C9. Provision and Contingent liabilities assets
• Provisions:
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, 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.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, considering the risks and uncertainties surrounding the obligation. Provisions are determined by discounting the expected future cash flows at a pretax rate that reflects current market assessments of the time value of money and the risks specific to the liability.
• Contingent liabilities / assets:
A possible obligation that arises from past events and the existence of which 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; present obligation that arises from past events where 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 are disclosed as contingent liability and not provided for.
Contingent assets are disclosed where an inflow of economic benefits is probable. Contingent assets are not recognised in the standalone financial statements.
C10. Finance costs
Finance costs include interest expense computed by applying the effective interest rate on respective financial instruments measured at amortized cost. Financial instruments include bank term loans, nonconvertible debentures, commercial papers and exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost. Finance costs are charged to the standalone statement of profit and loss in the period for which they are incurred.
C11. Impairment of non-financial assets
The Company assesses on each reporting date whether there is any indication that any Property, Plant and Equipment and Intangible Assets or group of assets, called Cash Generating Units (CGU) may be impaired. If any such indication exists, the recoverable amount of an asset or CGU is estimated to determine the extent of impairment, if any. When it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the CGU to which the asset belongs.
An impairment loss is recognised in the standalone statement of profit and loss to the extent, asset's carrying amount exceeds its recoverable amount. The recoverable amount is higher of an asset's fair value less cost of disposal and value in use. Value in use is based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and risk specific to the assets. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount and the impairment loss is recognised in the standalone statement of profit and loss.
When an impairment loss subsequently reverses, the carrying amount of the asset (or a cash-generating unit) is increased to the revised estimate of its recoverable amount such that the increased carrying amount does not exceed the carrying amount that would have been determined if no impairment loss had been recognised for the asset (or cash-generating unit) in prior years. The reversal of an impairment loss is recognised in the standalone statement of profit and loss.
C12. Employee benefits expense
a. Short-term employee benefits
Liabilities for employee benefits, including
non-monetary benefits that are expected to be settled wholly within 12 months after the end of the period in which the employees render the related service are the amounts expected to be paid when the liabilities are settled. Short-term employee benefits are recognised in the standalone statement of profit and loss in the period in which the related service is rendered.
b. Long-term employee benefits
The expected costs of other long-term employee benefits, such as long-term service incentive plan benefits (not being share-based payments), are accrued over the requisite service period which is typically the vesting period.
• Post-employment benefits
• Defined contribution plans
A defined contribution plan is a postemployment benefit plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution plans are recognised as an employee benefit expense in the standalone statement of profit and loss in the periods during which the related services are rendered by the employees.
The Company pays provident and other fund contributions to publicly administered funds as per related Government regulations. The Company has no further obligation other than the contributions payable to the respective funds.
• Defined benefit plans
A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Company's net obligation in respect of defined benefit plans is calculated separately for each plan annually by a qualified actuary using the project unit credit method and spread over the period during which the benefit is expected to be derived from employees' services.
Remeasurement gains or losses arising from experience adjustments and changes in actuarial assumptions are recognised directly in other comprehensive income in the period they occur and are subsequently transferred to retained earnings.
• Leave encashment / compensated absences
The Company's net obligation in respect of long-term employee benefits other than postemployment benefits is the entitlement to compensated absences. The expected cost of accumulated compensated absences is determined by actuarial valuation using the projected credit method for the unused entitlement accumulated at the balance sheet date.
The benefits are discounted using the market yields at the end of the balance sheet date that has terms approximating the terms of the related obligation. Remeasurements resulting from experience adjustments and changes in actuarial assumptions are recognised in standalone statement of profit and loss.
C13. Earnings per share
Basic earnings per share is calculated by dividing the net profit after tax by the weighted average number of equity shares outstanding during the year adjusted for bonus element in equity share. Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to consider the conversion of all dilutive potential equity shares.
C14. Foreign currencies transactions and translation
Transactions in foreign currencies are recorded at the exchange rate prevailing on the date of transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency's closing rates of exchange at the reporting date. Exchange differences arising on settlement or translation of monetary items are recognised in the standalone statement of profit and loss.
Non-monetary items that are measured in terms of historical cost in a foreign currency are recorded using the exchange rates at the date of the transaction. Nonmonetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was measured. The gain or loss arising on translation of non-monetary items measured at fair value is treated in line with the recognition of the gain or loss on the change in fair value of the item.
