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NOTES TO ACCOUNTS

Aditya Birla Money Ltd.

You can view the entire text of Notes to accounts of the company for the latest year
Market Cap. (₹) 252.79 Cr. P/BV 11.77 Book Value (₹) 3.81
52 Week High/Low (₹) 75/39 FV/ML 1/1 P/E(X) 26.61
Bookclosure 03/07/2019 EPS (₹) 1.69 Div Yield (%) 0.00
Year End :2018-03 

1. Nature of operations

Aditya Birla Money Limited (‘ABML’ or ‘the Company’) was incorporated on July 04, 1995 in Chennai, Tamil Nadu. ABML is a broking and distribution player, offering Equity and Derivative trading through NSE and BSE and Currency Derivative on MCX-SX. It is registered as a Depositor Participant with both NSDL and CDSL in terms of the Securities and Exchange Board of India (Depositor Participants) Regulations, 1996 and also provides Portfolio Management Services.

2 Terms/Rights attached to Equity Shares

The Company has only one class of Equity shares having at par value of Re.1/- each per share. Each holder of Equity shares is entitled to one vote per share. The dividend proposed by the Board of Directors, if any, is subject to the approval of the shareholders in the ensuing Annual General Meeting.

In the event of liquidation of the Company, the holders of Equity shares will receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of the Equity shares held by the shareholders.

3 Terms/Rights attached to Preference Shares

3.1 Preference shares cary a non-cumulative dividend of 8% per annum. Dividend amounts, declared if any, will be paid in Indian rupees. In the year ended 31st March, 2011, the Company had allotted 800,000 8% Redeemable Non-Convertible Non-Cumulative Preference Shares of Rs.100/- each, fully paid-up at a premium of Rs.150/-per share to Aditya Birla Capital Limited (Formerly known as Aditya Birla Financial Services Limited), the Holding Company. These Preference Shares are redeemable at the end of 5 years from the date of issue at a price of Rs.320/- per share.However, basis the written consent of preference shareholders, the period of redemption extended by 39 months from March 2016 to June 2019 and the redemption price of Redeemable NonConvertible Non-Cumulative Preference Shares shall be varied from Rs.320/ - (Face value Rs.100/ - and Premium of Rs.220/- per share) to Rs.411/- (Face value Rs.100/- and Premium of Rs.311/- per share).

3.2 During the year ended 31st March, 2014, the Company had allotted 200,000 8% Redeemable NonConvertible Non-Cumulative Preference Shares of Rs.100/- each, fully paid-up at a premium of Rs.400/- per share to Aditya Birla Financial Services Limited, the Holding Company. These Preference Shares are redeemable at the end of 5 years from the date of issue at a price of Rs.725/- per share.

4 Shares held by Holding Company

41,550,000 (Previous Year: 41,550,000) Equity Shares of Re.1/- each fully paid-up and 1,000,000 (Previous Year : 1,000,000) 8% Redeemable Non-Convertible Non-Cumulative Preference Shares Rs.100/- each fully paid-up are held by Aditya Birla Capital Limited (Formerly known as Aditya Birla Financial Services Limited), the Holding Company.

A Repayable in 27 to 91 days from the date of draw down. The interest on this loan ranges from 6.90 % to 8.32 % and interest on this loan in the previous year ranged from 6.85% to 9.76%

*Commercial Papers shown net of unamortised discounting charges Rs.28,642,572/- and previous year Rs. 2,922,937/-

There are no Micro, Small & Medium Enterprises, to whom the Company owes dues, which, are outstanding for more than 45 days as at 31st March, 2018 and no interest payment made during the year to any Micro, Small & Medium Enterprises. (Previous year MSME/Interest: Nil). This information as required to be disclosed under the Micro, Small & Medium Enterprises Development Act, 2006 has been determined to the extent such parties have been identified on the basis of information available with the Company.

5) Other Significant Notes - SPA Claims

Pursuant to a Share Purchase agreement (‘SPA’) between Aditya Birla Nuvo Limited (‘ABNL’ or ‘the Purchaser’), ultimate holding company and Mr. Prataph C Reddy and others (“Erstwhile Promoters”) dated August 28, 2008, ABNL had agreed to acquire 31 million equity shares in Aditya Birla Money Limited (“the Company”). The transaction was completed on March 06, 2009.

