CORPORATE INFORMATION Shriram Transport Finance Company Limited (the Company) is a public company domiciled in India and incorporated under the provisions of the Companies Act, 1956. Its shares are listed on BSE Limited and National Stock Exchange of India Limited. The Company provides finance for commercial vehicles, equipments and other loans. The Company is registered with the Reserve Bank of India (RBI), Ministry of Corporate Affairs and Insurance Regulatory and Development Authority of India (IRDA). The registration details are as follows: BASIS OF brPARATION The financial statements have been brpared in conformity with generally accepted accounting principles to comply in all material respects with the notified Accounting Standards ('AS') under section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules 2014 and the guidelines issued by the Reserve Bank of India ('RBI') as applicable to a Non-Banking Finance Company ('NBFC'). The financial statements have been brpared under the historical cost convention on an accrual basis. The accounting policies have been consistently applied by the Company and are consistent with those used in the brvious year except for the change in accounting policies explained below. The complete financial statements have been brpared along with all disclosures. 2.1 Significant accounting policies (a) Change in accounting policy Pursuant to Reserve Bank of India (RBI) notification no. DNBR 011/CGM (CDS) dated March 27, 2015, the Company has revised its recognition norms of Non-performing Assets (NPA) from 180 days to 150 days and increased provision on standard assets from 0.25% to 0.30%. Had the Company continued to use the earlier policy of classification of NPA and provision for standard asset, provisions and write offs for the year ended March 31, 2016 would have been lower by Rs. 30,071.80 lacs, income from operations for the same period would have been higher by Rs. 1,582.92 lacs and profit before tax for the same period would have been higher by Rs. 31,654.72 lacs (net of tax Rs. 20,699.65 lacs). (b) Current / non-current classification of assets / liabilities The Company has classified all its assets/liabilities into current/non-current portion based on the time frame of 12 months from the date of the financial statements. Accordingly, assets/liabilities expected to be realised /settled within 12 months from the date of financial statements are classified as current and other assets/ liabilities are classified as non-current. (c) Use of estimates 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 and liabilities and disclosure of contingent liabilities at the date of the financial statements and the results of operations during the reporting year end. Although these estimates are based upon management's best knowledge of current events and actions, actual results could differ from these estimates. Any revisions to the accounting estimates are recognised prospectively in the current and future years. During the year, the Company has revised its estimate for provision on Non-performing Asset. Had the Company continued to use the earlier estimate for provision of Non-performing Asset, provisions and write-offs for the year ended March 31, 2016 would have been higher by Rs. 41,562.71 lacs and profit before tax for the same period would have been lower by Rs. 41,562.71 lacs (net of tax Rs. 27,178.69 lacs). (d) Fixed assets, debrciation/amortisation and impairment Tangible fixed assets Fixed assets are stated at cost less accumulated debrciation and impairment losses, if any. Cost comprises the purchase price and any attributable cost of bringing the asset to its working condition for its intended use. Borrowing costs relating to acquisition of assets which takes substantial period of time to get ready for its intended use are also included to the extent they relate to the period till such assets are ready to be put to use. Debrciation on tangible fixed assets Debrciation on tangible fixed asset is provided on Straight Line basis ('SLM') using the rates arrived at based on the Intangible assets Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition intangible assets are stated at cost less accumulated amortisation and impairment losses, if any. Cost comprises the purchase price and any attributable cost of bringing the asset to its working condition for its intended use Impairment of fixed assets The carrying amount of assets is reviewed at each Balance Sheet date if there is any indication of impairment based on internal/external factors. An impairment loss is recognised wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the assets, net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their brsent value using a br-tax discount rate that reflects current market assessments of the time value of money and risks specific to the asset. After impairment, debrciation is provided on the revised carrying amount of the asset over its remaining useful life. A brviously recognised impairment loss is increased or reversed depending on changes in circumstances. However, the carrying value after reversal is not increased beyond the carrying value that would have brvailed by charging usual debrciation if there was no impairment. The reversal of impairment is recognised in Statement of Profit and Loss, unless the same is carried at revalued amount and treated as revaluation reserve. (e) Investments Investments intended to be held for not more than a year are classified as current investments. All other investments are classified as long-term investments. Current investments are carried at lower of cost and fair value determined on an individual investment basis. Long-term investments are carried at cost. However, provision for diminution in value is made to recognise a decline, other than temporary, in the value of the investments. An investment in buildings, which is not intended to be occupied substantially for use by, or in the operations of, the Company, is classified as investment property. Investment properties are stated at cost, net of accumulated debrciation and accumulated impairment losses, if any. Debrciation on building component of investment property is calculated on a straight-line basis using the rate arrived at based on the useful life as brscribed as per the Schedule II of the Companies Act, 2013. (f) Provisioning / Write-off