The Company recognizes provisions when a presentobligation (legal or constructive) as a result of apast event exists and it is probable that an outflowof resources embodying economic benefits will berequired to settle such obligation and the amount ofsuch obligation can be reliably estimated. The amountrecognised as a provision is the best estimate of the
consideration require to settle the present obligationat the end of reporting period, taking into account therisk & uncertainties surrounding the obligation.
If the effect of time value of money is material,provisions are discounted using a current pre-tax ratethat reflects, when appropriate, the risks specific tothe liability. When discounting is used, the increase inthe provision due to the passage of time is recognizedas a finance cost.
The Company in the normal course of its business,comes across client claims/ regulatory penalties/inquiries, etc. and the same are duly clarified/addressed from time to time. The penalties/ actions ifany are being considered for disclosure as contingentliability only after finality of the representation ofappeals before the lower authorities.
A disclosure for a contingent liability is made whenthere is a possible obligation or a present obligationthat may, but probably will not, require an outflowof resources embodying economic benefits or theamount of such obligation cannot be measuredreliably. When there is a possible obligation or apresent obligation in respect of which likelihood ofoutflow of resources embodying economic benefitsis remote, no provision or disclosure is made.
Contingent assets are disclosed only where an inflowof economic benefits is probable.
Statement of Cash Flows is prepared segregatingthe cash flows into operating, investing and financingactivities. Cash flow from operating activities isreported using indirect method adjusting the netprofit for the effects of:
- changes during the period in operatingreceivables and payables transactions of anoncash nature;
- non-cash items such as depreciation, provisions,deferred taxes and unrealised foreign currencygains and losses.
- all other items for which the cash effects areinvesting or financing cash flows.
Cash and cash equivalents for the purpose of CashFlow Statement comprise cash and cheques in
hand, bank balances. Bank borrowings are usedfor business purposes, and hence bank overdraftsare not considered to be a part of cash and cashequivalents in Cash flow statement.
l) Revenue Recognition
Revenue towards satisfaction of a performanceobligation is measured at the amount of transactionprice (net of variable consideration) allocated to thatperformance obligation. The transaction price ofgoods sold and services rendered is net of variableconsideration on account of various discountsand schemes offered by the Company as part ofthe contract
The Company recognizes revenue from contractswith customers based on a five-step model as setout in Ind AS 115:
Step 1: Identify contract(s) with a customer: Acontract is defined as an agreement between twoor more parties that creates enforceable rights andobligations and sets out the criteria for every contractthat must be met.
Step 2: Identify performance obligations in thecontract: A performance obligation is a promise ina contract with a customer to transfer a good orservice to the customer.
Step 3: Determine the transaction price: Thetransaction price is the amount of consideration towhich the company expects to be entitled in exchangefor transferring promised goods or services to acustomer, excluding amounts collected on behalf ofthird parties.
Step 4: Allocate the contract price to the performanceobligations in the contract: For contract that hasmore than one performance obligation, the Companyallocates the transaction price to each performanceobligation in an amount that depicts the amountof consideration to which the Company expectsto be entitled in exchange for satisfying eachperformance obligation.
Step 5: Recognise revenue when (or as) the Companysatisfies a performance obligation.
The Company assesses its revenue arrangementsagainst specific criteria to determine if it isacting as principal or agent. The Company has
concluded that it is acting as a principal in all of itsrevenue arrangements.
Income from services rendered as a broker isrecognised upon rendering of the services on atrade date basis, in accordance with the terms ofcontract. Fees for subscription based services arereceived periodically but are recognised as earnedon a pro-rata basis over the term of the contract.Commissions from distribution of financial productsare recognised upon allotment of the securities tothe applicant. Commission and fees recognized asaforesaid are exclusive of goods and service tax,securities transaction tax, stamp duties and otherlevies by SEBI and stock exchanges.
Advances received from customers in respect ofcontracts are treated as liabilities and adjustedagainst progress billing as per terms of the contract.Progress payments received are adjusted againstamount receivable from customers in respect of thecontract work performed. Amounts retained by thecustomers until the satisfactory completion of thecontracts are recognised as receivables.
