3.15 Provisions, contingent liabilities and contingent assets
A. Provisions
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.
B. Contingent liability
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.
C. Contingent Asset
A contingent asset is a possible asset that arises from past events and whose existence will be confirmed
only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the
control of the Company. Contingent assets are not recognised and disclosed only when an inflow of
economic benefits is probable.
3.16 Taxes
A. Current tax
Current tax assets and liabilities for the current and prior years are measured at the amount expected to
be recovered from, or paid to, the taxation authorities. Current tax is the amount of tax payable on the
taxable income for the period as determined in accordance with the applicable tax rates and the
provisions of the Income Tax Act, 1961.
Current income tax relating to items recognised outside profit or loss is recognised outside profit or loss
(either in other comprehensive income or in equity). Current tax items are recognised in correlation to the
underlying transaction either in OCI or equity.
B. Deferred tax
Deferred tax is recognised on temporary differences between the carrying amounts of assets and
liabilities in the standalone financial statements and the corresponding tax bases used in the computation
of taxable profit.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in
which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been
enacted or substantively enacted by the end of the reporting period. The carrying amount of deferred tax
liabilities and assets are reviewed at the end of each reporting period.
Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss (either
in other comprehensive income or in equity). Deferred tax items are recognised in correlation to the
underlying transaction either in OCI or equity.
Deferred tax assets and liabilities are offset if such items relate to taxes on income levied by the same
governing tax laws and the Company has a legally enforceable right for such set off.
C. Goods and services tax / value added taxes paid on acquisition of assets or on incurring expenses
Expenses and assets are recognised net of the goods and services tax paid, except when the tax incurred
on a purchase of assets or availing of services is not recoverable from the taxation authority, in which
case, the tax paid is recognised as part of the cost of acquisition of the asset or as part of the expense
item, as applicable.
The net amount of tax recoverable from, or payable to, the taxation authority is included as part of
receivables or payables in the balance sheet.
3.17 Earnings Per Share
Basic earnings per share is computed by dividing the profit after tax (i.e. profit attributable to ordinary
equity holders) by the weighted average number of equity shares outstanding during the year.
Diluted earnings per share is computed by dividing the profit after tax (i.e. profit attributable to ordinary
equity holders) as adjusted for after-tax amount of dividends and interest recognised in the period in
respect of the dilutive potential ordinary shares and is adjusted for any other changes in income or
expense that would result from the conversion of the dilutive potential ordinary shares, by the weighted
average number of equity shares considered for deriving basic earnings per share as increased by the
weighted average number of additional ordinary shares that would have been outstanding assuming the
conversion of all dilutive potential ordinary shares
Potential equity shares are deemed to be dilutive only if their conversion to equity shares would decrease
the net profit per share from continuing ordinary operations. Potential dilutive equity shares are deemed
to be converted as at the beginning of the period, unless they have been issued at a later date. Dilutive
potential equity shares are determined independently for each period presented. The number of equity
shares and potentially dilutive equity shares are adjusted for share splits / reverse share splits, right issue
and bonus shares, as appropriate.
3.18 Dividends on ordinary shares
The Company recognises a liability to make cash to equity holders of the Company when the distribution
is authorised and the distribution is no longer at the discretion of the Company. As per the Companies
Act, 2013, a distribution is authorised when it is approved by the shareholders. A corresponding amount is
recognised directly in equity.
3.19 Cash flow statement
Cash flows are reported using the indirect method as prescribed under Ind AS 7, whereby profit 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. The cash flows from operating, investing and financing activities of the
Company are segregated based on the available information.
3.20 Operating cycle
Based on the nature of products/activities of the Company and the normal time between acquisition of
assets and their realisation in cash or cash equivalents, the Company has determined its operating cycle as
12 months for the purpose of classification of its assets and liabilities as current and non-current.
3.21 Use of estimates
The preparation of the financial statements in conformity with Ind AS requires the management to make
estimates and assumptions considered in the reported amounts of assets and liabilities (including
contingent liabilities) and the reported income and expenses during the year.
4. Adoption of Ind AS
The Company has adopted Ind AS with effect from 1st April 2019 with comparatives being restated.
