(1) CORPORATE INFORMATION:
The Company is engaged in the business to provide finance and to undertake all lending and finance to any person or persons, co-operative society, association of persons, body of individuals, companies, institutions, firms, builders, developers, contractors, tenants and others either at interest or without and/or with or without any security for construction, erection, building, repair, remodeling, development, improvement, purchase of houses, apartments, flats, bungalows, rooms, huts, townships and/or other buildings and real estate of all descriptions or convenience there on and to equip the same or part thereof with all or any amenities or conveniences, drainage facility, electric, telephonic, television, and other installations, either in total or part thereof and /or to purchase any free hold or lease hold lands, estate or interest in any property and such other activities as may be permitted under the Main Objects of the Memorandum of Association of the Company.
The Board of Directors of Indiabulls Housing Finance Limited (100% subsidiary of “IBFSL”) and Indiabulls Financial Services Limited (“IBFSL”, “Erstwhile Holding Company”) at their meeting held on April 27, 2012 had approved the Scheme of Arrangement involving the reverse merger of IBFSL with the Company in terms of the provisions of Sections 391 to 394 of the Companies Act, 1956 (the “Scheme of Arrangement”). The Appointed Date of the proposed merger fixed under the Scheme of Arrangement was April 1, 2012. The Hon’ble High Court of Delhi, vide its Order dated December 12, 2012, received by the Company on February 8, 2013, approved the Scheme of Arrangement. In terms of the Court approved Scheme of Arrangement, with the filing of the copy of the Order, on March 8, 2013, with the office of ROC, NCT of Delhi & Haryana (the Effective Date), IBFSL, as a going concern, stands amalgamated with IBHFL with effect from the Appointed Date, being April 1, 2012.
Indiabulls Financial Services Limited (“IBFSL”) was incorporated on January 10, 2000 as a Private Limited Company. On March 30, 2001, the Company was registered under Section 45-IA of the Reserve Bank of India (RBI) Act, 1934 to carry on the business of a Non-Banking Financial Company. The Company was converted into a public limited Company pursuant to Section 44 of the Companies Act, 1956 on February 03, 2004.
Indiabulls Housing Finance Limited (“the Company”) (“IBHFL”) was incorporated on May 10, 2005. On December 28, 2005 the Company was registered under Section 29A of the National Housing Bank Act, 1987 to commence / carry on the business of a Housing Finance Institution without accepting public deposits. The Company is required to comply with provisions of the National Housing Bank Act, 1987, the Housing Finance Companies (NHB) Directions, 2010 and other guidelines / instructions / circulars issued by the National Housing Bank from time to time.
(I) Indiabulls Financial Services Limited (“Erstwhile Holding Company”) had issued Global Depository Receipts (GDR’s) which were transferred under the Scheme of Arrangement in financial year 2012-13. As at March 31, 2017 3,199,409 (Previous Year 3,019,521) GDR’s were outstanding and were eligible for conversion into Equity Shares. The Company does not have information with respect to holders of these GDR’s. Holders of Global Depository Receipts (GDRs) will be entitled to receive dividends, subject to the terms of the Deposit Agreement, to the same extent as the holders of Equity Shares, less the fees and expenses payable under such Deposit Agreement and any Indian tax applicable to such dividends. Holders of GDRs will not have voting rights with respect to the Deposited Shares. The GDRs may not be transferred to any person located in India including Indian residents or ineligible investors except as permitted by Indian laws and regulations.
(II) 312,511,167 (Previous Year 312,511,167) equity Shares were allotted by the Company, for consideration other than cash to the shareholders of Erstwhile Holding Company pursuant to and in terms of the Scheme of Arrangement, approved by the Hon’ble High Court of Delhi vide its Order dated December 12, 2012, which came into effect on March 8, 2013 from the Appointed Date April 1, 2012.(Refer Note 39)
(III) Reconciliation of the number of shares and amount outstanding at the beginning and at the end of the financial year:-
* Includes 2,564,078 (Previous Year 2,149,424) Equity Shares of Rs.2 each issued during the year, under various ESOP Schemes aggregating to Rs.5,128,156 (Previous Year Rs.4,298,848), Nil (Previous Year 6,643,700) Equity Shares of Rs.2 each issued during the year to eligible warrant holders (Refer Note 5(i)) against outstanding Share warrants aggregating to Rs.Nil (Previous Year Rs.13,287,400) and Nil Equity Shares Rs.2 each issued during the year (Previous Year Rs.56,934,372) under Qualified Institutions Placement (Refer Note 5(ii)) aggregating to Rs.Nil (Previous Year Rs.113,868,744).
