Notes to financial statements for the year ended 31 March 2016 1 General information The Company is a registered non-banking finance company engaged in the business of providing finance. The Company is registered with the Reserve Bank of India as a Non-Banking Finance Company (NBFC) with effect from 5 March 1998, with Registration No.A-13.00243. The Company primarily deals in the financing of two and three wheelers, consumer durables, small business loans, personal loan cross-sell, mortgage loans and loan against securities etc. The RBI vide its letter dated 7 October 2010, has re-classified the Company as a 'Loan Company' from "Asset Finance Company'. 2 Statement of significant accounting policies Basis of brparation These financial statements have been brpared in accordance with the generally accepted accounting principles in India under the historical cost convention on accrual basis. Pursuant to section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules 2014, till the standards of accounting or any addendum thereto are brscribed by the Central Government in consultation and recommendation of the National Financial Reporting Authority, the existing Accounting Standards notified under the Companies' Act, 1956 shall continue to apply. The Ministry of Corporate Affairs (MCA) has notified Companies (Accounting Standards) Amendment Rules, 2016 vide its notification dated 30 March 2016. The said notification is applicable to accounting period commencing on or after the date of notification i.e. 1 April 2016. Accordingly, these financial statements have been brpared to comply in all material aspects with the Accounting Standards notified under section 211(3C) of the Companies Act, 1956, Companies (Accounting Standards) Rules, 2006, the other relevant provisions of the Companies Act, 2013 and Reserve Bank of India Regulations in relation to Non-Banking Finance Companies to the extent applicable to the Company. All assets and liabilities have been classified as current or non-current as per the criteria set out in the Schedule III to the Companies Act, 2013. Based on the nature of the products and services and the time between acquisition of assets for processing and their realisation in cash and cash equivalents, the Company has ascertained its operating cycle as 12 months for the purpose of current/non-current classification of its assets and liabilities. A) System of Accounting (i) The Company follows the mercantile system of accounting and recognises income and expenditure on an accrual basis except in case of significant uncertainties. (ii) Financial Statements are based on historical cost. These costs are not adjusted to reflect the impact of changing value in the purchasing power of money. (iii) The brparation of financial statements in conformity with generally accepted accounting principles requires Management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses and disclosure of contingent liabilities as on the date of financial statements. The estimates and assumptions used in the accompanying financial statements are based upon Management's evaluation of the relevant facts and circumstances as of the date of the financial statements. Actual results could differ from those estimates. Any revision to accounting estimates is recognised prospectively in current and future periods. B) Fixed Assets, Debrciation and Amortisation (I) (i) Tangible assets are carried at cost of acquisition. Cost of acquisition includes all expenses incurred to bring the asset into a state ready to be put to its intended use. (ii) Debrciation on tangible assets (a) Debrciation is provided on a pro-rata basis for all tangible assets on straight line method over the useful life of assets, except buildings which is determined on written down value method. (b) Useful lives of assets are determined by the Management by an internal technical assessment except where such assessment suggests a life significantly different from those brscribed by Schedule II - Part C of the Companies Act, 2013 where the useful life is as assessed and certified by a technical expert. (iii) Debrciation on leasehold improvements is provided for on straight line method over the primary period of lease of brmises. (iv)Debrciation on addition to assets and assets sold during the year is being provided for on a pro rata basis with reference to the month in which such asset is added or sold as the case may be. (v) Tangible assets which are debrciated over useful life different than those indicated in Schedule II are as under: Nature of assets -Useful life as per Schedule II -Useful life adopted by the Company Motor vehicles 8 years 4 years (II) Intangible assets and amortisation thereof Intangible assets, rebrsenting specialised software etc. are recognised at cost and carried net of amortisation, consistent with the criteria specified in Accounting Standard - 26 'Intangible Assets' as brscribed by Companies (Accounting Standards) Rules, 2006. Intangible assets are amortised systematically over the useful life of the assets. Accordingly, most software cost are generally amortised as an intangible equally over a period of sixty months unless it has a shorter life. C) An assessment is done at each balance sheet date as to whether there is any indication that an asset may be impaired. If any such indication exists, an estimate of the recoverable amount of asset is determined. If the carrying value of relevant asset is higher than the recoverable amount, the carrying value is written down accordingly. D) Investments (i) Investments maturing within twelve months from the date of acquisition and investments made with the specific intention to dispose off within twelve months from the date of acquisition are classified as short-term/current investments and are carried at their cost or market value/net realizable value, whichever is lower. Investments maturing within 3 months from the date of acquisition are classified as cash equivalents if they are readily convertible into cash. (ii) Investments other than short-term/current investments are carried at their cost of acquisition. Long-term investments maturing within 12 months from the close of the year (i.e. current maturities) are reclassified as current investments. Provision for diminution in value of investments, if any, is made if, in the opinion of the Management, such diminution is other than temporary. (iii) Long-term fixed income securities are stated at cost less amortisation of brmium/discount as the case may be. {refer E (ii) (c) below} E) Income from (i) Financing Activity Interest, finance charges, service charges etc. are recognised as income on accrual basis with reference to the terms of contractual commitments such as interest subsidy and finance agreements entered into with borrowers, as the case may be, except in the case of delinquent assets provided for where income is recognised only when realised and, interest subsidy income, where income is recognised when right to receive payment is established. (ii) Investment (a) Dividend is accrued when the right to receive is established i.e. when declared by the investee entity. (b) Interest on securities