Interest is earned on delayed payments fromcustomers and amounts funded to them as wellas term deposits with banks. Interest income isrecognised on a time proportion basis taking intoaccount the amount outstanding from customers oron the financial instrument and the rate applicable.Dividend income is recognised when the right toreceive the dividend is established.
Interest income or expense is recognised using theeffective interest method.
The 'effective interest rate' is the rate that exactlydiscounts estimated future cash payments orreceipts through the expected life of the financialinstrument to:
- the gross carrying amount of the financialasset; or
- the amortised cost of the financial liability
Gains / losses on dealing in securities are recognizedon a trade date basis.
Share-based payment arrangements:
Equity-settled share-based payments to employeesand others providing similar services are measuredat the fair value of the equity instruments at thegrant date. The fair value determined at the grantdate of the equity settled share-based payments isexpensed on a straight line basis over the vestingperiod, based on the Company's estimate ofequity instruments that will eventually vest, with acorresponding increase in equity. At the end of eachreporting period, the Company revises its estimate ofthe number of equity instruments expected to vest.The impact of the revision of the original estimates,if any, is recognised in the Statement of Profit andLoss such that the cumulative expense reflects therevised estimate, with a corresponding adjustmentto the equity-settled employee benefits reserve.
When the terms of an equity-settled award aremodified, the minimum expense recognized is theexpense had the terms had not been modified, if theoriginal terms of the award are met. An additionalexpense is recognized for any modification thatincreases the total fair value of the share-basedpayment transaction, or is otherwise beneficial to theemployee as measured at the date of modification.Where an award is cancelled by the entity or by thecounterparty, any remaining element of the fair valueof the award is expensed immediately through thestatement of profit and loss.
The dilutive effect of outstanding options is reflectedas additional share dilution in the computation ofdiluted earnings per share.
Securities premium includes the differencebetween the face value of the equity shares and theconsideration received in respect of shares issuedpursuant to Stock Option Scheme. Expenses relatingto share issue has been reduced from share premium.
Short Term Employee Benefits:
All employee benefits payable wholly within twelvemonths of rendering the service are classified asshort term employee benefits and they are recognizedin the period in which the employee renders therelated service if the company has a present legal orconstructive obligation to pay this amount as a resultof past service provided by the employee and theobligation can be estimated reliably. The Companyrecognizes the undiscounted amount of short termemployee benefits expected to be paid in exchange
for services rendered as a liability (accrued expense)
after deducting any amount already paid.
Post-Employment Benefits:
I. Defined contribution plans:
Defined contribution plans are post-employmentbenefit plans under which the Companypays fixed contributions into state managedretirement benefit schemes and will have nolegal or constructive obligation to pay furthercontributions, if any, if the state managedfunds do not hold sufficient assets to pay allemployee benefits relating to employee servicesin the current and preceding financial years. TheCompany contributions to defined contributionplans are recognised in the Statement of Profitand Loss in the financial year to which theyrelate. The Company and its Indian subsidiariesoperate defined contribution plans pertainingto Employee State Insurance Scheme andGovernment administered Pension FundScheme for all applicable employees and theCompany operates a Superannuation schemefor eligible employees.
Recognition and measurement of definedcontribution plans: The Company recognizescontribution payable to a defined contributionplan as an expense in the Statement of Profitand Loss when the employees render services tothe Company during the reporting period. If thecontributions payable for services received fromemployees before the reporting date exceed thecontributions already paid, the deficit payableis recognized as a liability after deducting thecontribution already paid. If the contributionalready paid exceeds the contribution due forservices received before the reporting date, theexcess is recognized as an asset to the extentthat the prepayment will lead to, for example, areduction in future payments or a cash refund.
II. Defined benefit plans:
Gratuity scheme: The Company, operates agratuity scheme for employees. The contributionis paid to a separate fund in ICICI Prudentialnamed 5 Paisa Capital Limited Gratuity Fund,towards meeting the Gratuity obligations.