Accordingly the impact of transition has been provided in the Opening Reserves as at 1st April 2018. The
figures for the previous period have been restated, regrouped and reclassified wherever required to
comply with the requirement of Ind AS and Schedule III.
i) Fair value as deemed cost exemption
The Company has elected to measure items of property, plant and equipment and intangible
assets at its carrying value at the transition date.
ii) Derecognition of financial assets and financial liabilities
The Company has applied the derecognition requirements of financial assets and financial
liabilities prospectively for transactions occurring on or after April 1, 2018 (the transition date).
iii) Impairment of financial assets
The Company has applied the impairment requirements of Ind AS 109 retrospectively; however,
as permitted by Ind AS 101, it has used reasonable and supportable information that is available
without undue cost or effort to determine the credit risk at the date that financial instruments
were initially recognised in order to compare it with the credit risk at the transition date. Further,
the Company has not undertaken an exhaustive search for information when determining, at the
date of transition to Ind ASs, whether there have been significant increases in credit risk since
initial recognition, as permitted by Ind AS 101.
17.1 Nature and purpose of reserve
1 Special reserve
Special Reserve is created as required under Section 45-IC of the RBI Act.
2 Securities premium
Securities premium reserve is used to record the premium on issue of shares. The reserve can be utilised only for
limited purposes in accordance with the provisions of section 52 the Companies Act, 2013.
3 Surplus in Statement of Profit and Loss
Surplus in Statement of Profit and Loss is the accumulated available profit for the company carried forward from
earlier years. These reserve are free reserves which can be utilised for any purpose as may be required.
B Measurement of fair values
i. Valuation techniques and significant unobservable inputs
The carrying amounts of financial assets and liabilities which are at amortised cost are considered to be the same
as their fair values as there is no material differences in the carrying values presented.
ii. Financial instruments - fair value
The fair value of financial instruments as referred to in note (A) above have been classified into three categories
depending on the inputs used in the valuation technique. The hierarchy gives the highest priority to quoted prices
in active markets for identical assets or liabilities (Level 1 measurements) and lowest priority to unobservable
inputs (Level 3 measurement).
The categories used are as follows:
Level 1: Level 1 hierarchy includes financial instruments measured using quoted prices;
Level 2: The fair value of financial instruments that are not traded in active market is determined using valuation
technique which maximizes the use of observable market data and rely as little as possible on entity specific
estimates. If all significant inputs required to fair value on instrument are observable, the instrument is included in
level 2; and
Level 3: If one or more of significant input is not based on observable market data, the instrument is included in
level 3.
iii. Transfers between levels I and II
There has been no transfer in between level I and level II.
C Capital
The Company maintains an actively managed capital base to cover risks inherent in the business and is meeting the
capital adequacy requirements of the regulator.
Company has complied in full with all its externally imposed capital requirements over the reported period. Equity
share capital and other equity are considered for the purpose of Company's capital management.
1 Capital Management
The primary objectives of the Company's capital management policy are to ensure that the Company complies
with externally imposed capital requirements and maintains strong credit ratings and healthy capital ratios in
order to support its business and to maximise shareholder value.
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. No changes have been made to the objectives, policies and processes from the previous years.
However, they are under constant review by the Board.
35 Financial risk management objectives and policies
The Company's principal financial liabilities comprise loans and borrowings, trade and other payables. The main
purpose of these financial liabilities is to finance the Company's operations and to support its operations. The
Company's financial assets include loan and advances, cash and cash equivalents that derive directly from its
operations.
The Company is exposed to credit risk, liquidity risk and market risk. 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 developing and monitoring the
Company's risk management policies. The committee reports regularly to the board of directors on its activities.
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's 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.
1) Credit Risk
Credit risk is the risk of financial loss to the Company if a customer or counter-party to financial instrument fails to
meet its contractual obligations and arises principally from the Company's receivables from customers and loans.
The carrying amounts of financial assets represent the maximum credit risk exposure.
Loans and advances
The Company's exposure to credit risk is influenced mainly by the individual characteristics of each customer.
However, management also considers the factors that may influence the credit risk of its customer base, including
the default risk associated with the industry.
The risk management committee has established a credit policy under which each new customer is analysed
individually for creditworthiness before the Company's standard payment and delivery terms and conditions are
offered. The Company's review includes external ratings, if they are available, financial statements, credit agency
information, industry information and in some cases bank references.
An impairment analysis is performed at each reporting date based on the facts and circumstances existing on that
date to identify expected losses on account of time value of money and credit risk. For the purposes of this
analysis, the loan receivables are categorised into groups based on days past due. Each group is then assessed for
impairment using the Expected Credit Loss (ECL) model as per the provisions of Ind AS 109 - Financial instruments.
