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Can Fin Homes

BSE: 511196|NSE: CANFINHOME|ISIN: INE477A01012|SECTOR: Finance - Housing
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Mar 16
Accounting Policy Year : Mar '17

i. METHOD OF ACCOUNTING

The Company adopts the accrual method and historical cost concept in the preparation of the accounts in accordance with generally accepted accounting principles.

ii. REVENUE RECOGNITION

The Company follows National Housing Bank’s (NHB) Prudential Norms for recognition of income for Non-performing assets and provision for Non-performing & Standard assets. As per NHB Prudential Norms, an asset will be classified as non-performing if the interest or installments are overdue for 90 days or more. Further, non-performing assets are classified into sub-standard, doubtful and loss assets depending upon the age. Income is recognized on accrual basis in respect of performing Assets and on receipt basis for non-performing Assets.

iii. ACCOUNTING OF HOUSING LOANS

Loans to the extent, the installments have not become due as at the year-end and suit filed accounts are being shown under housing loans.

iv. INTEREST ON LOANS

Repayment of loans is by way of Equated Monthly Installments (EMIs) comprising of principal and interest. EMIs commence once the entire loan is disbursed. Pending commencement of EMIs, Pre-EMI interest is receivable every month. Interest is calculated on annual/ monthly rest basis.

v. INVESTMENTS

Investments are long term in nature and capitalized at cost inclusive of brokerage and stamp charges and adjusted for any front-end fees received. Premium paid on Investments are written off in the year of purchase. Weighted Average Cost is taken for determining the profit on sale of Investments.

vi. FIXED ASSETS

Fixed Assets are capitalized at cost inclusive of legal and/or installation expenses.

vii. DEPRECIATION

Depreciation is calculated on the Written Down Value Method as per the useful life, in the manner prescribed in Schedule II to the Companies Act, 2013.

viii. EMPLOYEE BENEFITS

The Provision towards Gratuity, Compensated Absence, Exempt Provident Fund, Leave Fare Concession and Sick Leave are made based on the actuarial valuation as at the end of the year and charged to the Profit & Loss Account along with actuarial gains/losses.

ix. TAXATION

Tax expense comprises Current and Deferred Taxes. Provision for Current Taxes is measured at amount expected to be paid to the tax authorities in accordance with the Indian Income Tax Act, 1961 on the basis of estimated taxable income for the current accounting period. Deferred Income Taxes resulting from timing difference between book and taxable profit is accounted for using the rates and laws that have been enacted or substantially enacted as at the Balance Sheet date. The Deferred Tax Asset is recognized and carried forward only to the extent that there is a future taxable income.

x. ACCOUNTING OF BORROWING EXPENSES

Expenses incurred for issue of NCDs & CPs such as ROC fee, Stamp Duty etc., are charged to Profit & Loss Statement in the year of issue. Discount on CPs are amortized to the Statement of Profit & Loss over the tenure of the CP.

2.1 During the financial year 2014-15 the Company had allotted 61,34,992 Equity Shares of the face value of H10/- each for cash at a price of H450/- each (inclusive of a premium of H440/- per share) on Rights basis on 09/03/15 and the allotment of 10,583 equity shares are kept in abeyance pending receipt of final order by the Hon’ble High Court of Kerala.

2.2 Terms and rights attached to Equity Shares: The Company has one class of Equity shares having a face value of H10/- per share and each shareholder is eligible for one vote per share held. In the event of liquidation the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amount in proportion to their shareholdings.

3.1 Special Reserve has been created over the years in terms of Income Tax Act 1961, out of the distributable Profits of the Company.

3.2 As per Section 29C of the National Housing Bank Act, 1987, the Company is required to transfer at least 20% of its net profits every year to a reserve before any dividend is declared. For this purpose, any Special Reserve created by the Company under Section 36(1) (viii) of the Income Tax Act, 1961 is considered to be an eligible Transfer U/S 29C of the NHB Act, 1987 also. The Company has transferred a sum of RS,6,400 Lakh (previous year RS,5,500 Lakh) to Special Reserve which is in terms of Section 36(1)(viii) of the Income Tax Act, 1961 and RS,4,800 Lakh (previous year RS,3,200 Lakh) to Additional Reserve U/S 29C of the NHB Act, 1987 during the FY16-17.