Recognition and measurement of defined benefitplans:
The cost of providing defined benefits is determinedusing the Projected Unit Credit method with actuarialvaluations being carried out at each reporting date.The defined benefit obligations recognized in theBalance Sheet represent the present value of thedefined benefit obligations as reduced by the fairvalue of plan assets, if applicable. Any defined benefitasset (negative defined benefit obligations resultingfrom this calculation) is recognized representing thepresent value of available refunds and reductions infuture contributions to the plan.
All expenses represented by current service cost,past service cost if any and net interest on thedefined benefit liability (asset) are recognized in theStatement of Profit and Loss. Re-measurements ofthe net defined benefit liability (asset) comprisingactuarial gains and losses and the return on theplan assets (excluding amounts included in netinterest on the net defined benefit liability/asset), arerecognized in Other Comprehensive Income. Suchremeasurements are not reclassified to the Statementof Profit and Loss in the subsequent periods.
Other Long Term Employee Benefits:
Entitlements to annual leave and sick leave arerecognized when they accrue to employees. Sickleave can only be availed while annual leave caneither be availed or encashed subject to a restrictionon the maximum number of accumulation of leave.The Company determines the liability for suchaccumulated leaves using the Projected AccruedBenefit method with actuarial valuations beingcarried out at each Balance Sheet date.
Other Employee Benefits
Compensated absences which accrue to employeesand which can be carried to future periods but areexpected to be availed in twelve months immediatelyfollowing the year in which the employee has renderedservice are reported as expenses during the year inwhich the employees perform the services that thebenefit covers and the liabilities are reported at theundiscounted amount of the benefits.
The Company as a Lessee
The Company's lease asset classes primarily consistof leases for land and buildings. The Companyassesses whether a contract contains a lease, at
inception of a contract. A contract is, or contains,a lease if the contract conveys the right to controlthe use of an identified asset for a period of timein exchange for consideration. To assess whether acontract conveys the right to control the use of anidentified asset, the Company assesses whether: (i)the contract involves the use of an identified asset (ii)the Company has substantially all of the economicbenefits from use of the asset through the period ofthe lease and (iii) the Company has the right to directthe use of the asset.
At the date of commencement of the lease, theCompany recognizes a right-of-use asset ("ROU”)and a corresponding lease liability for all leasearrangements in which it is a lessee, except forleases with a term of twelve months or less (short¬term leases) and low value leases. For these short¬term and low value leases, the Company recognizesthe lease payments as an operating expense on astraight-line basis over the term of the lease.
Certain lease arrangements includes the options toextend or terminate the lease before the end of thelease term. ROU assets and lease liabilities includesthese options when it is reasonably certain that theywill be exercised.
The right-of-use assets are initially recognized atcost, which comprises the initial amount of the leaseliability adjusted for any lease payments made at orprior to the commencement date of the lease plusany initial direct costs less any lease incentives. Theyare subsequently measured at cost less accumulateddepreciation and impairment losses.
Right-of-use assets are depreciated from thecommencement date on a straight-line basis overthe shorter of the lease term and useful life of theunderlying asset. Right of use assets are evaluatedfor recoverability whenever events or changes incircumstances indicate that their carrying amountsmay not be recoverable. For the purpose ofimpairment testing, the recoverable amount (i.e. thehigher of the fair value less cost to sell and the value-in-use) is determined on an individual asset basisunless the asset does not generate cash flows thatare largely independent of those from other assets.In such cases, the recoverable amount is determinedfor the Cash Generating Unit (CGU) to which theasset belongs.
The lease liability is initially measured at amortizedcost at the present value of the future lease payments.The lease payments are discounted using the interestrate implicit in the lease or, if not readily determinable,using the incremental borrowing rates in the countryof domicile of these leases. Lease liabilities areremeasured with a corresponding adjustment to therelated right of use asset if the Company changes itsassessment if whether it will exercise an extensionor a termination option.
Lease liability and ROU asset have been separatelypresented in the Balance Sheet and lease paymentshave been classified as financing cash flows.
The Company as a Lessor
Leases for which the Company is a lessor is classifiedas a finance or operating lease. Whenever the termsof the lease transfer substantially all the risks andrewards of ownership to the lessee, the contract isclassified as a finance lease. All other leases areclassified as operating leases.