The calculation is based on provision matrix which considers actual historical data adjusted appropriately for the
future expectations and probabilities. Proportion of expected credit loss provided for across the ageing buckets is
summarised below:
The loss rates are based on actual credit loss experience over past years. These loss rates are then adjusted
appropriately to reflect differences between current and historical economic conditions and the Company's view
of economic conditions over the expected lives of the loan receivables. Movement in provision of expected credit
loss has been provided in below note.
Cash and cash equivalent and Bank deposits
Credit risk on cash and cash equivalent and bank deposits is limited as the Company generally invests in term
deposits with banks.
2) Liquidity Risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting its obligations associated with its
financial liabilities. The Company's approach in managing liquidity is to ensure that it will have sufficient funds to
meet its liabilities when due.
The Company monitors its risk of a shortage of funds by estimating the future cash flows. The Company's
objective is to maintain a balance between continuity of funding and flexibility through the use of cash credit
facilities and bank loans. The Company has access to a sufficient variety of sources of funding.
The composition of the Company's liability mix ensures healthy asset liability maturity pattern and well diverse
resource mix.
3) Market risk
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of
changes in market prices. Market risk includes interest rate risk and foreign currency risk. The objective of market
risk management is to manage and control market risk exposures within acceptable parameters, while optimising
the return.
3.1 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. The Company's exposure to the risk of changes in market interest rates relates
primarily to the Company's investment in bank deposits and variable interest rate borrowings and lending. The
interest rates for the tenure of the fixed deposits are fixed. However, with the continuous decrease in the returns
on fixed deposits, the income earned on such deposits may change in future based on the interest rates.
The sensitivity analysis have been carried out based on the exposure to interest rates for bank deposits, lending
and borrowings carried at variable rate.
The company has mainly obtained short term loan which are repayable on demand, Further the company has
mainly given Short Term Advances which are also repayable on demand, besides most of the loans given and loans
taken are fixed interest loan and therefore there is not significant / material effect of interest rate due.
3.2 Foreign Currency Risk
The company does not have any instrument denominated or traded in foreign currency. Hence, such risk does not
affect the company.
36 Revenue from contracts with customers
Set out below is the disaggregation of the Company's revenue from contracts with customers and reconciliation
to profit and loss account:
39 Additional regulatory information
(b) Details of Benami Property Held
The Company does not hold any benami property as defined under the Benami Transactions (Prohibition) Act,
1988 (45 of 1988) and the rules made thereunder. No Proceeding has been initiated or pending against the
company for holding any benami property under the Benami Transactions (Prohibition) Act, 1988 (45 of 1988) and
the rules made thereunder.
(c) Particulars of Transactions with companies struck off under section 248 of the Companies Act, 2013 or
Section 560 of Companies Act, 1956 are given hereunder:
During the year the company has not done any transaction with struck off companies.
(d) Registration of Charges of Satisfaction with Registrar of Companies
The Company does not have any charges or satisfaction, which yet to be registered with ROC beyond the
statutory period.
(e) Undisclosed Income
The Company does not have any such transaction which is not recorded in the books of accounts that has been
surrendered or disclosed as income during the year in the tax assessment under the income tax act, 1961 (Such as
search or survey or any other relevant provisions of the income tax act, 1961.
(f) Details of Crypto Currency or Virtual Currency
The Company has not traded or invested in crypto currency or virtual currency during the financial year.
(g) The Company has not advanced or loaned or invested funds to any other person(s) or entity, including
foreign entities (intermediaries) with the understanding that the Intermediary Shall:
a. 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
b. provide any guarantee, security or the like on behalf of the ultimate beneficiaries.
(h) The Company has not received any fund any person or entity, including foreign entities (funding party) with
the understanding (whether recorded in writing or otherwise) that the company shall:
a. 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
b. provide any guarantee, security or the like on behalf of the ultimate beneficiaries.
40 As per the management explanation, the company does not has any immovable property. Further the
Company has not revalued its property, plant and equipment (including right-of-use assets) during the current or
previous year.
41 The Management is of the opinion that as on the Balance Sheet date, there are no indications of material
impairment loss on Fixed Assets, hence, the need to provide for impairment loss does not arise.
42 Previous year figures have been recasted / restated wherever necessary including those as required in keeping
with revised Schedule III amendments.
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