As per the SPA, the Erstwhile Promoters had agreed to indemnify and hold harm less the Purchaser to the extent of any Losses, resulting from or consequent upon or relating to such breach of representations or warranties, covenants or agreement including but not limited to the recoveries of receivables and other assets in the books of the Company, contingencies on tax and related matters etc.

Subsequent to the completion of the above transaction, the Purchaser noted several breaches of representations and warranties including but not limited to non-recovey of debtors, irrecoverable advances, missing fixed assets etc. Accordingly, ABNL based on its internal assessment of the recoverability of receivables, fixed assets, other assets and matters relating to tax and other contingencies arrived at an amount of Rs.163,882,296/- as Losses incurred on account of breach of representation / warranties in the SPA. Further, ABNL vide its letter dated March 05, 2011 made a separate claim of Rs.5,169,379/- for amounts becoming due and payable on accounts of various cases initiated by the customers of the Company. ABNL invoked the arbitration mechanism and filed their Statement of Claim on Februay 26, 2011 with the Arbitration Tribunal.

Pending the final outcome of the arbitration proceedings, the Company has identified all such receivables, assets etc. which are have not been recovered and other items which are the subject matter of the claim to the extent they are in the books of accounts of the Company as at March 31, 2017 aggregating Rs.18,40,50,594/- and disclosed the same in Short Term Loans & Advances under Note 11B of the Balance Sheet, as these amounts would be paid directly to the Company by the Erstwhile Promoters at the direction of ABNL as and when the settlement happens.

Both parties completed filing of documents. On July 04, 2012, a hearing was held and M/s. Delloitte Haskins & Sells were asked to act as Auditors by the Arbitrators with a mandate to submit a report on whether from an accounting perspective, including the accounting treatment that has been given to the items set out in the Statement of Claim, the amounts as claimed are correct as per accounting practice.

The Arbitral Tribunal then directed the Claimants and Respondents to file their objections if any to the audit report submitted by Professional Accounting firm and had also directed the Respondent to file their list of witnesses (if any) by the end of April 2013. The Respondents filed their objections to the audit report and ABNL had also filed its reply to the said objections.

Arguments in rebuttal by the Claimant was completed on October 25, 2013 and written submissions were filed by October 29, 2013. The tribunal has reserved the award.

During FY 2014-15, Arbitral Tribunal has passed an award, allowing claim of Rs.99,190,697/-, which excluded premature claims pertaining to income tax, service tax, etc. Further, such award directed the Erstwhile Promoters to pay a sum of Rs.55,546,790/- (being 56% of Rs.99,190,697/-, as ABNL has purchased only 56% of shares), along with interest @ 14% from the date of award. This award was received by ABNL on May 27, 2014

Subsequently, both parties have filed petitions under Section 34 of the Arbitration and Conciliation Act, 1996 seeking to set aside the award and the same are admitted and pending on the file of the High Court of Madras.

In respect of such receivables, which exclude premature claims pertaining to income tax, service tax, etc., the Company has created adequate provision, which also includes claims not awarded by the Arbitral Tribunal to the extent of 44%. In respect of tax claims, the company has obtained favorable order for certain assessment years & is confident of recovering such amount in due course. Such amounts are fully recoverable from the income tax department.

Further in the month of October 2015, Supreme Court dismissed the appeal filed by the Company against SAT order directing the company to pay a sum of Rs.16,596,652/- together with interest thereon. Consequently SEBI served a notice of demand on the Company seeking payment of a sum of Rs.16,596,652/- towards turnover fee and a sum of Rs.37,638,304/- and in the month of October 2016, Rs.1,129,149/- towards interest thereon from the respective due dates of payment of the said Turnover Fee.

As the erstwhile promoters have agreed to indemnify ABNL to the extent of any losses resulting from or consequent upon the civil appeal pending before Supreme Court vide Civil Appeal No. 3441/2007 in the SPA, the demand was communicated to the erstwhile promoters and the erstwhile promoters have paid the total turnover fee of Rs.16,596,652/- to the Company against the payment made by the Company to SEBI.

The request of the Company to SEBI seeking waiver of the interest was not considered favourably and the review petition filed by the Company in Supreme Court was also dismissed. In the meanwhile SEBI issued a Recovey Certificate dated 12.01.2016 seeking to recover the interest amount and the Company remitted the above mentioned interest amount with SEBI under intimation to erstwhile promoters.