When the Company is an intermediate lessor, itaccounts for its interests in the head lease and thesublease separately. The sublease is classified as afinance or operating lease by reference to the right-of-use asset arising from the head lease.
For operating leases, rental income is recognized on astraight line basis over the term of the relevant lease.
The Company does not have any lease arrangementwhere it is a lessor as on the balance sheet date.
Borrowing cost includes interest, amortizationof ancillary costs incurred in connection withthe arrangement of borrowings and exchangedifferences arising from foreign currency borrowingsto the extent they are regarded as an adjustment tothe interest cost. Borrowing costs, if any, directlyattributable to the acquisition, construction orproduction of an asset that necessarily takes asubstantial period of time to get ready for its intendeduse or sale are capitalized, if any. All other borrowingcosts are expensed in the period in which they occur.
Basic earnings per share are calculated by dividingthe net profit or loss for the period attributable toequity shareholders by the weighted average numberof equity shares outstanding during the period.
For the purpose of calculating diluted earnings pershare, the net profit or loss for the period attributableto equity shareholders and the weighted averagenumber of shares outstanding during the periodare adjusted for the effects of all dilutive potentialequity shares.
The Company's business is to provide brokingservices, to its clients, in the capital markets in India.All other activities of the Company are ancillary themain business. As such, there are no reportablesegments that need to be reported separately asdefined in Ind AS 108, Operating Segments.
The preparation of the financial statements in conformitywith Ind AS requires the Management to make estimates,judgements and assumptions. These estimates, judgementsand assumptions affect the application of accountingpolicies and the reported amounts of assets and liabilities,the disclosures of contingent assets and liabilities at thedate of the financial statements and reported amountsof revenues and expenses during the period. Accountingestimates could change from period to period. Actual resultscould differ from those estimates. Appropriate changes inestimates are made as the Management becomes awareof changes in circumstances surrounding the estimates.Estimates and underlying assumptions are reviewed onongoing basis. Changes in estimates are reflected in thefinancial statements in the period in which changes aremade and, if material, their effects are disclosed in the notesto the financial statements.
The Company makes certain judgments and estimatesfor valuation and impairment of financial instruments,fair valuation of employee stock options, useful life ofproperty, plant and equipment, deferred tax assets andretirement benefit obligations. Management believes thatthe estimates used in the preparation of the financialstatements are prudent and reasonable.
The key assumptions concerning the future and other keysources of estimation uncertainty at the reporting date,that have a significant risk of causing a material adjustmentto the carrying amounts of assets and liabilities within thenext financial year, are described below:
The Company tax jurisdiction is India. Significantjudgements are involved in estimating budgetedprofits for the purpose of paying advance tax,determining the provision for income taxes,
including amount expected to be paid/recoveredfor uncertain tax positions. Further Deferred taxassets and liabilities are recognized for the futuretax consequences of temporary differences betweenthe carrying values of assets and liabilities and theirrespective tax bases.
The charge in respect of periodic depreciation is derivedafter determining an estimate of an asset's expecteduseful life and the expected residual value at the end ofits life. The useful lives and residual values of Company'sassets are determined by the management at thetime the asset is acquired and reviewed periodically,including at each financial year end. The lives arebased on historical experience with similar assets aswell as anticipation of future events, which may impacttheir life, such as changes in technical or commercialobsolescence arising from changes or improvementsin production or from a change in market demand ofthe product or service output of the asset.
The obligation arising from defined benefit plan isdetermined on the basis of actuarial assumptions.Key actuarial assumptions include discount rate,trends in salary escalation, actuarial rates and lifeexpectancy. The discount rate is determined byreference to market yields at the end of the reportingperiod on government bonds. The period to maturityof the underlying bonds corresponding to the probablematurity of the post-employment benefit obligations.Due to complexities involved in the valuation andits long term nature, defined benefit obligation issensitive to changes in these assumptions. Furtherdetails are disclosed in Note 25.
When the fair values of financials assets andfinancial liabilities recorded in the Balance Sheetcannot be measured based on quoted prices inactive markets, their fair value is measured usingvaluation techniques, including the discountedcash flow model, which involve various judgementsand assumptions.