(IV) Shares held by Shareholders holding more than 5% shares
(V) Employees Stock Options Schemes:
(a) Indiabulls Financial Services Limited (“Erstwhile Holding Company”) (Refer Note 39) and its erstwhile subsidiary, Indiabulls Credit Services Limited (“ICSL”) had announced ESOS / ESOP schemes for its employees and the employees of it’s group companies wherein each option represents one Equity Share of the Company. The Company has adopted the ESOS / ESOP schemes in respect of its employees. A Compensation Committee constituted by the Board of Directors administers each of the plans.
* The name of the schemes have been revised by the approval of the Shareholders of the Company in the 8th Annual General Meeting held on July 1, 2013.
(b) Indiabulls Housing Finance Limited Employees Stock Option Scheme-2013
The members of the Company at their Meeting dated March 6, 2013 approved the IBHFL ESOS - 2013 scheme consisting of 39,000,000 stock options representing 39,000,000 fully paid up Equity Shares of Rs.2 each of the Company to be issued in one or more tranches to eligible employees of the Company or to eligible employees of the subsidiaries / step down subsidiaries of the Company. The Compensation Committee constituted by the Board of Directors of the Company has, at its meeting held on October 11, 2014, granted, 10,500,000 Stock Options representing an equal number of equity shares of face value of Rs.2 each at an exercise price of Rs.394.75, being the then latest available closing market price on the National Stock Exchange of India Ltd. as on October 10, 2014 following the intrinsic method of accounting as is prescribed in the Guidance Note issued by the Institute of Chartered Accountants of India on Accounting for Employees Share Based Payments (“the Guidelines”). As the options have been granted at intrinsic value, there is no employee stock compensation expense on account of the same. These options vest with effect from the first vesting date i.e. October 11, 2015, whereby the options vest on each vesting date as per the vesting schedule provided in the Scheme.
(c) The other disclosures in respect of the ESOS / ESOP Schemes are as under:-
Fair Value Methodology:
As all the other plans were issued based on the fair value of the options on the date of the grant, there is no impact of the same on the net profit and earnings per share. The IBHFL - IBFSL Employees Stock Option Plan - 2008 (including re-grant) and IBHFL ESOS - 2013, were issued at the Intrinsic value of the options on the date of the grant. Had the compensation cost for the stock options granted under 2006 (Regrant) IBHFL - IBFSL Employees Stock Option Plan -2008 (including re-grant) and IBHFL ESOS - 2013, been determined based on the fair value approach, the Company’s net profit and earnings per share would have been as per the pro forma amounts indicated below:-
(VI) During the year ended March 31, 2013, pursuant to the Scheme of Arrangement the Authorised Capital of the Company has been rearranged to Rs.16,000,000,000 divided into 3,000,000,000 Equity Shares of Rs.2 each and 1,000,000,000 Preference Shares of Rs.10 each.
(VII) 7,785,523 Equity Shares of Rs.2 each (Previous year 10,527,452) are reserved for issuance towards Employees Stock options as granted.
(1) Pursuant to the notification dated December 29, 2011 issued by the Ministry of Corporate Affairs amending Accounting Standard 11 - The Effects of Changes in Foreign Exchange Rates, the Company has exercised the option as per para 46A inserted in the said Standard for all long term monetary assets and liabilities. Consequently an amount of Rs.1,091,272 (Previous Year Rs.712,390,036) representing translation difference on foreign currency loans is carried forward in the Foreign Currency Monetary Item Translation Difference Account as on March 31, 2017.
(2) In terms of Section 29C of the National Housing Bank (“NHB”) Act, 1987, the Company is required to transfer at least 20% of its Profit after tax to a Reserve Fund before any dividend is declared. Transfer to a Reserve Fund in terms of Section 36(1)(viii) of the Income Tax Act, 1961 is also considered as an eligible transfer as transfer to Special Reserve under Section 29C of the National Housing Bank (“NHB”) Act, 1987. The Company has transferred an amount of Rs.3,350,000,000 (Previous Year Rs.2,620,000,000) to reserve created in terms of Section 36(1)(viii) of the Income Tax Act, 1961 termed as “Reserve (III)” and also transferred an amount of Rs.2,334,765,396 (Previous Year Rs.1,968,247,713) to the Reserve in terms of Section 29C of the National Housing Bank (“NHB”) Act, 1987 as at the year end. Further an additional amount of Rs.2,500,000,000 (Previous Year Rs.Nil) has been set apart by way of transfer to Additional Reserve Fund in excess of the statutory minimum requirement as specified under Section 29C pursuant to Circular no. NHB(ND)/DRS/Pol-No. 03/2004-05 dated August 26, 2004 issued by the National Housing Bank. The additional amount so transferred may be utilised in the future for any business purpose.