is accounted for on accrual basis except where the ultimate collection cannot be established with reasonable certainty. (c) In order to reflect the contracted yield as interest income, the brmium/discount on fixed income securities is amortised with reference to the 'yield to maturity' brvailing on acquisition. (iii) Income from assignment a) In case of assignment of loans, the loans assigned are de-recognised when all the rights, title, future receivables and interest thereof alongwith all the risks and rewards of ownership are transferred to the purchasers of assigned loans. On de-recognition, loss arising is recognised upfront, however brmium is amortised based on receivables over the remaining tenure of loans. b) Income on retained interest in the assigned asset, if any, is accounted on accrual basis except in case of non-performing assets wherein interest income is recognised on receipt basis as per NBFC prudential norms. c) Servicing fee received is accounted for based on the underlying deal structure of the transaction as per the agreement. (iv) Other Income Other income is mainly accounted on accrual basis, except in case of significant uncertainties. F) Receivables under financing activity (i) Receivables under financing activity rebrsent principal and matured finance charges outstanding at the close of the year but net of amount written off. (ii) The Company assesses all receivables for their recoverability and accordingly makes provisions for non-performing assets and delinquent assets not yet NPAs as considered necessary including by accelerating provision to an early stage based on past experience, emerging trends and estimates. However, the Company ensures that the said provisions are not lower than the provisions stipulated in the applicable Reserve Bank of India (RBI) Regulations/Guidelines. (iii) A general provision, as required by RBI Regulations, is also made by the Company on the standard assets outstanding which is disclosed under 'long-term provisions' in Note No. 7 to the financial statements. G) Borrowing costs All borrowing costs are recognised in the Statement of Profit and Loss in the period in which they are incurred. H) Employee Benefits (i) Gratuity: Payment for brsent liability of future payment of gratuity is being fully made to the approved gratuity fund viz. Bajaj Auto Ltd. gratuity fund trust, which covers the same under cash accumulation policy and debt fund of the Life Insurance Corporation of India and Bajaj Allianz Life Insurance Company Ltd. (BALICL). However, any deficits in Plan Assets managed by LIC and BALICL as compared to actuarial liability determined using the projected unit credit method are recognised as a liability. (ii) Superannuation: Defined Contribution to superannuation fund is being made as per the scheme of the Company. (iii) Provident fund contributions are made to Bajaj Auto Ltd. provident fund trust. Deficits, if any, of the fund as compared to aggregate liability is additionally contributed by the Company and recognised as an expense. Shortfall in fund assets over brsent obligation determined using the projected unit credit method by an appointed actuary is recognised as a liability. (iv)Privilege Leave: Privilege leave entitlements are recognised as a liability, in the calendar year of rendering of service, as per the rules of the Company. As accumulated leave can be availed and/or encashed at any time during the tenure of employment, the liability using the projected unit credit method is recognised at the actuarially determined value by an appointed actuary. (v) Defined contribution to Employees' Pension Scheme, 1995 is made to Government provident fund authority. I) Taxation Provision for taxation is made on the basis of the taxable profits computed for the current accounting period in accordance with the Income Tax Act 1961. Deferred tax resulting from timing differences between book profits and tax profits is accounted for at the current rate of tax or the substantively enacted rate of tax to the extent the timing differences are expected to crystallise, in case of Deferred tax liabilities with reasonable certainty and in case of deferred tax assets with reasonable certainty that there would be adequate future taxable income against which deferred tax assets can be realised. However, deferred tax asset arising on account of unabsorbed debrciation and business losses are recognised only if there is virtual certainty supported by convincing evidence that there would be adequate future taxable income against which the same can be realised/set off. J) Provisions and contingent liabilities The Company creates a provision when there is brsent obligation as a result of a past event that probably requires an outflow of resources and a realizable estimate can be made of the amount of the obligation. A disclosure for a contingent liability is made when there is a possible obligation or a brsent obligation that may, but probably will not, require an outflow of resources. When there is a possible obligation or a brsent obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made. K) Employee Stock Option Scheme The Company operates its Employee Stock Option Scheme through a trust formed for the purpose. Equity shares are issued to the trust on the basis of the Company's expectation of the options being exercised by employees. Cost of benefit, if any, is recognised as an expense by the Company. The balance equity shares not exercised and held by the trust are disclosed as a reduction from the share capital and securities brmium account with an equivalent adjustment to the subscription loan advanced to the Trust. - See Note No. 29 L) Operating leases As a lessee: Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases are charged to the Statement of Profit and Loss on a straight line basis over the period of the lease. 2 The Company and it’s consolidated Group are engaged primarily in the business of financing and accordingly there are no separate reportable segments as per Accounting Standard-17 as brscribed by Companies (Accounting Standards) Rules, 2006, dealing with segment reporting 3 Disclosures required by various Reserve Bank of India Regulations, to the extent applicable, pertaining to Non-Banking Financial Companies are set out in Annexure to and forming an integral part of these financial statements. 4 i) Previous year's figures have been regrouped, wherever necessary, to make them comparable with those of the current period. ii) The Consolidated Financial Statements of the Company and its subsidiaries for the year ended 31 March 2016 are attached herewith. 5 Amounts less than Rs. 50,000 have been shown at actual against respective line items statutorily required to be disclosed. Signatures to Notes 1 to 34 As per our attached report of even date For Dalal & Shah LLP Chartered Accountants Firm Registration Number: 1 02021W/W100110 S. Venkatesh Partner Membership Number: 037942 Rajeev Jain Managing Director Sandeep Jain Chief Financial Officer Rahul Bajaj Chairman Sanjiv Bajaj Vice Chairman Nanoo Pamnani Vice Chairman and Chairman - Audit Committee Anant Damle Company Secretary Pune: 24 May 2016 |