The provision for expected credit loss involvesestimating the probability of default and loss givendefault based on the Company own experience &forward looking estimation.
In estimating the final outcome of litigation, theCompany applies judgment in considering factorsincluding experience with similar matters, pasthistory, precedents, relevant and other evidence andfacts specified to the matter. Application of suchjudgment determines whether the Company requiresan accrual or disclosure in the financial statements.
The fair valuation of the employee share options isbased on the Black-Scholes model used for valuationof options. Key assumptions made with respect toexpected volatility includes share price, expected
dividends and discount rate, under this option pricingmodel. Further details are disclosed in notes.
In determining whether an arrangement is, or containsa lease is based on the substance of the arrangementat the inception of the lease. The arrangement is, orcontains, a lease date if fulfilment of the arrangementis dependent on the use of a specific asset or assetsand the arrangement conveys a right to use theasset, even if that right is not explicitly specified inthe arrangement.
(i) Working Capital Demand Loan (WCDL) and bank overdraft are secured by way of fist pari-passu charge on all receivablesand current assets to the tune of 1.75 times of the outstanding facility amount. Bank overdraft secured against Bankdeposit Please refer to note 31 for details of asset pledged.
(ii) Loan from related parties are unsecured.
(i) For WCDL it varies from 7 days to 365 days of each tranche, principal amount of each tranche is to be paid as bulletpayment on maturity date.
(ii) For bank overdraft the same is repayable on demand
(iii) For loan from related parties the same is repayable on demand.
(i) For WCDL the rate of interest is fixed (Lending banks MCLR rate Spread varies (0.75% to 1.50%), Interest is payablemonthly basis on the last date of each month.
(ii) For Bank Overdraft Interest rate is FD rate Spread varies (0.50% to 1.00%), Interest is payable monthly basis on the lastdate of each month.
(iii) For related parties interest rate is in the range of 11.25% to 11.50% p.a. as approved by the board.
i) Capital reserves : Capital reserve is created as per scheme of arrangement where undertaking including all assets and liabilitiesof undertaking were transferred to and vested by IIFL Finance Limited (previously known as IIFL Holding Limited).
ii) Securities premium : Securities premium represents the surplus of proceeds received over the face value of shares, at thetime of issue of shares.
iii) Retained earnings : The balance in retained earnings primarily represents the surplus/deficit after payment of dividend(including tax on dividend) and transfer to reserves.
iv) General Reserve : General reserve is created on account on employee stock option lapsed/exercised, in accordance with theCompanies Act, 2013.
v) Employee stock option reserve : Employee stock option reserve accounts represents reserve created on fair value of optionsagainst the options to be granted by the Company and outstanding as at balance sheet date.
(a) The estimate of future salary increase, considered in the actuarial valuation, takes into account inflation, seniority,promotion, increments and other relevant factors.
(b) The Expected Rate of Return on Plan Assets is determined considering several applicable factors, mainly the compositionof Plan Assets held assessed risks, historical results of return on Plan Assets and the Company's policy for PlanAssets management.
Significant Actuarial Assumptions for the determination of the defined benefit obligation are discount trade ,expected salaryincrease and employee turnover. The sensitivity analysis below, have been determined based on reasonably possible changesof the assumptions occurring at end of the reporting year, while holding all other assumptions constant. The result of Sensitivityanalysis is given below:
Investment risk The present value of the defined benefit plan liability is calculated using a discount rate which is determinedby reference to market yields at the end of the reporting period on government bonds. If the return on plan asset is below thisrate, it will create a plan deficit. Currently, for the plan in India, it has a relatively balanced mix of investments in governmentsecurities, and other debt instruments.
Interest risk :- A fall in the discount rate which is linked to the G.Sec. Rate will increase the present value of the liabilityrequiring higher provision. A fall in the discount rate generally increases the mark to market value of the assets dependingon the duration of asset.
Salary risk The present value of the defined benefit plan liability is calculated by reference to the future salaries of members.As such, an increase in the salary of the members more than assumed level will increase the plan's liability.