(3) Disclosure in terms of Circular No. NHB(ND)/ DRS/ Pol.Circular.61/ 2013-14 dated April 7, 2014 and NHB notification No. NHB.HFC.CG-DIR.1/MD&CEO/2016 dated February 9, 2017:-
(4) This pertains to reserve created under section 45-IC of the Reserve Bank of India Act 1934, by the Erstwhile Holding Company Indiabulls Financial Services Limited, which has been transferred to the Company under the Scheme of Arrangement during the year ended March 31, 2013. (Refer Note 39)
(5) In terms of transitional provisions of Guidance note on Derivative Contracts issued by the Institute of Chartered Accountants of India, effective April 1, 2016, Cumulative impact of marked to market profit on all outstanding derivative contracts as on the effective date has been adjusted in the opening balance of Surplus in Statement of Profit and Loss.
(6) This pertains to reserve created under section 36(1)(viii) of the Income Tax Act, 1961, by the Erstwhile Holding Company Indiabulls Financial Services Limited, which has been transferred to the Company under the Scheme of Arrangement during the year ended March 31, 2013. (Refer Note 39)
(5) (i) During the financial year 2009-10, in terms of Chapter VIII of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 in respect of the issue of the Secured Non Convertible Debentures of the Company to QIBs under Qualified Institutions Placement , the erstwhile Holding Company issued 27,500,000 Share Warrants being issued at a Warrant Issue Price of Rs.5 per Share Warrant, with a right exercisable by the Warrant holder to exchange each Warrant with one equity share of the Company of face value Rs.2 each, any time before the expiry of 60 months from the date of allotment of the Warrants, at a Warrant Exercise Price of Rs.225 per equity share. During the financial year 2015-16 the company has issued and allotted 6,643,700(previous Year 20,856,300) equity shares of face value of Rs.2 each at an exercise price of Rs.225 per equity share to the eligible warrant holders.(Refer Note 39)
(ii) During the financial year 2015-16, the Company in terms of SEBI ICDR Regulations, has concluded Qualified Institutions Placement (QIP), by issuing 56,934,372 equity shares at a price of Rs.702 per equity share aggregating to Rs.39,967,929,144 on September 15, 2015. Share issue expenses amounting to Rs.676,209,687 (incurred in respect of this issuance) has been adjusted against the Securities Premium Account.(Includes Rs.12,840,000 paid to Auditors including service tax).
(iii) During the current year, the Company successfully raised Rs.13,300,000,000 by issue of secured rupee denominated masala bonds having a tenor of 3 years and 1 month. These bonds in the nature of debentures are listed on Singapore Stock Exchange (SGX-ST). Debenture issue expenses amounting to Rs.94,710,222 (incurred in respect of this issuance) has been adjusted against the Securities Premium Account (Includes Rs.8,620,000 paid to Auditors including service tax).
(iv) During the current year, the Company successfully raised Rs.70,000,000,000 by way of public issue of secured (Rs.68,011,384,000) and unsecured (Rs.1,988,616,000) NCDs having a face value of INR 1,000 each. The said NCDs are listed on BSE Limited (BSE) and National Stock Exchange of India Limited (NSE). Debenture issue expenses amounting to Rs.661,118,216 (incurred in respect of this issuance) has been adjusted against the Securities Premium Account (Includes Rs.12,930,000 paid to Statutory Auditors including service tax). Pro rata Debenture Redemption Reserve has been created on account of this issue of Non Convertible Debentures as at the year ended March 31, 2017.
(7) DEFERRED TAX LIABILITIES (NET)
Pursuant to Accounting Standard (AS) - 22 ‘Accounting for Taxes on Income’, the Company debited an amount of Rs.371,126,452 (Previous Year Rs.788,411,255) as deferred tax charge (net) to the Statement of Profit and Loss arising on account of timing differences. The breakup of deferred tax into major components as at March 31, 2017 is as under:
(1) Provision for Contingencies includes Contingent provision against standard assets and other contingencies. As per National Housing Bank Circular No. NHB/HFC/DIR.3/CMD/2011 dated August 5, 2011 and NHB/HFC/DIR.9/CMD/2013 dated September 6, 2013, in addition to provision for non performing assets, all housing finance companies are required to carry a general provision. (i) at the rate of 2% on housing loans disbursed at comparatively lower rate of interest in the initial few years, after which rates are reset at higher rates; (ii) at the rate of 0.75% of Standard Assets in respect of Commercial Real Estates (Residential Housing):, (iii) at the rate of 1.00% of Standard Assets in respect of other Commercial Real Estates and (iv) at the rate of 0.40% of the total outstanding amount of loans which are Standard Assets other than (i), (ii) & (iii) above. Accordingly, the Company is carrying a provision of Rs.6,100,000,000 (Previous Year Rs.4,150,000,000) towards standard assets (included in Provisions for Contingencies), which is over the required minimum provision as per the NHB Guidelines.
