1.1 Basis of preparation of financial statements :
a) These financial statements are prepared and presented in accordance with the Generally Accepted Accounting Principles (GAAP) under historical cost convention on accrual basis of accounting and comply with the Accounting Standards as prescribed under Section 133 of the Companies Act, 2013 and the guidelines issued by the National Housing Bank.
b) The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities (including contingent liabilities) on the date of financial statements and the reported amount of revenues and expenses during the reporting period. Management believes that the estimates used in preparation of the financial statement are prudent and reasonable. The future results could differ due to these estimates and the differences between the actual results and estimates are recognised in the periods in which the results are known / materialise.
c) Based on the nature of its activities, 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.
d) Amounts in the financial statements are presented in Rs. Lakh, except for per share data and as otherwise stated.
1.2 Revenue Recognition
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. In addition, the following criterias must also be met before revenue is recognised:
a) Interest on housing loans and other assets:
Repayment of housing loans is by way of Equated Monthly Installments (EMI) comprising principal and interest. Interest is calculated each period on the outstanding balance at the beginning of the Company’s financial year or on monthly reducing balance in terms of financing scheme opted by the borrower. EMI generally commences once the entire loan is disbursed. Pending commencement of EMI, pre-EMI monthly interest is payable.
Interest on performing assets comprising of fixed deposits, Certificate of Deposits, Debentures etc. are recognised on accrual basis and on non-performing assets on realisation basis as per the guidelines prescribed by the National Housing Bank.
b) Dividend income on investments is recognised when the right to receive the same is established. In term of Housing Finance Companies (NHB) Direction 2010 Dividend Income on units of Mutual Funds held by the Company are recongised on Cash Basis.
c) Processing fees and other loan related charges are recognised when it is resaonable to expect ulitimate collection which is generally at the time of Login/disbursement of the loan.
d) Additional / Overdue /penal interest / charges on delayed EMI/PEMI are recognised only when it is reasonably certain that the ultimate collection will be made.
e) Income from services including trade mark license fees is recognised after the service is rendered and to the extent it is probable that the economic benefits will flow to the Company and that the revenue can be reliably measured.
1.3 Interest & Ancillary Financial Cost :
Interest and other related financial charges are recognised as an expense in the period for which they relate as specified in Accounting Standard (AS 16) on “Borrowing Costs”. Ancillary costs in connection with the borrowings and deposit are amortised to Statement of Profit and Loss over the tenure of loan/deposit. Brokerage on deposits taken is amortised over the period of deposit.
Share / debenture issues expenses and premium / discount on issue of debentures (net of tax) are adjusted against the Securities premium account as permissible under the Companies Act, 2013 over the tenure of securities.
Interest accrued on cumulative fixed deposits and payable at the time of maturity is clubbed with the principal amount on the date of periodical rest when interest is credited in Fixed Deposit account in accordance with the particular deposit scheme.
1.4 Foreign Exchange Transactions :
Transactions in foreign currencies are recorded at the exchange rates prevailing on the date of transaction.
Monetary Assets and liabilities in foreign currencies are converted at the rates of exchange prevailing on the date of the financial statement. The net gain or loss on account of exchange differences either on settlement or on translation are recognised in the Statement of Profit and Loss.
In respect of Forward Exchange Contracts, the premium or discount arising at the inception of forward exchange contracts is amortised as expense or income over the life of the contract. Exchange differences on such contracts on reporting dates are recognised in the Statement of Profit and Loss. Any profit or loss arising on cancellation or renewal of forward exchange contract is recognised as income or as an expense in that year.
As a part of its risk management strategy, the Company has entered into derivatives like Interest Rate Swap, Cross Currency Swaps and Forward Contracts having the same notional amount and maturity as the underlying borrowings which are designated as fair value/cash flow hedge as applicable, as per Guidance Note on Derivatives (2015) issued by Institute of Chartered Accountants of India. All outstanding derivative contracts are marked-to-market as at the year end. The changes in fair value of hedges are recorded in income statement together with change in the fair value of underlying liability. Any profit/loss arising on cancellation/unwinding of derivative contracts are recognised as income or expenses.
1.5 Provision for Contingencies :
The Company makes provision towards Non Performing Assets and Standard Assets as per the Prudential Norms prescribed by the National Housing Bank. The Company also makes assessment of its portfolio and creates additional provision to meet unforeseen contingencies.