Asset Liability Matching Risk: The plan faces the ALM risk as to the matching cash flow. Since the plan is invested in linesof Rule 101 of Income Tax Rules, 1962, this generally reduces ALM risk.
Mortality risk: Since the benefits under the plan is not payable for life time and payable till retirement age only, plan does nothave any longevity risk.
Concentration Risk: Plan is having a concentration risk as all the assets are invested with the insurance company and a defaultwill wipe out all the assets. Although probability of this is very less as insurance companies have to follow regulatory guidelines.
MCX vide its final order dated July 01,2024 has imposed penalty of f 25.98 Mn in respect of non-reporting of certain technical glitches / delayedsubmission of RCAs thereafter, observed during the course of joint inspection for the period between 01-04-2022 to 31-12-2023. MCX has alsopassed an order restricting on-boarding of new clients for a period of 14 days from the date of receipt of the order. The company has filed an appealagainst the said order before the Securities Appellate Tribunal (SAT). SAT vide its order dated July 05, 2024 has stayed the effect and operation ofthe said order subject to deposit of 50% of the penalty amount with MCX which the company has since deposited. On a prudent basis, the companyhas made provision in the books for the said penalty amount.
Credit risk refers to risk that a counterparty will default on its contractual obligations resulting in financial loss to the Company.Credit risk arises primarily from financial assets such as trade receivables, investments, derivative financial instruments, otherbalances with banks, loans and other receivables and other financial asset.
The following tables sets out information about the credit quality of financial assets measured at amortised cost, FVOCI debtinvestments. Unless specifically indicated, for financial assets, the amounts in the table represent gross carrying amounts.
The Company holds collateral of securities and other credit enhancements against its credit exposures.
The Company has applied the impairment requirements of Ind AS 109 and has used reasonable and supportable information onbest efforts basis & that is available without undue cost or effort to determine the credit risk at the reporting date.
Liquidity risk arises from the Company's inability to meet its cash flow commitments on time. Prudent liquidity risk managementimplies maintaining sufficient stock of cash and marketable securities and maintaining availability of standby funding throughan adequate line up of committed credit facilities. It uses a range of products mix to ensure efficient funding from across well-diversified markets and investor pools. Treasury monitors rolling forecasts of the company's cash flow position and ensures thatthe company is able to meet its financial obligation at all times including contingencies.
The table below analyse the company financial liability into relevant maturity companying based on their contractual maturity.The amount disclosed in the table are the contractual undiscounted cash flows. Balance due within 1 year equals their carryingbalances as the impact of discounting is not significant.
Market risk is the risk of any loss in future earnings, in realizable fair values or in futures cash flows that may result from a changein the price of a financial instrument.
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes inmarket interest rates. Interest rate change does not affects significantly short term borrowing and current investment thereforethe Company's exposure to the risk of changes in market interest rates relates primarily to the Company's long-term debt and Noncurrent investment.
Company business is volatile and hence borrowings are done bases on requirement, generally borrowings are done for short termand are on market based interest rate.
The Company does not have any fixed-rate instruments presented in financial liabilities.
The Company does not have any exposure to foreign exchange risk arising form foreign currency transaction.
The Company does not have any long-term contracts including derivative contracts for which there are any material foreseeable losses.
The Company does not have any investments classified at fair value through profit or loss as at the reporting date. Accordingly,the Company is not exposed to price risk arising from changes in the fair value of financial instruments.
The company's objective when managing capital are to
- Safeguard their ability to continue as going concern, so that they can continue to provide returns for the share holders andbenefits for other stake holders, and
- Maintain an optimal capital structure to reduce the cost of capital.
The Company manages its capital structure and makes adjustments in light of changes in economic conditions and therequirements of the financial covenants. To maintain or adjust the capital structure, the Company may adjust the dividend paymentto shareholders, return capital to shareholders or issue new shares. The Company monitors capital using debt equity ratio.
The company measures fair values using the following fair value hierarchy, which reflects the significance of the inputs used inmaking the measurements.
- Level 1: Inputs that are quoted market prices (unadjusted) in active markets for identical instruments.