* Disclosures under the Micro, Small and Medium Enterprises Development Act, 2006:
(a) An amount of Nil and Nil was due and outstanding to suppliers as at the end of the accounting year on account of Principal and Interest respectively.
(b) No interest was paid during the year in terms of section 16 of the Micro, Small and Medium Enterprises Development Act, 2006 and no amount was paid to the supplier beyond the appointed day.
(c) No amount of interest is due and payable for the period of delay in making payment but without adding the interest specified under the Micro, Small and Medium Enterprises Development Act, 2006.
(d) No interest was accrued and unpaid at the end of the accounting year.
(e) No further interest remaining due and payable even in the succeeding years for the purpose of disallowance of a deductible expenditure under section 23 of the Micro, Small and Medium Enterprises Development Act, 2006.
The above information regarding Micro, Small and Medium Enterprises has been determined to the extent such parties have been identified on the basis of information available with the Company. This has been relied upon by the Auditors.
(1) As at March 31, 2017, the Company holds 100% of the Equity Share capital of Indiabulls Insurance Advisors Limited, Indiabulls Life Insurance Company Limited and Indiabulls Capital Services Limited are considered as strategic and long term in nature and are held at a cost of Rs.500,000, Rs.500,000 and Rs.50,000,000 respectively. Based on the audited financials of these companies, as at March 31, 2017, there has been an erosion in the value of investment made in these companies as the operations in this company have not yet commenced / are in the process of being set up. During the current financial year provision of Rs.51,000,000 (Previous year Rs.Nil) for diminution in the carrying value has been made in the books of account.
(2) During the current financial year, the Company has sold its entire investment in Indiabulls Asset Reconstruction Company Limited for a consideration of Rs.12,250,000(Previous year N.A.).
(3) The Board of Directors of Indiabulls Finance Company Private Limited (“IFCPL”) and Indiabulls Commercial Credit Limited (“ICCL”) (formerly Indiabulls Infrastructure Credit Limited) (both being wholly owned subsidiaries of the Company)) at their meeting held on April 16, 2015 had approved, the merger of IFCPL, on an ongoing basis, into ICCL, pursuant to and in terms of the provisions of Section 391 - 394 of the Companies Act, 1956, as amended from time to time. The appointed date of the proposed merger fixed under the Scheme was April 01, 2015. The Hon’ble High Court of Delhi, vide its order dated March 15, 2016, received by the Company on March 31, 2016, approved the Scheme (Order). In terms of the court approved Scheme, with the filing of the copy of the Order, on March 31, 2016 with the office of ROC, NCT of Delhi & Haryana (the Effective Date), the Scheme came into effect and IFCPL, as a going concern, stands amalgamated with ICCL with effect from the Appointed Date, being April 01, 2015. Subsequently the Board of Directors of ICCL, on March 31, 2016, issued and allotted 32,826,288 Equity Shares of Rs.10 each of ICCL to the Company against its holding of 10,942,096 fully paid Equity Shares of Rs.10/- each of IFCPL, in the ratio of 3:1 i.e the Share Exchange Ratio, fixed under the Scheme.
(4) On December 13, 2010 the Erstwhile Holding Company (IBFSL) had sold 26% shares held by it in Indian Commodity Exchange Limited (ICEX) to Reliance Exchange Next Limited (R-Next) for a total consideration of Rs.473,500,000 against a proportionate cost of Rs.260,000,000. As a result thereof, the stake of IBFSL in ICEX has been reduced from 40% to 14% and the same has been reclassified as a long term investment from the earlier classification of being an Associate. MMTC filed a petition before the Company Law Board (CLB) against ICEX, R-Next and IBFSL alleging that the transfer is null and void in terms of the Shareholders Agreement in view of the Forward Markets Commission (FMC) guidelines. IBFSL contends that such view of MMTC is based on the old FMC guidelines and without considering the amended FMC Guidelines dated June 17, 2010 wherein the transfer norms were relaxed. IBFSL had filed its objections on maintainability of the petition which is pending adjudication before the CLB.
(5) During the current financial year, the Company has invested Rs.70,000,000 (Previous Year Rs.Nil) by subscribing to 7,000,000 (Previous year Nil) Equity Shares of face value Rs.5 per share, issued by Indian Commodity Exchange Limited through Rights issue.
(6) During the financial year 2015-16, the Company has invested Rs.6,633,121,000 in OakNorth Holdings Limited by subscribing to 818,615 of face value of GBP 0.59 per share for 39.76% stake. OakNorth Bank- a licensed UK commercial bank is a wholly owned subsidiary of OakNorth Holdings Limited. As at on March 31, 2017 the Company has a stake of 38.73%.