A loan is recognised as sub-standard Assets or Doubtful or Loss Assets based on the period for which the repayment installment or interest has remained in arrears as prescribed under NHB Guidelines.
1.6 Investments :
Investments are accounted at cost inclusive of brokerage, fees and stamp charges and are classified into two categories, viz. Current or Long-Term based on management’s intention at the time of purchase.
Current investments are carried category wise, at the lower of cost and fair value, whereas Long-Term investments are carried at cost less provision for diminution, other than temporary, in the value of such investments. Unquoted current investment in units of Mutual Funds are valued as per NAV of the Plan.
Provision for diminution in the value of investments is made in accordance with the guidelines issued by the National Housing Bank and the Accounting Standard on ‘Accounting for Investments’ (AS 13) and is recognised through the Provision for Contingencies Account.
1.7 Property, Plant & Equipment :
Tangible Fixed Assets are stated at cost less accumulated depreciation and impaired losses, if any. All directly attributable costs including borrowing cost, net of cenvat credit, till the asset is put to use is shown as capital work-in-progress and is capitalised thereafter.
Depreciation on fixed assets is provided on straight-line method by considering useful lives of assets which are same as specified in part ‘C’ of schedule II to the Companies Act, 2013.
1.8 Intangible Assets and Amortisation :
Intangible assets comprising of system software are stated at cost less accumulated amortisation.
Intangible assets are amortised over their estimated useful life of 3 to 6 years on straight-line method.
1.9 Impairment of Assets :
Impairment losses (if any) on Assets are recognised in accordance with the Accounting Standard 28 “Impairment of Assets”. The Company assesses at each Balance sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount of the assets. An asset is treated as impaired when the carrying cost of assets exceeds its recoverable value.
Lease rentals in respect of assets taken on “Operating Leases” are charged to the Statement of Profit and Loss on straight-line basis over the lease term.
Finance leases, which effectively transfer to the Company substantially all the risks and rewards incidental to ownership of the leased item, are capitalised at the lower of the fair value and present value of the minimum lease payments at the inception of the lease and are accordingly disclosed. The capital element of the leasing commitments is shown as Secured liabilities. Lease payments are apportioned between the finance charges and reduction of the corresponding liability based on the implicit rate of return.
1.11 Statutory / Special Reserve :
The Company creates Statutory / Special Reserve every year out of its profits in terms of Section 36(1) (viii) of the Income Tax Act, 1961 read with Section 29C of the National Housing Bank Act, 1987.
1.12 Prepaid Expenses :
Financial & Other Expenses incurred during the year which relates to future accounting years and brokerage paid on long-term fixed deposits has been treated as revenue expense only for the period relating to the current year and balance is treated as prepaid expenses to be adjusted on pro-rata time basis of respective instrument in the future accounting years.
1.13 Employee Benefits :
a) Company’s contribution in respect of Employees’ Provident Fund made to Government is considered as defined contribution plan and is charged to the Statement of Profit & Loss.
b) Gratuity Fund Scheme is considered as defined benefit plan. The Company’s liability is determined on the basis of an actuarial valuation using the Projected Unit Credit Method as at Balance Sheet date. Actuarial gains and losses comprise experience adjustments and the effects of changes in actuarial assumptions and are recognised in the Statement of Profit and Loss as Income or Expenses, as applicable in the period in which they occur.
c) Compensated Absences are accounted for on the basis of actuarial valuation at the year end using the projected Unit Credit Method. Actuarial gains/losses are recognised in the Statement of Profit & Loss in the period in which they occur.
d) Short-term employee benefits:
The undiscounted amount of short-term employee benefits expected to be paid in respect of services rendered by employees are recognised during the year when the employees render the service.
e) Company has introduced the Employee Stock Option Scheme (‘the Scheme’) which provides the grant of options to acquire equity shares of the Company to its employees. The options granted to employees vest in a graded manner and these may be exercised by the employees within a specified period.
The Company follows the intrinsic value method to account for its stock-based employee compensation plans. Compensation cost is measured by the excess, if any, of the market price of the underlying stock over the exercise price as determined under the option plan. The market price is the closing price on the stock exchange where there is highest trading volume on the working day immediately preceding the date of grant. Compensation cost, if any, is amortised over the vesting period.