3.3 Vide Circular NHB(ND)/DRS/Pol.62/2014 dated May 27, 2014, the National Housing Bank (NHB) had directed Housing Finance Companies (HFCs) to provide for deferred tax liability in respect of the balance in the Special Reserve created under section 36(1)(viii) of the Income Tax Act, 1961 as on 31/03/14 and permitted to adjust the same from Retained Earnings. Further, vide Circular NHB(ND)/DRS/Pol.65/2014 dated August 22, 2014, NHB has permitted HFCs to adjust the Deferred Tax Liability in a phased manner, over a period of three years in the ratio of 25:25:50 starting from FY14-15. Accordingly the Company has to adjust the DTL of RS,7,399.96 Lakh in three years. In the current year the Company has transferred RS,3,700.00 Lakh (previous year RS,1,850 Lakh) from the General Reserve to DTL on the Special Reserve outstanding as on 31/03/14. The Company has transferred the third and final tranche of 50% being RS,3,700 Lakh in this year ending 31/03/17 from the General Reserves to DTL (RS,3,700 Lakh transferred in the previous two years).

3.4 Further, Deferred Tax Liability (net) of RS,1,977.65 Lakh (previous year RS,1,675.56 Lakh) is charged off to the Statement of Profit & Loss, on account of various components of assets & liabilities including Special Reserve appropriated during the current year.

3.5 The Company has in the current year recommended a Dividend of RS,10/- on the Equity Shares of the face value of RS,10/- each. (refer note 9.1)

3.6 Presentation of Reserve Fund as per NHB’s policy circular reference NHB(ND)/ DRS/ Pol.Circular.61/ 2013-14 dated April 7, 2014 and Notification No. NHB.HFC.CG-DIR.1/MD&CEO/2016 dated February 9, 2017 issued by National Housing bank.

3.7. During the year an amount of RS,281.87 Lakh earlier shown under the head Land & Building was bifurcated into Land (RS,97.77 Lakh) and Building (RS,187.10 Lakh). This has resulted in reversal of accumulated depreciation and thereby increase in profit by RS,58.85 Lakh during the year which is disclosed as Prior Period Adjustment in the statement of Profit & Loss.

5.1 The borrowings from National Housing Bank, HUDCO, Canara Bank, HDFC Bank, Bank of Baroda, Federal Bank, and State Bank of India are secured by way of specific charge on book debts, outstanding, receivables, etc.,/ promissory notes and / or a negative lien on assets of the Company. The tenure of the Long term borrowings are more than one year and up to 15 years and that of short term borrowings is less than 1 year.

5.2 During the year the Company has issued Secured Redeemable Non-Convertible Non-Cumulative Taxable Debentures worth RS,1,86,200 Lakh (previous year RS,1,54,000 Lakh) through private placement totaling to RS,3,60,200 Lakh. These debentures are secured by way of floating charge on the assets i.e., loan receivables specifically earmarked for the purpose. The debentures to the extent of RS,25,000 Lakh (raised in the year 2013-14) were secured by way of floating charge on the assets i.e., loan receivables specifically earmarked for the purpose and also by mortgage of an immovable property (an apartment located at Kodigehalli, Hebbal, Bengaluru) in favour of the Debenture Trustees. The said debenture of RS,25,000 Lakh have been redeemed on the due date during the current financial year.

5.3 Further, the Company has issued Unsecured Debentures in the nature of Tier II Bonds worth H100 crore in the financial year 2014-15 for a term of 10 years through private placement. These Debentures are subordinated to present and future senior indebtedness of the Company and qualify as Tier II Capital under the National Housing Bank (NHB) guidelines for assessing capital adequacy. Based on the balance term to maturity as at March 31, 2017, 100% of the book value of the subordinated debt is considered as Tier II Capital for the purpose of Capital Adequacy computation.

5.4 As per the Directions of the National Housing Bank, the Company has created floating charge on Statutory Liquid Assets (Investments in Govt. Securities and Deposits in Commercial Banks) in favor of the Trustees of the depositors in a manner prescribed by the National Housing Bank in terms of sub-sections (1) & (2) of section 29B of the NHB Act, 1987.

7.1 The Overdraft account with related party includes RS,15,106.07 Lakh (previous year RS,8,980.76 Lakh) being the cheques issued towards disbursements to borrowers and towards expenses but not encased as on 31/03/17.

7.2 Commercial Paper of the Company have a maturity value of H2,37,000.00 Lakh (previous year H1,00,000.00 Lakh)

8.2 Other Liabilities include H Nil (Previous Year H Nil) payable to Suppliers registered under The Micro, Small & Medium Enterprises Development Act 2006. No interest has been paid by the Company during the year to the suppliers covered under The Micro, Small & Medium Enterprises Development Act 2006. The above information takes into account only those suppliers who have responded to inquiries made by the Company for this purpose.