In the case of an asset, expense or income where a non-monetary advance is paid / received, the date of transaction is the date on which the advance was initially recognised. If there were multiple payments or receipts in advance, multiple dates of transactions are determined for each payment or receipt of advance consideration.
C15. Operating segments
Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision Maker (CODM) of the Company. The CODM is responsible for allocating resources and assessing the performance of the operating segments of the Company.
Segment revenue, segment expenses, segment assets and segment liabilities have been identified to segments on the basis of their relationship to the operating activities of the segment. Revenue, expenses, assets and liabilities which are related to the Company as a whole and are not allocable to segments on a reasonable basis have been included under unallocable revenue / expenses / assets or liabilities.
C16. Contract liabilities
A contract liability is the obligation to transfer goods or services to a customer for which the Company has received consideration (or an amount of consideration is due) from the customer. If a customer pays consideration before the Company transfers goods or services to the customer, a contract liability is recognised when the payment is made, or the payment is due (whichever is earlier). Contract liabilities are recognised as revenue when the Company performs under the contract.
D. Critical accounting judgements and key sources of estimations uncertainty
The preparation of the Company's financial statements requires management to make judgements, estimates and assumptions that affect the reported amount of revenue, expenses, assets and liabilities and the accompanying disclosures. Actual results may differ from these estimates. 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 the subsequent financial year. Accounting estimates and underlying assumptions are reviewed on an ongoing basis. Revisions of estimates are recognised prospectively.
D1. Provisions and contingent liabilities
The timing of recognition and quantification of the provisions, contingent liabilities / assets require the application of judgement to existing facts and circumstances which are subject to change on the actual occurrence or happening. Judgement is required for estimating the possible outflow of
resources, if any, in respect of contingencies / claims / litigations against the Company and possible inflow of resources in respect of the claims made by the Company which has been considered to be contingent in nature. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates.
D2. Impairment of financial assets
The measurement of impairment losses across all categories of financial assets requires judgement and the estimation of the amount and timing of future cash flows when determining impairment losses and the assessment of a significant increase in credit risk. These estimates are driven by several factors, changes in which can result in different levels of allowances. It has been the Company's policy to regularly review its models in the context of actual loss experience and adjust when necessary.
D3. Fair value measurement
The fair values of financial instruments that are not traded in an active market and cannot be measured based on quoted prices in active markets are determined using valuation techniques including the Discounted Cash Flow (DCF) model. The Company uses its judgment to select a variety of methods and make assumptions that are mainly based on market conditions at regular intervals.
The inputs to these models are taken from observable markets where possible, but where this is not feasible,
a degree of judgment is required in establishing fair values. Judgments include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments.
D4. Defined benefit plans (gratuity benefits)
The company's retirement benefit obligations, cost of the defined benefit gratuity plan and the present value of the gratuity obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, inflation, future salary increments and mortality rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.
E. Recent Accounting Pronouncements
Ministry of Corporate Affairs ("MCA") notifies new standards or amendments to the existing standards under Companies (Indian Accounting Standards) Rules as issued from time to time. For the year ended 31st March, 2024, MCA has not notified any new standards or amendments to the existing standards applicable to the Company.
Nature and purpose of reserves Capital redemption reserve
Capital redemption reserve (CRR) represents reserve created pursuant to Section 55 (2) (c) of the Companies Act, 2013 by transfer of an amount equivalent to nominal value of the Preference shares redeemed. The CRR may be utilised by the Company in accordance with the provisions of the Companies Act, 2013.
Securities premium
The amount received in excess of the face value of share capital issued and subscribed is recognised in securities premium. Further it also includes amount of per share value in excess of face value of share capital issued and subscribed pursuant to the Scheme of Arrangement (Refer note no. 30) The reserve can be utilised only for limited purposes in accordance with the provisions of the Companies Act, 2013.
Capital reserve
Pursuant to the Scheme of Arrangement (Refer note no. 30) the entire pre-scheme paid up share capital stood cancelled on allotment of new equity shares and has been credited to capital reserve.
Statutory reserve fund
Statutory reserve represents the reserve created in terms of Section 45 IC(1) of the Reserve Bank of India Act, 1934 (the "RBI Act”). Appropriation from this Reserve Fund is permitted only for the purposes specified by RBI.
Retained earnings
Retained earnings represents the surplus in the statement of profit and loss and net amount of appropriations made to / from retained earnings.
Remeasurement of defined benefit liability
Remeasurement comprises of gains and losses resulting from experience adjustments and changes in actuarial assumptions. These are recognised directly in other comprehensive income during the period in which they occur and are presented separately under reserve and surplus.
