b) Terms/rights attached to equity shares
The Company has only one class of equity shares, having a par value of Rs.10 per share. All shares rank pari passu with respect to dividend, voting rights and other terms. Each shareholder is eligible to one vote per share. The dividend proposed, if any, by the Board of Directors is subject to approval of shareholders in the ensuing Annual General Meeting, except in case of interim dividend. The repayment of equity share capital in the event of liquidation and buy back of shares are possible subject to prevalent regulations. In the event of liquidation, normally the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding.
i) Statutory Reserve under Section 45-IC of the RBI Act, 1934:
The Company has to create a reserve pursuant to section 45 IC of the Reserve Bank of India Act, 1934 by transferring amount not less than twenty per cent of its net profit after tax every year before any dividend is declared.
ii) Securities premium:
The amount received in excess of face value of the equity shares is recognised in Securities Premium Account. In case of equity-settled share based payment transactions, the difference between fair value on grant date and nominal value of share is accounted as securities premium account. The account is utilised in accordance with the provisions of the Companies Act 2013.
iii) General reserve:
Under the erstwhile Companies Act 1956, general reserve was created through an annual transfer of net income at a specified percentage in accordance with applicable regulations. Consequent to introduction of Companies Act 2013, the requirement to mandatorily transfer a specified percentage of the net profit to general reserve has been withdrawn. However, the amount previously transferred to the general reserve can be utilised only in accordance with the specific requirements of Companies Act, 2013.
iv) Retained earnings:
Retained earnings represents accumulated earnings of the Company. This reserve can be utilise in accordance with the provisions of Companies Act, 2013.
26 Employee benefits
Defined Contribution Plan - Provident Fund (PF) Contribution
The Company makes provident fund contribution which are defined contribution plans for qualifying employees under the scheme, company is required to contribute a specified percentage of the payroll costs to fund the benefits. The contribution payable to these plans by the company are at rates specified in the rules of the scheme.
Defined Benefit Plan - Gratuity
The Company operates an unfunded gratuity plan, under which every employee who has completed atleast five years of service gets a gratuity on departure @15 days of last drawn basic salary for each completed year of service.
The plan is of a final salary defined benefit in nature which is sponsored by the Company and hence it underwrites all the risks pertaining to the plan. The actuarial risks associated are:
Interest Rate Risk:
The risk of government security yields falling due to which the corresponding discount rate used for valuing liabilities falls. Such a fall in discount rate will result in a larger value placed on the future benefit cash flows whilst computing the liability and thereby requiring higher accounting provisioning.
Longevity Risks:
Longevity risks arises when the quantum of benefits payable under the plan is based on how long the employee lives post cessation of service with the company. The gratuity plan provides the benefit in a lump sum form and since the benefit is not payable as an annuity for the rest of the lives of the employees, there is no longevity risks.
Salary Risks:
The gratuity benefits under the plan are related to the employee’s last drawn salary. Consequently, any unusual rise in future salary of the employee raises the quantum of benefit payable by the company, which results in a higher liability for the company and is therefore a plan risk for the company.
The estimates of the future salary increases, considered in actuarial valuation, include inflation, seniority, promotion and other relevant factors such as supply and demand in the employment market. The discount rate is based on the prevailing market yield on government securities as at the balance sheet date for the estimated average remaining service.
27 Additional regulatory information
i) The company does not have any immovable property, hence disclosure for title deeds not held in the name of the company is not applicable
ii) The company does not hold any investment property in its books of accounts, so fair valuation of investment is not applicable
iii) During the year the company has not revalued any of its Property, plant and equipment or intangible assets.
iv) The company does not any trade receivables during the current and previous year
v) The company does not have any trade payable during the current and previous year
vi) The company does not have any Capital work in progress (CWIP) as on 31 March 2024 (PY -Nil)
vii) The company does not have any Intangible Assets under development.
viii) No proceeding have been initiated or pending against the company under the Benami Transactions (Prohibitions) Act 1988.
ix) The Company does not have any borrowings from banks or financial institutions on the basis of security of current assets.
x) The Company have not declared as a wilful defaulter by any bank or financial Institution or other lender.
xi) The company has not any transactions with companies struck off during the period.
xii) The company has no cases of any charges or satisfaction yet to be registered with ROC beyond the statutory time limits.
xiii) The company has complied with the provisions of clause (87) of section 2 of the Act read with the Companies (Restriction on number of Layers) Rules, 2017
xv) No scheme of arrangements has been approved by competent authority in terms of sections 230 to 237 of the Companies Act,2013 in respect of company.
xvi) The company has not provided nor taken any loan or advance to/from any other person or entity with the understanding that benefit of the transaction will go to a third party, the ultimate beneficiary.
xvii) The Company does not have any transaction not recorded in the books of accounts that has been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961
xviii) The Company has neither traded nor invested in crypto currency or virtual currency during the financial year.