During the current financial year all the parties to the agreement have agreed to settle the dispute for a full and final settlement amount of Rs.147,307,418/-. The Company received the settlement amount. Out of this Rs.44,600,000/- has been kept aside by the company towards tax matters relating to period prior to acquisition. All the parties to the dispute have agreed to file the settlement petition with High Court.

6) Stamp Duty

Hitherto, the Company had been collecting and remitting stamp duties with respect to states wherein the manner of payment of the same has been prescribed by the respective state governments. From July 2011, the Company had started collecting stamp duty on contract notes for all states, including the states wherein the manner of payment has not yet been notified. The Company is evaluating various options of remitting the same, including remitting those amounts in the State of Tamil Nadu, as all the contract notes are executed at Tamil Nadu. Pending, the final determination of the manner of remittance, amount of Rs.12,481,598/- (Previous year: Rs.10,572,030/-) collected till March 31, 2018 has been disclosed under Statutoy Dues under Other Current Liabilities.

7) Capital and Other Commitment

a) Estimated amount of contracts remaining to be executed on capital account, net of advances and not provided for is Nil (Previous year - Nil).

b) For commitments relating to lease arrangements, please refer Note 30.

8) Managerial Remuneration

During an earlier year the Company had made an application to the Central Government under Section 309 (5B) of the Companies Act, 1956 for seeking waiver of excess managerial remuneration amounting to Rs.3,094,634/-(Previous year: Rs.3,094,634/-) (excluding statutoy contribution to provident fund, gratuity and leave encashment which are exempted under Schedule VI) paid to Mr. P.B. Subramaniyan, the erstwhile whole time director (‘Erstwhile Director’) of the Company for the period from April 01, 2008 to March 06, 2009.

During earlier year, the Company has received an order from the Central Government (CG) whereby the CG has rejected excess remuneration of Rs.1,626,614/ - (Previous year: Rs.1,626,614/-) and directed the Company to collect the same from the Erstwhile Director. Further the Company has filed a civil suit in the High Court of Judicature at Madras vide C.S. No. 53/2016 seeking recovey of the excess remuneration paid to Mr. P.B. Subramaniyan. Pending the recovey of the same, it has been shown as advances recoverable by the Company in the Balance Sheet.

9) Lease Disclosures Operating Leases for Premises:

Lease rentals in respect of premises taken on operating lease during the year ended March 31, 2018 amounts to Rs.45,532,262/- (Previous Year Rs.49,361,872/-).

Future obligations towards lease rentals under non-cancellable lease agreements as on March 31, 2018 amounts to Rs.181,716,115/- (Previous Year Rs.206,783,838/-). Details of Lease Rentals payable within one year and thereafter are as under:

The company has entered into lease / license agreements in respect of immovable properties with different parties. Some of the agreements contain escalation clause related to lease rentals / license fees from 5% to 15% p.a.

Operating Leases for Computers:

The company has entered into commercial leases on computer desktops. These leases have an average life of three years with renewal option included in the contracts.

Lease rentals in respect of computers taken on operating lease during the year ended March 31, 2018 amounts to Rs.1,792,250/- (Previous Year Rs.2,795,464/-).

Future obligations towards lease rentals under non-cancellable lease agreements as on March 31, 2018 amounts to Rs.707,057/- (Previous Year Rs. 2,500,954/-). Details of Lease Rentals payable within one year and thereafter are as under:

10) Employment Benefit disclosures

The amounts charged to the Statement of profit and loss during the year for Provident fund contribution aggregates to Rs.16,568,304/- (Previous year: Rs.19,066,935/-) and employees’ state insurance contribution aggregates to Rs.1,367,939/- (Previous year: Rs.731,827/-).

The Company has a defined benefit gratuity plan. Evey employee who has completed five years or more of service gets a gratuity on departure at 15 days salay (last drawn salay) for each completed year of service. The scheme is funded with Aditya Birla NUVO Employee Gratuity Fund.

The following tables summaries the components of net benefit expense recognized in the Statement of Profit and Loss and the funded status and amounts recognized in the balance sheet for the gratuity plan.

11) Foreign Currency Transactions

The Company did not enter into any foreign currency transactions in the current year and previous year.