(1) Secured Loans and Other Credit Facilities given to customers amounting to Rs.712,079,767,507 (Previous Year Rs.522,745,629,584) are secured / partly secured by :
(a) Equitable mortgage of property and / or
(b) Pledge of shares / debentures, units, other securities, assignment of life insurance policies and / or
(c) Hypothecation of assets and / or
(d) Company guarantees and / or
(e) Personal guarantees and / or
(f) Negative lien and / or Undertaking to create a security.
(2) Includes Home loan to director for Rs.22,454,320(Previous year N.A.)
(3) Movement in Provision for Loan Assets is as under :
(4) Includes Rs 683,174,252 (being 57% of total cost(excluding taxes) (Previous year N.A.) paid under construction linked plan for purchase of 179,649 sq ft office space @Rs6,580 / sqft.
(1) Secured Loans and Other Credit Facilities given to customers amounting to Rs.77,620,592,429 (Previous Year Rs.68,698,951,346) are secured / partly secured by :
(a) Equitable mortgage of property and / or
(b) Pledge of shares / debentures, units, other securities, assignment of life insurance policies and / or
(c) Hypothecation of assets and / or
(d) Company guarantees and / or
(e) Personal guarantees and / or
(f) Negative lien and / or Undertaking to create a security.
(2) Includes Home loan to director for Rs.1,065,228(Previous Year N.A.).
(3) Includes Rs.1,258,363,568(Previous year N.A.) receivables on account of hedging of interest rate swaps contract.
(2) EMPLOYEE BENEFITS EXPENSE
(1) Employee Benefits - Provident Fund, ESIC, Gratuity and Compensated Absences disclosures as per Accounting Standard (AS) 15 (Revised) - Employee Benefits:
Contributions are made to Government Provident Fund and Family Pension Fund, ESIC and other statutory funds which cover all eligible employees under applicable Acts. Both the employees and the Company make predetermined contributions to the Provident Fund and ESIC. The contributions are normally based on a certain proportion of the employee’s salary. The Company has recognised an amount of Rs.55,124,863 (Previous year Rs.35,035,247) in the Statement of Profit and Loss towards Employers contribution for the above mentioned funds.
Provision for unfunded Gratuity and Compensated Absences for all employees is based upon actuarial valuations carried out at the end of every financial year. Major drivers in actuarial assumptions, typically, are years of service and employee compensation. Pursuant to the issuance of the Accounting Standard (AS) 15 (Revised) on ‘Employee Benefits’, commitments are actuarially determined using the ‘Projected Unit Credit’ Method. Gains and losses on changes in actuarial assumptions are accounted for in the Statement of Profit and Loss.
1) During the year, the Company has recognized Premium on forward contract & principal only swaps on foreign currency loans amounting to Rs.1,310,998,974 (Previous Year Rs.1,061,188,724) included in Interest on Loans and unrealised marked to market profit towards derivatives which are not designated as hedges amounting to Rs.183,184,405 (Previous Year loss Rs.140,446,781) and unrealised marked to market profit towards derivatives which are designated as hedges amounting to Rs.262,968,179 (Previous Year N.A.) which has been included under Bank / Finance Charges. Derivative instruments that are outstanding as at March 31, 2017 is as given below:-
I. Cross Currency Swaps entered for hedging purposes outstanding as at March 31, 2017 for USD 367,702,517 (Previous Year USD 255,084,236) against cross currency of Rs.23,434,750,000 (Previous Year Rs.16,034,750,000) for a total of 9 outstanding Contracts (Previous Year 9 Contracts).
II. INR Interest Rate Swaps (Fixed to Floating) for Notional Principal of Rs.66,000,000,000 outstanding as at March 31, 2017(Previous Year Rs.9,250,000,000) for a total of 53 outstanding contracts (Previous Year 11 contracts).
III. USD Interest Rate Swaps (Floating to Fixed/ Floating to Floating) for Notional Principal INR of Rs.29,007,787,500 against USD 447,685,108 (Previous Year Notional Principal INR of Rs.15,622,250,000 against USD 249,299,717) for a total of 19 contracts outstanding as at March 31, 2017 (Previous Year 18 contracts) against fluctuations in USD Libor.
IV. Forward Contract entered for hedging purposes outstanding as at March 31, 2017 for USD 457,782,202 (Previous Year USD 108,204,333) against cross currency of Rs.30,733,653,531 (Previous Year Rs.7,015,965,407) for a total of 18 Contracts outstanding (Previous Year 13 Contracts).
2) During the year the Company has credited an amount of Rs.359,526,532 (Previous year debited Rs.183,194,578) on account of Net Revaluation on Foreign Currency Loans, which is included in Interest on loans above.
