no sufficient liquid assets to repay the loan when demaded and accordingly the Company estimates the PD based on historical observed default rates adjusted for forward looking estimates, based upon macro-economic developments occuring in the economy and market it operates in and the relationship between key economic trends like GDP, benchmark rates set by the Reserve Bank q^lndia, inflation and most importantly the competitive advantage and disadvantage the company has in comparison to its peer group(s).
Based upon the above facts, the Company has assessed the following PD Percentage as at 31st March, 2024, while PD percentages for 31st March 2023 and on the date of transition remain same at 5%
Category
Loans: Unsecured and repayable on demand
Stage 1: All Standard loans in the above category upto 30 days past due (DPD) are considered as Stage 1 assets for computation of ECL
Stage 2: Exposure under Stage 2 include under-performing loans having 31 to 90 days past due (DPD) for computation of ECL
Stage 3: Exposure under Stage 2 include non-performing loans with overdue more than 90 days past due (DPD). Based upon historical data the Company assigns PD to Stage 1 and Stage 2 and applies it to the EAD to compute
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 Company would expect to receive, including from the realisation of any collateral. It is usually expressed as a percentage of the EAD.
Probability of default is consistent as mentioned above and LGD are always near to 100% since the loans are unsecured.
Further refer note no 10 which provides information about exposure to credit risk and ECL on loan Trade receivables
Trade receivables are non-interest bearing and dp rfotHnvolve significant financing cost further all the receivables are of short term in nature, hence transaction value approximates fair value for trade receivables.
The Company follows 'simplified approact/fwrecognition of impairment loss allowance on trade receivables. The application of simplified approach does not require the Company to track changes in credit risk.
An impairment analysis is performed at each balance sheet date on an individual basis for major clients. In addition, number of minor receivables are grouped into homogenous groups and assessed for impairment collectively
bl Liquidity Risk
Liquidity risk is the risk that the entity will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The entity's approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to entity's reputation.
Prudent liquidity risk management requires sufficient cash and marketable securities and availability of funds through adequate committed credit facilities to meet obligations when due and close out market positions.
The Company has a view of maintaining liquidity with minimal risks while making investments. The Company invests its surplus funds in short term liquid assets. The Company monitors its cash and bank balances periodically in view of its shortterm obligations associated with its financial liabilities.
Refer note 32 for analysis of maturities of financial assets and financial liabilities. cl Market Risk
Market risk arises when movements in market factors (interest rates, credit spreads, equity prices etc.) impact the Company's income or market value of its portfolios. The Company, in its course of business, is exposed to market risk due to change in equity prices and interest rates. The objective of market risk management is to maintain an acceptable level of market risk exposure while aiming to maximizing returns
(I) Equity price
The Company's exposure to equity price risk arises primarily on account of investments in equity instruments (both short term and long term). The Company designates its investments in equity instruments based upon its business model. Investments which are held for trading are fair valued through profit and loss, whereas investments which are held for long term and strategic purpose are fair valued through Other comprehensive income. The Company's equity price risk is managed in accordance with the objective of the Company and as approved by the senior management of the Company.
fii) Interest Rate Risk
The Company is exposed to Interest rate risk if the fair value or future cash flows of its financial instruments will fluctuate as a result of changes in market interest rates. Fair value interest rate risk is the risk of changes in fair values of fixed interest bearing investments because of fluctuations in the interest rates.
The Company's interest rate risk arises from interest bearing deposits with bank and loan given to customers. Such instrument exposes the Company to fair value interest rate risk. Management believes that the interest rate risk attached to these financial assets is not significant due to the nature of these financial assets.
d) Operational And Business Risk
Operational risk is the risk of loss arising from systems failure, human error, fraud or external events, when controls fails 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 effective segregation of duties, access, authorisation and reconciliation procedures, staff education and assessment processes, such as the use of internal audit.
3)Capital Management
The Company's capital management is intended to create value for shareholders by facilitating the meeting of longterm and shortterm goals of the Company. The Company determines the amount of capital required on the basis of recurring business plan coupled with long term and shortterm Strategic investments and expansion plans.
The funding needs are met through equity, cash generated from operations, short term borrowings and through use of bank overdrafts if required. For the purpose of the Company's capital management, capital includes issued equity capital, and all other equity reserves attributable to the equity shareholders of the Company. The Company's objective when managing capital is to safeguard its ability to continue as a going concern so that it can continue to provide returns to shareholders and other stake holders. The Company manages its capital structure and makes adjustments in light of changes in the financial condition and the requirement ofthe financial covenants if any.