- Level 2: Inputs other than quoted prices included within Level 1 that are observable either directly (i.e. as prices) or indirectly(i.e. derived from prices). This category includes instruments valued using: quoted market prices in active markets for similarinstruments; quoted prices for identical or similar instruments in markets that are considered less than active; or other valuationtechniques in which all significant inputs are directly or indirectly observable from market data.
- Level 3: Inputs that are unobservable. This category includes all instruments for which the valuation technique includes inputsthat are not observable and the unobservable inputs have a significant effect on the instrument's valuation. This category includesinstruments that are valued based on quoted prices for similar instruments for which significant unobservable adjustments orassumptions are required to reflect differences between the instruments.
The company uses widely recognised valuation models to determine the fair value of common and simple financial instruments,such as interest rate and currency swaps, that use only observable market data and require little management judgement andestimation. Observable prices or model inputs are usually available in the market for listed debt and equity securities, exchange-traded derivatives and simple OTC derivatives such as interest rate swaps. The availability of observable market prices and modelinputs reduces the need for management judgement and estimation and also reduces the uncertainty associated with determiningfair values.
The following table analyses financial instruments measured at fair value at the reporting date, by the level in the fair value hierarchyinto which the fair value measurement is categorised. The amounts are based on the values recognised in the statement of financialposition. The fair values include any deferred differences between the transaction price and the fair value on initial recognition whenthe fair value is based on a valuation technique that uses unobservable inputs.
The following table sets out the fair values of financial instruments not measured at fair value and analyses them by the level inthe fair value hierarchy into which each fair value measurement is categorised.
Below are the methodologies and assumptions used to determine fair values for the above financial instruments which arenot recorded and measured at fair value in the Company's Financial Statement. These fair value is calculated for disclosurespurpose only.
For Financial assets and liabilities that have a short term nature, the carrying amount, which is net of impairment, are a reasonableapproximation of their fair value. Such instruments include cash and bank balances, trade receivables, other receivables, balancesother than cash and cash equivalents and trade payables.
In the opinion of the management, there is only one reportable business segment as envisaged by Ind AS 108 on 'OperatingSegment' issued by Institute of Chartered accountant of India. Accordingly, no separate disclosure for segment reporting is requiredto be made in the financial statements of the Company. Secondary segmentation based on geography has not been presented asthe Company operates primarily in India and the Company perceives that there is no significant difference in its risk and returns inoperating from different geographic areas within India.
The fair value of the Options granted has been estimated using the Black-Scholes option pricing Model. Each tranche of vestinghave been considered as a separate grant for the purpose of valuation.
Stock Price: The fair value of the underlying stock based on the latest available closing Market Price on NSE has beenconsidered for valuing the grant.
Volatility: Volatility is a measure of the amount by which a price has fluctuated or is expected to fluctuate during the period. Themeasure of volatility is used in the Black Scholes option-pricing model is the annualized standard deviation of the continuouslycompounded rates of return on the stock over a period of time.
The period to be considered for volatility has to be adequate to represent a consistent trend in the price movements. It isalso important that movement due to abnormal events get evened out. There is no research that demonstrates conclusivelyhow long the historical period used to estimate expected long-term future volatility should be. However, informal tests andpreliminary research tends to confirm that estimates of expected future long term volatility should be based on historicalvolatility for a period that approximates the expected life of the options being valued.”
Risk-free rate of return: The risk-free rate being considered for the calculation is the interest rate applicable for a maturityequal to the expected life of the options based on the zero-coupon yield curve for Government Securities.
Exercise Price: The Exercise Price as communicated to us by the management of the Company have been considered inthe valuation.
Time to Maturity: Time to Maturity / Expected Life of Options is the period for which the Company expects the Options tobe live. The minimum life of a stock option is the minimum period before which the Options cannot be exercised and themaximum life is the period after which the Options cannot be exercised.
Expected dividend yield: The management's representation of the Expected dividend yield of 0% has been accepted for thepurpose of this valuation.
1. The wholly owned subsidiary of the Company namely 5paisa P2P Limited ("the Company”) was incorporated on December17, 2017 with the objective to provide an online marketplace to the participants involved in peer to peer lending and also toact as a distributor of financial products. The company has received approval from RBI to commence its business as NBFCP2P and the company has started its P2P business operations.