3) Additional disclosure for Hedge Accounting:-
i) The company has debited Rs.172,533,938 (Net) in statement of profit and loss account against which accounting of fair value hedge has been adopted.
ii) During the year, the company has recognised an amount of Rs.42,817,255 to Cash flow Hedge Reserve. There is no amount recycled from the hedge reserve and reported in statement of profit and loss, as this is the first year of adoption of Hedge accounting.
iii) Disclosure of Foreign Currency Exposures:-
4) Additional disclosures required by the NHB notification No. NHB.HFC.CG-DIR.1/MD&CEO/2016 dated February 9, 2017 Clause 3.4 for Derivatives are as follows:-
3.1.1 (A) Qualitative Disclosure:-
The Company’s activities expose it to the financial risks of changes in foreign exchange rates and interest rates. The Company uses derivate contracts such as foreign exchange forward, cross currency contracts, interest rate swaps, foreign currency futures, options and swaps to hedge its exposure to movements in foreign exchange and interest rates. The use of these derivative contracts reduce the risk or cost to the Company and the Company does not use those for trading or speculation purposes.
The Company uses hedging instruments that are governed by the policies of the Company which are approved by the Board of Directors, which provide written principles on the use of such financial derivatives consistent with the risk management strategy of the Company. The Board constituted Risk Management Committee (RMC) of the company manages risk on the company’s derivative portfolio. The officials authorized by the board to enter into derivative transactions for the company are kept separate from the authorized signatories to confirm the derivative transactions. All derivative transactions that are entered into by the company are reported to the board, and the mark-to-market on its portfolio is monitored regularly by the senior management. The company uses Bloomberg to monitor and value its derivative portfolio to ascertain its hedge effectiveness vis-a-vis the underlying.
To hedge its risks on the principal and/ or interest amount for foreign currency borrowings on its balance sheet, the company has currently used cross currency derivatives, forwards and principal only swaps. Additionally, the company has entered into Interest Rate Swaps (IRS) to hedge its basis risk on fixed rate borrowings and LIBOR risk on its foreign currency borrowings.
Derivative financial instruments are initially measured at fair value on the contract date and are subsequently re-measured to fair value at each reporting date. Derivatives are classified as assets when the fair value is positive (positive marked to market value) or as liabilities when the fair value is negative (negative marked to market value). Derivative assets and liabilities are recognized on the balance sheet at fair value. Fair value of derivatives is ascertained from the mark to market and accrual values received from the counterparty banks. These values are cross checked against the valuations done internally on Bloomberg. Changes in the fair value of derivatives other than those designated as hedges are recognized in the Statement of Profit and Loss.
Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised, no longer qualifies for hedge accounting or the Company chooses to end the hedging relationship.
(4) OTHER EXPENSES
(1) The Company has taken office premises on Lease and Leave & License basis at various locations in India. Lease rent/ License fees aggregating to Rs.406,220,106 (Previous Year Rs.351,742,791) in respect of the same have been charged to the Statement of Profit and Loss. The agreements are executed for periods ranging from 11 months to 12 years with a renewable clause. In many cases, the agreements also provide for termination at will by either party by giving a prior notice period between 30 to 90 days. The minimum lease rentals outstanding as at March 31, 2017, are as under:
(2) Contingent Provision against standard Assets / Provision for Loan assets / Bad Debts Written Off(Net of Recoveries) includes;
Net of Bad Debt Recovery of Rs.13,410,848 (Netted of by Bad Debt /advances written off of Rs.168,662,106) (Previous Year Inclusive of Net Bad Debts /Advances written off of Rs.566,981,259 (netted of by Bad Debt Recovery of Rs.379,881,376).
(3) In respect of Corporate Social Responsibility activities, gross amount required to be spent by the Company during the year was Rs.367,493,798 (Previous Year Rs.318,210,932) and Company has spent Rs.367,494,000 (Previous Year Rs.318,211,000).
(5) CONTINGENT LIABILITY AND COMMITMENTS:
(a) Demand pending u/s 143(3) of the Income Tax Act,1961
(i) For Rs.2,414,210 with respect to FY 2007-08 (Previous Year Rs.2,414,210) against disallowance U/s 14A of the Income Tax Act,1961, against which appeal is pending before High Court.
(ii) For Rs.12,301,239 with respect to FY 2008-09 (Previous Year Rs.12,301,239/-) against disallowance u/s 14A of the Income Tax Act,1961, against which appeal is pending before Supreme Court.
(iii) For Rs.12,737,519 with respect to FY 2010-11 (Previous Year Rs.12,737,519/-) against disallowance U/s 14A of the Income Tax Act,1961, against which the department has filed appeal before the ITAT against the order of CIT (Appeal).
(iv) For Rs.Nil with respect to FY 2011-12 (Previous Year Rs.11,625,706) against disallowances u/s 14A and 32(1) of the Income Tax Act, 1961 against which appeal was pending before CIT (Appeal).