12) Stock Options Granted

The objective of the Employee Stock Option Scheme is to attract and retain talent and align the interest of employees with the Company as well as to motivate them to contribute to its growth and profitability.

In accordance with the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999, as amended by Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 (hereinafter referred to as ‘SEBI ESOP Regulations’) and the Guidance Note on Accounting for Employee Share-based Payments, the cost of equity-settled transactions is measured using the intrinsic value method. The cumulative expense to be recognized for equity-settled transactions at each reporting date until the vesting date will reflect the extent to which the vesting period has expired and the company’s best estimate of the number of equity instruments that will ultimately vest. The expense or credit to be recognized in the statement of profit and loss for a period to represent the movement in cumulative expense recognized as at the beginning and end of that period and is to be recognized in employee benefits expense.

i) ABML - Employee Stock Option Scheme - 2014

The Company had formulated the ABML Employee Stock Option Scheme - 2014 (ABML ESOP Scheme - 2014) with the approval of the shareholders at the Annual General Meeting dated September 09, 2014. The Scheme provides that the total number of options granted there under will be 27,70,000 and to follow the Market Value Method (Intrinsic Value) for valuation of the Options. Each option, on exercise, is convertible into one equity share of the Company having face value of Re.1 each. Subsequently, the Nomination and Remuneration Committee of the Board of Directors on December 02, 2014 has granted 25,09,341 stock options to its eligible employees under the ABML ESOP Scheme - 2014 at an exercise price of Rs.34.25/-. The Exercise Price was based on the latest available closing price, prior to the December 02, 2014 (the date of grant by the Nomination & Remuneration Committee) on the recognized stock exchanges on which the shares of the Company are listed with the highest trading volume.

The Company has granted options to the eligible employees at an exercise price of Rs.34.25/- per share being the market price as per SEBI ESOP Regulations. In view of this, there being no intrinsic value (being the excess of the market price of share under ESOP over the exercise price of the option), on the date of grant, the Company is not required to account the accounting value of option as per SEBI ESOP Regulations.

Fair Valuation:

The fair value of the options on the date of grant has been done by an independent valuer using Black-Scholes Formula.

Had the company used the fair value model to determine compensation, its profit after tax and earnings per share as reported would have changed to the amounts indicated below:

ii) ABCL - Employee Stock Option Scheme - 2017

Pursuant to ESOP Plan being established by the holding company (i.e. Aditya Birla Capital Limited), stock options were granted to the employees of the Company during the financial year. Total cost incurred by the holding company till date is being recovered from the Company over the period of vesting. Accordingly, a sum of Rs.14,862,522/- has been recovered from the Company during the year, which has been charged to the Statement of Profit and Loss.

13) i) The Company has a process whereby periodically all long term contracts, if any, are assessed for material foreseeable losses. As at the balance sheet date, there were no long term contracts (including derivative contracts) (Previous Year: Nil)

ii) The Company’s pending litigations comprise of claims against the Company primarily by the customers and proceedings pending with Income Tax and other statutoy authorities. The Company has reviewed all its pending litigations and proceedings and has adequately provided for where provisions are required and disclosed the contingent liabilities where applicable, in its financial statements. The Company does not expect the outcome of these proceedings to have a materially adverse effect on its financial results. Refer Note 26 for details on contingent liabilities.

14) Portfolio Management Scheme

The Company holds several accounts under Portfolio Management Scheme (PMS). These accounts are held by the company under fiduciay capacity and all services are rendered as per PMS Guidelines issued by the Security & Exchange Board of India (SEBI). In return for PMS services the Company is entitled to professional fee. The accounts of each PMS client is maintained by the company and is annually audited by an independent Chartered Accountant. Since the company renders PMS services under fiduciay capacity, the financials of each PMS clients does not form part of the financials of the Company. This has been done based on the opinion obtained from the Expert Advisoy Committee of the Institute of Chartered Accountants of India (ICAI). A brief summay of the aggregated quantum of the funds received, funds invested, services fee charged and the balance available in the PMS accounts are produced below.

15) Segment Reporting:

The Company’s business is to provide brokerage service, trading in securities and portfolio management services (‘PMS’) to its clients in the capital markets within India. All other activities of the Company revolve around these activities.

16) Previous Year Figures

Previous year figures have been regrouped / reclassified, where necessaiy, to conform to this year’s classification.

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