29. Segment reporting
The Company is engaged primarily in the business of investing & financing in India which constitutes one single reporting segment in accordance with Ind AS-108 "Operating Segments". Therefore, there are no separate business or geographical segments as reportable.
30. In accordance with the Scheme of Arrangement between Reliance Industries Limited (RIL) and its shareholders and creditors ("the Scheme") and the Company and its shareholders and creditors as approved by the Hon'ble National Company Law Tribunal, Mumbai Bench by an order dated 28th June, 2023, the Financial Services Business of RIL, along with its related assets and liabilities at the values appearing in the books of accounts of RIL as on the closing business hours of 31st March, 2023 (Appointed Date), was demerged and transferred and vested into the Company with effect from the Appointed Date. The Effective Date of the Scheme was 1st July, 2023. Therefore, the figures of the previous year may not be comparable with the figures of the current year.
In terms of the Scheme, the Company has issued and allotted 635,32,84,188 equity shares having a face value of ^ 10 each fully paid up at a premium of ^ 25.70 per share, for every 1 fully paid-up equity share held in RIL on 10th August, 2023 (Record Date), which was pending for allotment as at 31st March, 2023. Upon allotment of new equity shares, the entire pre-scheme paid up share capital stood cancelled, and an equivalent amount has been credited to capital reserve.
The effect of the aforementioned Scheme has been accounted for in the books of accounts in accordance with the Scheme and Ind AS and there are no deviations between the two.
Reliance Industrial Investments and Holding Limited had transferred its investments in its wholly-owned subsidiaries namely Jio Finance Limited (formerly known as Reliance Retail Finance Limited), Jio Payment Solutions Limited (formerly known as Reliance Payment Solutions Limited) and Jio Leasing Services Limited (formerly known as Jio Information Aggregators Services Limited) to the Company. These step-down subsidiaries have become direct subsidiaries of the Company.
Necessary approval for the change in the name of the Company to "Jio Financial Services Limited" was received on 25th July, 2023.
Valuation Methodology
All financial instruments are initially recognised and subsequently re-measured at fair value as described below:
The fair value of investment in quoted Equity shares, Bonds, Government securities, Treasury bills, Certificate of deposit, Commercial paper and Mutual funds are measured at quoted price or NAV.
C) Financial Risk Management
Risk Management Framework:
The Company's Board of Directors has overall responsibility for the establishment and oversight of the Company's risk management framework. The Board of Directors has established the Risk Management Committee, which is responsible for overseeing development and monitoring the Company's risk management policies. The Committee reports regularly to the Board of Directors on its activities. Risk management involves identifying, measuring, monitoring and managing risks on a regular basis. To achieve this objective, the Company employs leading risk management practices and recruits experienced people.
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. 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 maintain 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 both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the audit committee.
The Board of Directors have constituted risk management committee. The purpose of the Committee is to assist the Board in its oversight of various risks (i) Credit Risk (ii) Market and Liquidity Risk (iii) Operational Risk.
Different types of risks the Company is exposed to are as under:
Credit risk
Credit risk is the risk of financial loss to the company if a customer or counter party to a financial instrument fails to meet its contractual obligations and arises principally from the company's receivable from customers, loans and investments in debt securities.
a) Cash & cash equivalents and other bank balances
The Company holds cash & cash equivalents and other bank balances aggregating T 4,590.20 crore (previous year T 5,249.8 crore). The creditworthiness of such banks and financial institutions is evaluated by the management on an ongoing basis and is considered to be good.
b) Investments
The Company had limited its exposure to credit risk by investing in money market instruments that have an investment grade credit rating. The Company monitors changes in credit risk by tracking external credit ratings.
c) Loans
The Company has limited its exposure to credit risk by rendering loans only to its group companies, wherein company has significant influence.
Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Company's income or the value of its holding of financial instruments.
Main activity is to do investment in financial instruments. This market is influenced by domestic / international political, financial and other events occurring on day-to-day basis. Hence the market is constantly volatile and uncertain. The Company has strong treasury philosophies and practices and is well geared to meet the challenges of volatile market conditions.
Interest rate risk
Interest rate risk consists primarily of risk inherent in ALM activities and relates to the potential adverse impact of changes
in market interest rates on future net interest income (NII). Since the company does not have any financial assets or liabilities bearing floating interest rates any change in interest rates at the reporting date would not have significant impact on standalone financial statement of the company.
Company's borrowing for the current year and previous year is NIL (except borrowings transferred pursuant to Scheme of Arrangement, Refer note no. 30) from Bank / FI etc.