(v) For Rs.764,126 with respect to FY 2012-13 (Previous Year Rs.Nil) against disallowances u/s 14A and 32(1) of the Income Tax Act, 1961 against which appeal is pending before CIT (Appeal).
(b) (i) Demand pending u/s of 25, 55, 56 & 61 of The Rajasthan Value Added Tax Act, 2003 for Rs.14,505,873 (Including interest & Penalty) with respect to FY 2007-08 to FY 2012-13 (Previous Year Rs.14,505,873) against which appeal was pending before Rajasthan High Court. .The Company has paid tax along with interest for Rs.6,231,069 (Previous Year Rs.6,231,069) under protest. Further the company has deposited Rs.2,068,701/- (Previous Year Rs.Nil) on May 30, 2016. Further, the company has opted for New Amnesty Scheme 2016 and accordingly deposited 25% of the disputed demand amount and withdrawn appeal before the Hon’ble High Court.
(ii) Demand pending u/s of 25, 55 & 61 of The Rajasthan Value Added Tax Act, 2003 for Rs.Nil (Including interest & Penalty) with respect to FY 2012-13 to FY 2014-15 (Previous Year Rs.1,240,200) against which appeal was pending before The Appellate Authority-II , Commercial Taxes, Jaipur. The Company has paid tax along with interest for Rs.Nil (Previous Year Rs.472,200 under protest). Further, the company has opted for New Amnesty Scheme 2016 and accordingly deposited 25% of the disputed demand amount for Rs.192,000 (previous Year Rs.Nil) and withdrawn our appeal before the Appellate Authority-II.
(c) Corporate counter guarantees outstanding in respect of securitisation/ assignment agreements entered by the Company with different assignees as at March 31, 2017 is Rs.1,879,775,887 (Previous Year Rs.1,879,775,887) against which collateral deposit of Rs.87,150,746 (Previous Year Rs.81,059,574) for the year ended March 31, 2017 is being provided to the assignees by the Company in the form of Fixed Deposit Receipts. The Company does not anticipate any losses on account of the said corporate guarantees, in the event of the rights under guarantee being exercised by the assignees.
(d) The Company in the ordinary course of business, has court cases pending, however, the management does not expect any unfavourable outcome resulting in material adverse effect on the financial position of the Company.
(e) Capital commitments for acquisition of fixed assets at various branches as at the year end (net of capital advances paid) Rs.639,100,865 (Previous Year Rs.74,153,763).
(f) Contingent liability with respect to Security deposit to the Bombay Stock Exchange(Representing 1% of the public issue amount i.e. Rs.700,000,000) against which security deposit provided by the company to the exchange is Rs.30,000,000 and the balance is in the form of a bank guarantee).
(6) SEGMENT REPORTING:
Segment information for the year ended March 31, 2017, as per Accounting Standard (AS)-17 “Segment Reporting” :
(a) Primary segment information (by business segments)
(Figures in respect of previous years are stated in italics)
# Includes Dividend Income on units of Mutual Fund, Dividend Income from Subsidiary Company, Gain on Mutual Fund Investments and Profit on sale of current investments included in other income.
b) The Company operates solely in one Geographic segment namely “Within India” and hence no separate information for Geographic segment wise disclosure is required.
c) The Company’s primary business segment is reflected based on principal business activities carried on by the Company. The Company’s primary business comprises of investing and financing related activities (investing in various subsidiaries, financing of loans and credit activities) and fee income which mainly comprises of financial service related fee from services income, commission on insurance and other fee based activities.
d) Segment revenue, results, assets and liabilities include amounts identifiable to each segment and amounts allocated on a reasonable basis.
e) The accounting policies adopted for segment reporting are in line with the accounting policies adopted for preparation of financial information as disclosed in Significant Accounting Policies (Refer Note 1) above.
Earnings Per Equity Share (EPS) as per Accounting Standard (AS)-20 “Earnings Per Share”,:
The basic earnings per share is computed by dividing the net profit attributable to Equity Shareholders for the year by the weighted average number of Equity Shares outstanding during the year. Diluted earnings per share are computed using the weighted average number of Equity Shares and also the weighted average number of Equity Shares that could have been issued on the conversion of all dilutive potential Equity Shares. The dilutive potential Equity Shares are adjusted for the proceeds receivable, had the shares been actually issued at fair value.
Dilutive potential Equity Shares are deemed converted as of the beginning of the year, unless they have been issued at a later date. The number of Equity Shares and potential diluted Equity Shares are adjusted for potential dilutive effect of Employee Stock Option Plan as appropriate. Potential dilutive Equity Shares on account of Share warrants are not adjusted being anti dilutive in nature.
(7) In respect of amounts as mentioned under Section 124 of the Companies Act, 2013 there were no dues(Previous Year Rs.Nil) required to be credited to the Investor Education and Protection Fund as on March 31, 2017.