30 Financial Risk Management
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 constituted the risk management committee, which is responsible for developing and monitoring the Company’s risk management policies. The Company’s risk management commiee 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 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.
The Company has exposure to the following risks arising from its business operations:
i) Credit risk
Credit risk is the risk of financial loss if a customer or counterparty fails to meet an obligation under a contract. Lending activities account for most of the Company’s credit risk. Other sources of credit risk also exist in loans and transaction settlements. Credit risk is measured as the amount that could be lost if a customer or counterparty fails to make repayments. The maximum exposure to credit risk in case of all the financial instruments is restricted to their respective carrying amount.Credit Risk is monitored through stringent credit appraisal, counter party limits ands internal risk ranges of the borrowers. Exposure to credit risk is managed through regular analysis of the ability of all the customers and counterparties to meet interest and capital repayment obligations and by changing lending limits where appropriate.
b) Credit quality analysis
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. The credit quality of Loans and advances measured at amortised cost is primarily assessed by the Days Past Due (DPD) status and other qualitative factors leading to increase in credit risk.
Inputs, assumptions and techniques used for estimating impairment
In assessing the impairment of financial assets under the expected credit loss model, the Company defines default when a loan obligation is overdue for more than 90 days and credit impaired.
Assessment of significant increase in credit risk
When determining whether the risk of default has increased significantly since initial recognition, the Company considers the DPD status of the loans. Credit risk is deemed to have increased significantly when an asset is more than 30 days past due (DPD) and other qualitative internal or external factors demonstrating credit or liquidity risk.
Calculation of expected credit losses
The key elements in calculation of ECL are as follows:
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.
EAD - The Exposure at Default is an estimate of the exposure at a future default date, taking into account expected changes in the exposure after the reporting date, including repayments of principal and interest, whether scheduled by contract or otherwise, expected drawdowns on committed facilities, accrued interest from missed payments and loan commitments.
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 lender would expect to receive, including from the realisation of any collateral. It is usually expressed as a percentage of the EAD. The LGD is determined based on valuation of collaterals and other relevant factors.
For PD the Company has relied upon the PD data from industry benchmarks and external rating agencies. For Loss Given Default (LGD) the Company has relied on internal and external information.
The following table sets out information about the credit quality of financial assets measured at amortised cost.
c) Movement in Gross Exposures and credit impairment for loans and advances
The Company uses ‘Expected Credit Loss’ (ECL) model, for evaluating impairment of Financial Assets measured at amortised cost or FVTOCI. Company follows a ‘three-stage’ model for impairment based on changes in credit quality since initial recognition. Please refer to the accounting policy for details.
ii) Liquidity Risk
Liquidity risk is the risk that the Company will encounter difficulties in meeting the obligations associated with its financial liabilities that are settled by delivering cash or other financial assets. The Company’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 the Company’s reputation.Company has in place an Asset-Liability Management Committee (ALCO) which functions as the operational unit for managing the Balance Sheet within the performance and risk parameters laid down by the Board and Risk Committee of the Board. ALCO reviews Asset Liability strategy and Balance Sheet management in relation to asset and liability profile. ALCO ensures that the objectives of liquidity management are met by monitoring the gaps in the various time buckets, deciding on the source and mix of liabilities, setting the maturity profile of the incremental assets and liabilities etc.
Key principles adopted in the Company’s approach to managing liquidity risk include:
a) Monitoring the Company’s liquidity position on a regular basis, using a combination of contractual and behavioural modelling of balance sheet and cash flow information.
b) Maintaining a high quality liquid asset portfolio or maintaining undrawn bank lines.
c) Operating a prudent funding strategy which ensures appropriate diversification and limits maturity concentrations.
The Company’s principal sources of liquidity are cash and cash equivalents and the cash flow that is generated from operation.
The following are the remaining contractual maturities of financial liabilities at the reporting date. The amounts are gross and undiscounted, and include interest accrued till the reporting date.
iii) Market Risk
Market Risk is the risk of financial loss arising on account of changes/fluctuations in market variables such as interest rates, equity prices etc. Market risk stems from the Company’s Loan book and balance sheet management activities, the impact of changes and correlation between interest rates, credit spreads and volatility in bond or equity prices.
Market risk represents the risk that the fair value or future cash flows of financial instruments will fluctuate due to changes in market variables such as interest rates, foreign exchange rates and equity prices.
iv) Interest rate risk
Company has exposure to interest rate risk, primarily from its lending business and related borrowings. The following table demonstrates the sensitivity to a reasonably possible change in interest rates (all other variables being constant) of the Company’s Statement of Profit and Loss.
Interest rate risk is managed primarily by monitoring the sensitivity of expected net interest income (‘NII’) under varying interest rate scenarios. This monitoring is undertaken by ALCO on regular basis. The NII sensitivities shown are indicative and based on simplified scenarios.