Liquidity risk
Liquidity risk is the risk that the company may not be able to meet its obligations on time or at a reasonable price. The Company maintains sufficient liquid assets to meet working capital requirements in the form of term deposits with banks and / or in money market instruments which can be liquidated on demand. The Company's financial liabilities consists mainly of accrued expenses and other liabilities which are due within the next twelve months from the reporting date. The Company has sufficient funds to meet all maturing obligations.
Liquidity analysis for non-derivative financial liabilities
The following table details the Company's remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods. The table has been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Company is required to pay.
Operational Risk
Operational risk is the risk arising from inadequate or failed internal processes, people or systems, or from external events. The Company manages operational risks through comprehensive internal control systems and procedures laid down around various key activities in the Company viz. loan acquisition, customer service, IT operations, finance function etc. Further IT and operations have a dedicated compliance and control units within the function who on a continuous basis review internal processes. This enables the Management to evaluate key areas of operation risks and the process to adequately mitigate them on an ongoing basis.
33. Capital
a) Capital management
The Company manages its capital to ensure that it will continue as a going concern while maximising the return to stakeholders and ensuring adequate liquidity is available to meet its commitments. The company manages its capital structure prudently and may undertake adjustments in light of changes in business conditions. The overall strategy remained unchanged as compared to last year.
(iii) Willful defaulter: The company has not been declared as a willful defaulter by any bank or financial institution or other lender.
(iv) The company has not entered into any transaction during the year nor there is any balance outstanding against the companies struck off u/s 248 of the Companies Act, 2013.
(v) There is no charge or satisfaction yet to be registered with Registrar of Companies (ROC) beyond the statutory period.
(vi) Utilisation of borrowed funds and share premium:
(a) The Company has not advanced or loaned or invested funds to any other persons or entities, including foreign entities (Intermediaries) other than normal course of business with the understanding 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) other than normal course of business 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.
(vii) The Company has not carried out any such transaction which is not recorded in the books of accounts that have been surrendered or disclosed as income during the year in the tax assessments under the Income-tax Act, 1961.
(viii) Details of crypto currency or virtual currency: The Company has not traded or invested in crypto currency or virtual currency during the financial year.
38. Events after reporting date
There have been no events after the reporting date that require adjustments or disclosure in these financial statements.
39. The figures for the corresponding previous year have been regrouped / reclassified wherever necessary.
40. Approval of Financial Statements
The Financial statements were approved by the board of directors on 19th April, 2024.
41.10 Disclosures as required in para 116 of RBI notification - RBI/DOR/2021-22/85 DOR.STR.
REC.53/21.04.177/2021 -22 dated 24th September, 2021 'Master Direction - Reserve Bank of India (Securitisation of Standard Assets) Directions, 2021 to the extent applicable
Disclosures to be made in Notes to Accounts by originators - Not applicable
41.11 Disclosures as required in para 86 of RBI notification - RBI/DOR/2021-22/86 DOR.STR.
REC.51/21.04.048/2021-22 dated 24th September, 2021 'Master Direction - Reserve Bank of India (Transfer of Loan Exposures) Directions, 2021 to the extent applicable.
a) Details of loans (not in default) transferred / acquired during the year - NIL
b) Details of stressed loans transferred during the year - NIL
c) Details of stressed loans acquired during the year - NIL
d) During the year excess provisions of NIL reversed to the profit and loss account on Accounts of sale of stressed
e) Details on recovery ratings assigned for Security Receipts (SR) by the credit rating agencies: NIL
As per our Report of even date For and on behalf of the Board
For C K S P AND CO LLP Charanjit Attra K. V. Kamath - Non-Executive
Chartered Accountants Group Chief Operating Officer DIN: 00043501 Chairman
(Firm Registration No :
131228W / W100044) Abhishek Haridas Pathak Isha M. Ambani - Non-Executive
Group Chief Financial Officer DIN: 06984175 Director
Kalpen Chokshi
Partner Mohana V Hitesh Kumar Sethia — Managing Director
Membership No.135047 Group Company Secretary DIN: 09250710 and Chief Executive
Officer
For LODHA & CO LLP Rajiv Mehrishi Bimal Manu Tanna
Chartered Accountants DIN: 00208189 DIN: 06767157
(Firm Registration No : Non-Executive
301051E / E300284) Anshuman Thakur Rama Vedashree Dlrectors
DIN: 03279460 DIN: 10412547
R. P. Singh
Partner
Membership No. 052438 Date: 19th April, 2024
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