a) Basis of Preparation of Financial Statements
The Financial Statements have been prepared under the historical cost
convention on accrual basis and in accordance with Generally Accepted
Accounting Principles in India (Indian GAAP). The said Financial
Statements comply with the relevant provisions of the Companies Act,
1956 (the Act), the mandatory Accounting Standards notified by the
Central Government of India under Companies (Accounting Standards)
Rules, 2006, as amended from time to time and guidelines issued by the
Reserve Bank of India for Non-Banking Financial (Non Deposit Accepting
or Holding) Companies from time to time.
b) Use of Estimates
The preparation of financial statements in conformity with the
generally accepted accounting principles requires the management to
make estimates and assumptions that affect the reported amount of
assets, liabilities, revenue and expenses and disclosure of contingent
liabilities as of the date of the financial statements. The estimates
and assumptions used in the accompanying financial statements are based
upon the management''s evaluation of the relevant facts and
circumstances as of the date of the financial statements. Actual
results may differ from estimates and assumptions used in preparing
these financial statements.
c) Revenue Recognition.
Profit / Loss on sale of investments - Realized gain or loss on
investments which is the difference between the sale consideration and
the carrying cost is recognized in the Statement of Profit and Loss on
the date of recognition of sale. In determining the realized gain or
loss on sale of a security, the cost of such security is arrived on
First in First out basis.
The cost of investments acquired or purchased would include brokerage,
stamp charges and any duties directly related to the acquisition of
Transactions for purchase or sale of investments shall be recognized as
of the trade date and not as of the settlement date, so that the effect
of all investments traded during the financial year are recorded and
refected in the financial statements, for the year.
Where investment transactions take place outside the stock market, for
example, acquisitions through private placement or purchases or sales
through private treaty, the transaction would be recorded, in the event
of a purchase, as of the date on which the Company obtains an
enforceable obligation to pay the price or, in the event of sale, when
the Company obtains an enforceable right to collect the proceeds of
sale or an enforceable obligation to deliver the instruments sold.
Interest income from financing activities is recognized at the rates
implicit in the contract. Unrealized Interest income relating to
Non-performing assets is derecognized. Interest income is recognized on
time proportion basis. Dividend income is recognized when the right to
receive the same is established.
Fee for services rendered is recognized at the specific rates as per
the terms of contract. Advisory fee payable for advisory services is
recognized at the specific rates and as per terms agreed.
d) Fixed Assets
Fixed Assets are stated at cost less depreciation. Cost includes all
direct expenses relating to the acquisition and installation of fixed
Depreciation is provided on Written Down Value Method at the rates and
in the manner prescribed under Schedule XIV to the Companies Act, 1956.
Assets individually costing Rs. 5,000/- or less are depreciated fully in
the year of purchase.
f) Foreign Currency Transactions
Foreign currency transactions are recorded at the rate of exchange
prevailing on the date of transaction. At the year-end, all monetary
assets and liabilities denominated in foreign currency are restated at
the year-end exchange rates. Exchange differences arising on actual
payment / realisation and year end re-instatement referred to above are
recognized in the Statement of Profit and Loss.
Investments maturing within twelve months from the date of investment
and investments made with the specific intention to dispose of within
twelve months from the date of investment are classified as current
investments. Other investments are classified as long-term investments.
Investments which are long term in nature are stated at cost and
provision for diminution is made if the decline in value is other than
temporary in nature. If the Balance Sheet of the unlisted investee
company is not available for two years, shares in such companies shall
be valued at one Rupee only which is in accordance with the prudential
norms prescribed by the Reserve Bank of India for Non- Banking
Financial (Non Deposit Accepting or Holding) Companies.
Current investments are stated at lower of cost and fair value
determined on the basis of each category of investments. For this
purpose, the investments shall be categorized as Equity, Preference,
Debentures, etc. and considered scrip- wise and the cost and market
value aggregated for all investments in each category. Unquoted
investments in the units of mutual funds in the nature of current
investments shall be valued at the net asset value declared by the
mutual fund in respect of each particular scheme as at the Balance
The reclassification of Investments from long term to Current
investments would be effected with the approval of the Board of
h) Retirement Benefits Defined Benefit Plan
Gratuity liability determined on actuarial valuation performed in
accordance with the projected unit credit method, as at the Balance
Sheet date is provided for.
Actuarial gains and losses arising from effects of changes in actuarial
assumptions are immediately recognised in the Statement of Profit and
Loss as income or expense.
Defined Contribution Plan
Fixed contributions to Provident Fund are recognized in the accounts on
actual cost to the Company.
Liability for short term compensated absences is recognised as expense
based on the estimated cost of eligible leave to the credit of the
employees as at the Balance Sheet date on undiscounted basis. Liability
for long term compensated absences is determined on the basis of
actuarial valuation as on the Balance Sheet date.
i) Deferred Compensation Cost
In respect of stock options, granted pursuant to the Company''s
Employee Stock Option Scheme 2011, the Company determines the
compensated cost based on the intrinsic value method and the
compensation cost is amortised on a straight line basis over the
Current tax is determined on the income for the year chargeable to tax
in accordance with the provisions of Income tax Act, 1961.
Deferred tax resulting from timing differences between taxable
and accounting income is accounted for using the tax rates and tax laws
that are enacted or substantially enacted as on the Balance Sheet date.
The deferred tax asset is recognized and carried forward only to the
extent that there is a virtual certainly that the asset will be
realized in future. In other situations, deferred tax assets are
recognised only to the extent that there is reasonable certainty that
sufficient future taxable income will be available to realize these
k) Impairment of assets
The carrying amounts of assets are reviewed at each Balance Sheet date
if there is any indication of impairment based on internal/external
factors. An impairment loss is recognized wherever the carrying amount
of an asset exceeds its recoverable amount. The recoverable amount is
the greater of the assets net selling price and value in use. An asset
is treated as impaired when the carrying cost of asset exceeds its
recoverable value. An impairment loss is charged to Statement of Profit
and Loss in the year in which the asset is impaired and the impairment
loss recognized in prior accounting periods is reversed if there has
been a change in the estimate of recoverable amount. In assessing value
in use, the estimated future cash flows are discounted to their present
value at the weighted average cost of capital.
A provision is recognized when an enterprise has a present obligation
as a result of past event; it is probable that an outflow of resources
will be required to settle the obligation, in respect of which a
reliable estimate can be made. Provisions are not discounted to its
present value and are determined based on best estimate required to
settle the obligation at the Balance Sheet date. These are reviewed at
each Balance Sheet date and adjusted to refect the current best