The Company has also approved the grant of Employee Stock Appreciation Rights (SARs) to the eligible employees of the Company. The said SARs shall carry the right to apply for number of equity shares of the Company, equivalent to Appreciation in those rights, over the grant price.
The Company follows the intrinsic value method to account for its Employee Stock Appreciation Rights (SARs). Compensation cost is measured by the excess, if any, of the market price of the underlying stock over the exercise price as determined under the option plan. The market price is the closing price on the stock exchange where there is highest trading volume on the working day immediately preceding the date of grant. Compensation cost, if any, is amortised over the vesting period.
1.14 Earnings per share :
The Basic earning per share and diluted earning per share have been computed in accordance with Accounting Standard (AS-20) on “Earnings Per Share” and is also shown in the Statement of Profit and Loss.
Basic earnings per share is computed by dividing the profit after tax by the weighted average number of equity shares outstanding during the year. Diluted earnings per share is computed by dividing the profit after tax relating to the dilutive potential equity shares, by the weighted average number of equity shares considered for deriving basic earnings per share and the weighted average number of equity shares which could have been issued on the conversion of all dilutive potential equity shares which are deemed to be dilutive only if their conversion to equity shares would decrease the net profit per share from continuing ordinary operations. Company also discloses EPS- both basic and diluted- for the accounting period, had the Fair value method being used for compensation cost for ESOS/ESARs.
1.15 Taxes on Income :
Current tax is the amount of tax payable on the taxable income for the year as determined in accordance with the applicable tax rates and the provisions of the Income Tax Act, 1961.
Minimum Alternate Tax (MAT) paid in accordance with the tax laws, which during the specified period gives future economic benefits in the form of adjustment to future income tax liability, is considered as an asset if there is convincing evidence that the Company will pay normal income tax. Accordingly, MAT is recognised as an asset in the Balance Sheet when it is highly probable that future economic benefit associated with it will flow to the Company.
Deferred tax arising on account of timing differences and which are capable of reversal in one or more subsequent periods is recognised using the tax rates and tax laws that have been enacted or substantially enacted as at the reporting date. Deferred tax assets are recognised for timing differences, only to the extent that reasonable certainty exists that sufficient future taxable income will be available against which these can be realised. In the event of existence of carry forward of losses and unabsorbed depreciation, deferred tax assets are recognised to the extent there are virtual certainties supported by convincing evidence that they would be realised in future.
Deferred Tax liability on deduction claimed in earlier years u/s 36 (1)(viii) of the Income Tax Act, 1961 has been provided in terms of National Housing Bank (NHB) policy circular.
1.16 Provisions, Contingent Liability and Contingent Assets :
A provision is recognised when the Company has a present obligation 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 in respect of which a reliable estimate can be made. Provisions are not discounted to their present value and are determined based on the best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates.
Contingent Liabilities are not recognised but are disclosed in the notes. Contingent Assets are neither recognised nor disclosed in the financial statements
1.17 Housing and Other Loans :
Housing Loans include outstanding amount of Housing Loans disbursed directly or indirectly to individual, project loans for residential buildings and other borrowers. Other loans include mortgage loan, non-residential property loan, plot loan for self construction where construction has not begun in last three years and loan against the lease rental income from properties in accordance with directions of National Housing Bank (NHB). Other loans also include loans granted to Small & Medium Enterprise (SME) and certain part there of are unsecured in terms of the particular scheme. EMI and PEMI installments due from borrowers against the housing loans receivable for less than equal to three months, are treated as trade receivables and are shown as current assets.
1.18 Securitised Assets :
Securitised and Assigned Assets are derecognised in the books of the Company based on the principle of transfer of ownership interest over the assets.
1.19 Cash Flow Statement :
Cash flows are reported using the indirect method set out in Accounting Standard (AS 3) on Cash Flow Statement. The cash flows from operating, investing and financing activities of the Company are segregated based on the available information.
Cash and cash equivalents for the purpose of cash flow statement comprise cash at bank and in hand and short-term investments with an original maturity of three months or less.
1.20 Assets acquired under SARFAESI Act :
Assets acquired under SARFAESI Act are part of NPA Portfolio of loans for which necessary provisions are being made and such assets are to be disposed off at the earliest, subject to legal formalities. Losses/gains, if any, are being booked at the time of sales realisation of such assets.