(8) (1) Disclosures required by the NHB notification No. NHB.HFC.CG-DIR.1/MD&CEO/2016 dated February 9, 2017:
(i) Disclosure for Capital to Risk Assets Ratio (CRAR)* :-
(ii) Exposure to Real Estate Sector:-
(iii) Exposure to Capital Market
(iv) Asset Liability Management
Note: In computing the above information certain estimates, assumptions and adjustments have been made by the Management for its regulatory submission which have been relied upon by the auditors.
(Figures in respect of previous years are stated in italics)
(2) Capital to Risk Assets Ratio (CRAR)(Proforma)
CRAR (Proforma)(considering Nil risk weightage on Mutual fund investments):-
(xi) Details of Single Borrower Limit (SGL) / Group Borrower Limit (GBL) exceeded by the HFC
The Company has not exceeded the limits for SGL / GBL.
(xii) Disclosure of Penalties imposed by NHB and other regulators
No penalties has been imposed on the Company by any regulators.
(9) The Company has entered into various agreements for the assignment/securitisation of loans with assignees, wherein it has assigned/securitised a part of its secured loan portfolio amounting to Rs.181,515,208,581 upto March 31, 2017 (Rs.145,912,932,121 upto March 31, 2016), being the principal value outstanding as on the date of the deals that are outstanding as on the Balance Sheet date.
The Company assigned/securitized various loan portfolios to banks and/or other institutions which are derecognised in the books of accounts of the Company in terms of accounting policy mentioned in Significant Accounting policies in Note 1 (v) above and residual income on these Loans is being recognised over the life of the underlying loans and not on an upfront basis.
Additional disclosures required by the NHB notification No. NHB.HFC.CG-DIR.1/MD&CEO/2016 dated February 9, 2017 for Securitisation are as follows:-
10.1.1 Outstanding amount of securitised assets as per books of the SPVs sponsored by the HFC and total amount of exposures retained by the HFC as on the date of balance sheet towards the Minimum Retention Requirements (MRR).
(11) The Board of Directors at their meeting held on April 27, 2012 had approved the Scheme of Arrangement involving the merger of Indiabulls Financial Services Limited (IBFSL, the Holding Company) with the Company in terms of the provisions of Sections 391 to 394 of the Companies Act, 1956 (the “Scheme of Arrangement”). The Appointed Date of the proposed merger fixed under the Scheme of Arrangement was April 1, 2012. The Hon’ble High Court of Delhi, vide its Order dated December 12, 2012, received by the Company on February 8, 2013, approved the Scheme of Arrangement (Order). In terms of the Court approved Scheme of Arrangement, with the filing of the copy of the Order, on March 8, 2013 with the office of ROC, NCT of Delhi & Haryana (the Effective Date), IBFSL, as a going concern, stands amalgamated with IBHFL with effect from the Appointed Date, being April 1, 2012 (Under the Accounting Standard 14 - Pooling of interest method). Consequent to the Scheme of Arrangement becoming effective, the Board of Directors of the Company, at their meeting held on March 25, 2013, issued and allotted -
i) 312,511,167 Equity Shares of Rs.2 each of the Company,
ii) 27,500,000 Warrants of the Company (against the listed warrants of IBFSL), and
iii) 20,700,000 Warrants of the Company (against the unlisted warrants of IBFSL held by certain promoter group entities and Key Management Personnel of IBFSL) to the Equity Shareholders / Warrants holders of IBFSL, against their holdings in such Equity Shares / Warrants, as on March 20, 2013 i.e. the record date fixed by IBFSL in this regard. The issue of Equity Shares / warrants by the Company was in terms of the share exchange ratio as mentioned in the Court approved Scheme of Arrangement. The Company’s Shares and Warrants (issued in lieu of listed warrants of IBFSL) got listed with National Stock Exchange of India Limited and BSE Limited w.e.f. July 23, 2013.
(12) Disclosures in respect of Specified Bank Notes (SBN) held and transacted during the period from 8th November, 2016 to 30th December, 2016 as required vide Notification No. G.S.R. 308(E) dated 30th March, 2017 issued by the Ministry of Corporate Affairs:
(1) details of denomination for amount aggregating to Rs.108,662 is not clearly legible from the bank deposit slips available with the Company.
(2) includes withdrawal from bank aggregating to Rs.1,250,000.
(3) amounts aggregating to Rs.4,242,367 have been directly deposited by customers into the Company’s bank accounts towards the repayment of their outstanding amounts for which details of denomination (SBN’s / Other denomination notes) is not available with the Management.
(13) The Company has complied with the NHB Directions, 2010 including Prudential Norms and as amended from time to time.
(14) Previous Year’s figures have been regrouped / reclassified wherever necessary to correspond with the current year’s classification / disclosures.