31 Financial Instruments
i) Accounting classification and fair values
The following table shows the carrying amounts and fair values of financial instruments (excluding investment in subsidiaries), including their levels in the fair value hierarchy. The company has disclosed financial instruments not measured at fair value at carrying values because their carrying amounts are a reasonable approximation of the fair values.
34. Contingent Liability
There is an outstanding Income Tax demand of Rs.9.90 lakhs regarding assessment year 2008-09 on account of mismatch of TDS Credit vs TDS Certificates (previous year -Rs.9.90 lakh).
35. Segment information
The Company is an NBFC registered with Reserve Bank of India and is in the business of providing credit. As such there are no separate reportable segments as per the Accounting Standards (Ind AS-108) -‘Operating Segment ‘specified under section 133 of the companies Act 2013. Since the business operations of the Company are concentrated in India, the Company is considered to operate only in the domestic segment and therefore there is no reportable geographic segment.
37. Prudential Norms of the Reserve Bank of India (RBI) :
a) The Company has earned profit during the financial year and Rs.40.09 lakhs transferred to”Reserve Fund” under section 45-IC of the Reserve Bank of India Act.1934. (Previous year Rs.Nil )
b) Balance Sheet of Non-Deposit taking Non-Banking Financial Company -
(as required in terms of paragraph 13 of Non-Banking Financial (Non-Deposit Accepting and Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007)
i) As defined in Paragraph 2(1) (xii) of the Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1998.
ii) Provisioning norms shall be applicable as prescribed in the Non-Banking Financial (Non-Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007.
iii) All Accounting Standards and Guidance Notes issued by ICAI are applicable including for valuation of investments and other assets as also assets acquired in satisfaction of debt. However, market value in respect of quoted investments and break up/fair value/NAV in respect of unquoted investments should be disclosed irrespective of whether they are classified as long term or current in column (4) above.
39. In certain cases, the Company has advanced loans on which no amount has been received against the principal and interest accrued thereon. The same is in accordance with the loan agreements entered by the Company which provides for payment of interest along with principal amount or at the expiry of the said loan agreements. The Company has correctly followed the relevant provisions of IND-AS as well as RBI regulations, so far as they are applicable to the said loan agreements in respect of provisioning. The Company is confident of the recovery of the said amounts as per respective terms of the loan agreements and has obtained declarations and confirmations from the respective parties.
40. In respect of loan given to TRN Energy Private Limited (Borrower) as per ICD agreement dated 31 May 2021 it is specified therein that the payment of interest on ICD or repayment of ICD shall be made by the Borrower upon clearing the dues of its term lenders as per financing agreement entered between the Borrower and its term lenders, who have sanctioned term facilities to TRN Energy Private Limited, which will be repaid up to 30 June 2038. Hence, the Company entered into a Novation Agreement dated 31 st March 2022 with ACB (India) Power Limited, the holding company of the Borrower, wherein it was agreed that ACB (India) Power Limited shall take over the loan of TRN Energy Private Limited from the Company by way of novation on cash basis with total consideration of Rs.76.75 crore as against total outstanding loan of Rs.84.09 crore in full and final settlement. Accordingly, during the month of June 2022 an amount of Rs.76.75 crore has been paid by ACB (India) Power Limited in full and final settlement of the ICD given to TRN Energy Private Limited. Also the Borrower has failed to deposit its TDS liability of Rs.1.54 crore pertaining to FY 2019-20 and 2020-21. The said TDS liability has been reversed and written off during the financial year 2023-24.
41. The outbreak of COVID 19 pandemic and consequent lockdown has severely impacted business and operations of the Company during the last three years, In relation to COVID-19, judgments and assumptions include the extent and duration of the pandemic, the impacts of actions of governments and other authorities, and the responses of businesses and consumers in different industries. While the methodologies and assumptions applied in the impairment loss allowance calculations remained unchanged from those applied prior to the COVID-19 pandemic, the Company has separately incorporated estimates, assumptions and judgments specific to the impact of the COVID-19 pandemic based on early indicators of moratorium and delayed payments metrics observed along with an estimation of potential stress on probability of defaults and exposure at defaults. The extent to which the COVID-19 pandemic will impact the Company’s impairment loss allowance on assets and future results will depend on future developments, which are highly uncertain and management has considered various internal and external information available up to the date of approval of financial results in assessing the impact of COVID-19 pandemic in the financial results for the year ended March 31,2024. Management will also continue to monitor changes in future economic conditions. The eventual outcome of the impact of COVID-19 and other business conditions may be different from that estimated as on the date of approval of these financial results..
42. The figures for the corresponding previous year have been regrouped/ reclassified wherever necessary to make them comparable.
43. The Financial Statements have been reviewed by the Audit Committee and approved by the Board of Directors at its meeting held on 24 May 2024.
44. There have been no events after the reporting date that require disclosure in these financial statements.
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