2. The Wholly owned subsidiary of the Company namely 5paisa Insurance Brokers Limited was incorporated on Oct 27, 2018.
3. The wholly owned subsidiary of the Company namely 5paisa Trading Limited had incorporated on February 27,2020.
4. The wholly owned subsidiary of the Company namely 5Paisa International Securities (Ifsc) Limited had incorporated onJun15,2022.
The Company operates from and uses the premises, infrastructure and other facilities and services as provided to it by groupcompanies which are termed as 'Shared Services'. Hitherto, such shared services consisting of administrative and other revenueexpenses paid for by the company were identified and recovered from them based on reasonable management estimates, whichare constantly refined in the light of additional knowledge gained relevant to such estimation. These expenses are recovered onan actual basis and the estimates are used only where actual were difficult to determine.
The Code on Social Security, 2020 ('Code') relating to employee benefits during employment and postemployment receivedIndian Parliament approval and Presidential assent in September 2020. The Code has been published in the Gazette of India andsubsequently on November 13, 2020 draft rules were published and invited for stakeholders' suggestions. The Central Governmenton 30th March 2021 has deferred the implementation of the said Code and the date on which the Code will come into effect has notbeen notified. The Company will assess the impact of the Code when it comes into effect and will account for the related impactin the period the Code becomes effective.
Additional regulatory information required under (WB)(xvi) of Division III of Schedule III amendment, disclosure of rations, is notapplicable to the Company as it is in broking business and not an NBFC registered under Section 45-IA of Reserve Bank of IndiaAct, 1934.
a) No funds have been advanced or loaned or invested by the company to or in any other persons or entities, including foreignentities ("Intermediaries”), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall,whether, directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf ofthe company ("Ultimate Beneficiaries”) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
b) No funds have been received by the company from any persons or entities, including foreign entities ("Funding Parties”), withthe understanding, whether recorded in writing or otherwise, that the company shall, whether, directly or indirectly, lend or investin other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party ("Ultimate Beneficiaries”)or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries
c) The Company does not have any long-term contracts including derivative contracts for which there are any materialforeseeable losses.
d) There were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company.
e) No proceedings have been initiated or pending against the company for holding any benami property under the BenamiTransactions (Prohibition) Act, 1988 (45 of 1988).
f) The Company has not been declared as wilful defaulter by any bank or financial Institution or other lender.
g) During the year, the company has not entered into any transactions with companies struck off under section 248 of theCompanies Act, 2013 or section 560 of Companies Act, 1956.
h) There are no transactions which have not been recorded in the books of accounts and which have been surrendered ordisclosed as income during the year in the tax assessments under the Income Tax Act, 1961.
i) The quarterly returns / statements of current assets filed by the Company, with banks from whom borrowings have beenavailed on the basis of security of current assets, are in agreement with the books of account.
j) There are no charges or satisfaction yet to be registered with the registrar of companies beyond the statutory period.
k) The company does not have layers beyond the number prescribed under clause (87) of section 2 of the Act read withCompanies (Restriction on number of Layers) Rules, 2017.
l) The company has not traded or invested in Crypto Currency or Virtual Currency during the financial year.
During January 2025, the Income Tax Department conducted a search operation at the premises of 5paisa Capital Ltd. Thecompany extended full cooperation to the Income Tax officials and provided all requisite information, documents, and clarificationsas sought during the proceedings. As of the date of this report, the company has not received any formal communication fromthe department regarding the outcome of the search. Accordingly, the impact, if any, on the company's financial results cannot bedetermined at this stage.
Previous year figures are re-grouped, re-classified and re-arranged, wherever considered necessary to confirm to currentyear's presentation.
Chartered AccountantsFirm's Registration No.109208WBy the hand of
Partner Managing Director & CEO Whole Time Director & CFO
Membership No.: 166048 (DIN : 10415364) (DIN : 06360031)
Place : Mumbai Namita Godbole
Dated : May 1, 2025 Company Secretary