8.3 As required under Section 125 of the Companies Act, 2013, the Company has transferred H0.72 Lakh (Previous Year H3.62 Lakh) to Investor Education and Protection Fund (IEPF) during the year as of March 31, 2017, except to the extent of H63.44 Lakh (previous year H21.41 Lakh) in respect of claims that are disputed. As of March 31, 2017, no amount was due for transfer to the IEPF.

8.4 Provision for Expenses includes provision made for interest on NHB borrowings of H NIL (previous year RS,7,025.46 LakRs,) and interest on Debentures of RS,14,702.75 Lakh (previous year RS,8,544.83 Lakh).

9.1 The Government of India, vide notification dated March 30, 2016 and Circular no. 4/2016 dated April 27, 2016 had amended The Companies (Accounting Standards) Rules, 2016 effective from March 30, 2016. According to the amended rules the proposed dividend will not be recorded as a liability as at March 31, 2017 (Refer para 8.5 of AS4 - Contingencies and Events occurring after the Balance Sheet date). Accordingly the proposed dividend (refer para 3.5) of H10/- each per share and tax thereon are not recognized as Liability in the annual accounts of the financial year ending 31/03/17. However, the same will be considered as Liability on approval of shareholders at ensuing Annual General Meeting.

* land jointly held with others Note

1. Depreciation has been charged as per the Revised Schedule II of the Companies Act, 2013.

2. During the year an amount of H281.87 lakh earlier shown under the head Land & Building was bifurcated into Land (H97.77 lakh) and Building (H187.10 lakh). This has resulted in reversal of accumulated depreciation and thereby increase in profit by H58.85 lakh during the year which is disclosed as Prior Period Adjustment in the statement of Profit & Loss.

12. DEFERRED TAX ASSET / LIABILITY

In view of Accounting Standard 22 Accounting for Taxes on Income issued by the Institute of Chartered Accountants of India, adjustment to the deferred tax liability (net) of RS,1,977.65 Lakh {Previous year RS,1,675.56 Lakh} has been made and is adjusted against provision for tax for the current year. Deferred tax assets and liabilities are measured using tax rates and tax laws that have been enacted or substantively enacted as at the reporting date. The tax effects of significant timing (temporary) differences that resulted in deferred tax assets and liabilities and description of the financial statement items are as follows:

13.1 Loans and installments due from borrowers are secured, partly secured or otherwise by:

(a) Equitable mortgage of property and/or

(b) Other securities, assignment of life insurance policies and/or

(c) Bank guarantees, Company guarantees or personal Guarantees and/or

(d) Negative lien and/or

(e) Undertaking to create a security.

20.1 Employee Benefit Expenses include RS,459.21 Lakh (Previous Year RS,407.50 Lakh) towards provision made in respect of Gratuity, accumulated leave salary (PL encashment), Statutory Provident Fund and Leave Travel Assistance which is in the nature of Long Term Employee Benefits and has been actuarially determined as per the Accounting Standard on Employee Benefits (AS 15).

23.1 The Company has entered into lease cum license agreement with M/s Encore Theme Technologies Pvt. Ltd., for implementation of Integrated Business Suit (IBS) software. The expenditure incurred in this regard amounting to RS,299.35 Lakh (Previous Year RS,277.87 Lakh) is charged off to the P & L account under Professional fees - IBS.

24 The Company has provided 100% provision for Non-Performing assets. Additional Provision provided in the current year is RS,815.38 Lakh (previous year RS,540.53 Lakh).

25 Prior Period Adjustment: During the year an amount of RS,281.87 Lakh earlier shown under the head Land & Building was bifurcated into Land (RS,97.77 Lakh) and Building (RS,187.10 Lakh). This has resulted in reversal of accumulated depreciation and thereby increase in profit by RS,58.85 Lakh during the year which is disclosed as Prior Period Adjustment in the statement of Profit & Loss.

h) Registration obtained from other financial sector regulators : NIL

i) Rating assigned by Credit Rating Agencies and migration of rating during the year:

MAAA by ICRA for Deposit Schemes

AAA by CARE, India Ratings & Research Pvt Limited (FITCH) and ICRA for Debenture issue A1 by ICRA for CP issue

AAA by ICRA for long term bank loans and A1 for short term bank loans The same rating was assigned in the last year also.

j) Revenue Recognition

No revenue recognition has been postponed pending the resolution of significant uncertainties.

k) Accounting Standard 21 - Consolidated Financial Statements (CFS)

The subject Standard is not applicable for the Company.

m) Draw Down from Reserves

There was no drawn down from Reserves during the year 2016-17 except for creation of Deferred Tax Liability on Special Reserve as per the Circular No. NHB(ND)/DRS/Pol.65/2014 dated August 22, 2014 issued by National Housing Bank.

Source :
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