To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholders (buy back its shares) or issue new shares.
a) Asset classifiation is as per Reserve Bank of India guidelines and provisions is as per Expected Credit Loss methodology as per Ind AS which is higherthan minimum required as per prudential norms
b) As the ECL provisions is higherthan provision required under IRACP (Income Recognition, Assets classification & provisioning, there is no requirement to create Impairment allowance reserve.
(6) Additional Regulatory Information
Amended Schedule III requires additional regulatory information to be provided in the financial statements. These are as follows;
1) Title deeds of Immovable Property
The Company does not have any immovable property during the year.
2) Revaluation of Property, Plant and Equipment and Right -of- Use Assets
The Company does not have any Property, Plant and Equipment during year
3) Intangible Assets underdevelopment
The Company does not have any intangible assets under development during the current and previous year reporting period.
4) Details of Benami Property held: Additional Disclosure
The Company does not hold any Benami Property and hence there were no proceedings initiated or pending against the Company for holding any benami property under the Benami Transactions (Prohibitions) Act, 1988 and the Rules made thereunder, hence no disclosure is required to be given as such.
5) Capital Work in Progress
The Company does not have any capital work in progress during the current and previous year reporting period.
6) Loans or advances to specified persons
The Company has granted loans to related parties (as defined under the Companies Act, 2013) either severally or jointly with any other person, that are repayable on demand.
Refer Note 10 for further details.
7) Undisclosed Income
The Company does not have any undisclosed Income which was not recorded in the books of accounts and which has been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961 such as, search or survey or any other relevant provisions. Also the Company does not have previously unrecorded income and related assets which were required to be properlyrecorded in the books of accounts duringtheyear.
8) Borrowings secured against current assets
The Company does not have any borrowings from banks or financial institutions on the basis of security of current assets hence no disclosure is required as such.
9) Wilful Defaulter
The Company has not been declared as wilful defaulter by any bank or financial institution or government or any government authority or any lender as at the date of the balance sheet or on the date of approval of the financial statements.
10) Relationship with Struck off Companies
The Company does not have any transactions with Companies which are struck off under Section 248 of the Companies Act, 2013 or Section 560 of the Companies Act, 1956, hence no disclosure is required as such.
11) Registeration of Charges or Satisfaction with Registrar of Companies (ROC)
There are no charges against the companies which are yet to be registered or satisfaction yet to be registered with ROC beyond the statutory period, hence no disclosures are required as such.
12) Compliance with number of layers of companies
The Company does not have investment in any downstream companies for which it has to comply with the 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, hence no disclosure is required as such.
13) Utilization of Borrowings
The Company does not have any outstanding balances towrads the borrowings from banks and financial institutions at the balance sheet date, hence no further disclosure is required as such.
14) Utilization of Borrowed Funds and Share Premium
(A) The Company has not advanced or loaneflofjinvested 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 inwri^ig or otherwise) that the intermediary shall;
/ ^ \
a) Directly or indirectly lent or invest in other person(s) or entity(ies) identified in any manner whatsoever by or on behalf of the company (Ultimate Beneficiaries) Or
b) Provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries. Hence no disclosure is required as such.
(B) The Company has not received any fund from any person(s) or entity(ies), including foreign entities (Funding Parties) with the understanding (whether recorded in writing or otherwise ) that the company shall;
a) Directly or indirectly lend or invest in other person(s) or entity(ies) identified in any manner whatsoever by or on behalf of the Funding Party (Ultimate Beneficiaries) Or
b) Provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries. Hence no disclosure is required as such.
15) Details of Crypto Currency Or Virtual Currency
The Company has not traded or invested in Crypto Currency or Virtual Currency during the financial year, hence disclosure requirmentsforthesame is not applicable
Note No.: 34 (2) Fraud
During the year there have been no such instances of fraud on the Company by the officers and employees, whether loan related misappropriations orcash embezzlements/ burglaries
Note No.: 34 (3) Previous year figures
Previous year figures have been regrouped/reclassified, where necessary, to conform current year's classification.
NOTES:
1. As defined in paragraph 2 (1) (xii) of the Non- Banking Financial Companies Acceptance of Public Deposits (Reserve bank) Directions, 1998.
2. Provisioning Norms shall be applicable as prescribed in Non-Systemically Important Non-Banking Financial (Non-Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions,
3. All Accounting Standards and Guidance Notes issued by ICAI are applicable including for valuation of Investments and other asset as also assets acquired in satisfaction of debts. However, market value in respect of quoted investment and break-up/ fair value/ NAV in respect of unquoted investment should be disclosed irrespective of whether they are classified as long term or current in (4) above.
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