of assets Non-performing loans are written off / provided for, as per management estimates, subject to the minimum provision required as per Non-Banking Financial (Deposit accepting or holding) Companies Prudential Norms (Reserve Bank) Directions, 2007 as and when amended. Delinquencies on assets securitised/assigned are provided for based on management estimates. Provision on standard assets is made as per Non-Banking Financial (Deposit accepting or holding) Companies Prudential Norms (Reserve Bank) Directions, 2007 as and when amended. (g) Loans Loans are stated at the amount advanced including finance charges accrued and expenses recoverable, up to the Balance Sheet date as reduced by the amounts received and loans securitised. (h) Leases Where the Company is the lessor Assets given on operating leases are included in fixed assets. Lease income is recognised in the Statement of Profit and Loss on a straight-line basis over the lease term. Costs, including debrciation are recognised as an expense in the Statement of Profit and Loss. Initial direct costs such as legal costs, brokerage costs, etc. are recognised immediately in the Statement of Profit and Loss. Where the Company is the lessee Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased item, are classified as operating leases. Operating lease payments are recognised as an expense in the Statement of Profit and Loss on a straight-line basis over the lease term. (i) Foreign currency translation Initial recognition Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction. Conversion Foreign currency monetary items are retranslated using the exchange rate brvailing at the reporting date. Non-monetary items, which are measured in terms of historical cost denominated in a foreign currency, are reported using the exchange rate at the date of the transaction. Non-monetary items, which are measured at fair value or other similar valuation denominated in a foreign currency, are translated using the exchange rate at the date when such value was determined. Exchange differences All exchange differences are dealt with including differences arising on translation settlement of monetary items in the Statement of Profit and Loss. Forward exchange contracts entered into to hedge foreign currency risk of an existing asset/liability The brmium or discount arising at the inception of forward exchange contract is amortised and recognised as an expense/income over the life of the contract. Exchange differences on such contracts are recognised in the Statement of Profit and Loss in the period in which the exchange rates change. Any profit or loss arising on cancellation or renewal of such forward exchange contract is also recognised as income or expense for the period. (j) Revenue recognition Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. i. Income from financing activities is recognised on the basis of internal rate of return on time proportion basis. All other charges relating to financing activities are recognised on accrual basis. ii. Subvention income is recognised as income over the tenor of the loan agreements. For the agreements foreclosed/transferred through assignment, balance of subvention income is recognised as income at the time of such foreclosure/transfer through assignment. iii. Income recognised and remaining unrealised after installments become overdue for five months or more in case of secured/unsecured loans are reversed and are accounted as income when these are actually realised. iv. Additional finance charges/additional interest are treated to accrue only on realisation, due to uncertainty of realisation and are accounted accordingly. v. Income apportioned on securitisation/direct assignment of loan receivables arising under brmium structure is recognised over the tenure of securities issued by SPV/agreements. Interest sbrad under par structure of securitisation/direct assignment of loan receivables is recognised on realisation over the tenure of the 'securities issued by SPV' /agreements. Loss, if any/expenditure for securitisation /direct assignment is recognised upfront. vi. Interest income on fixed deposits/margin money, call money (Collaterised borrowing and lending obligation), certificate of deposits, pass through certificates, subordinated debts, government securities, inter corporate deposits and treasury bills is recognised on a time proportion basis taking into account the amount outstanding and the rate applicable. Discount, if any, on government and other securities acquired as long term investments is recognised on a time proportion basis over the tenure of the securities. vii. Dividend is recognised as income when right to receive payment is established by the date of Balance Sheet. viii. Profit/loss on the sale of investments is computed on the basis of weighted average cost of investments and recognised at the time of actual sale/redemption. ix. Income from services is recognised as per the terms of the contract on accrual basis. x. Income from operating lease is recognised as rentals, as accrued on straight line basis over the period of the lease. (k) Retirement and other employee benefits Provident fund Retirement benefit in the form of provident fund is a defined contribution scheme. All the employees of the Company are entitled to receive benefits under the provident fund, a defined contribution plan in which both the employee and the Company contribute monthly at a stipulated rate. The Company has no liability for future provident fund benefits other than its annual contribution and recognises such contributions as an expense in the period in which employee renders the related service. If the contribution payable to the scheme for service received before the Balance Sheet date exceeds the contribution already paid, the deficit payable to the scheme is recognized as a liability after deducting the contribution already paid. If the contribution already paid exceeds the contribution due for services received before the Balance Sheet date, then excess is recognized as an asset to the extent that the br-payment will lead to, for example, a reduction in future payment or a cash refund. Gratuity The Company provides for the gratuity, a defined benefit retirement plan covering all employees. The plan provides for lump sum payments to employees upon death while in employment or on separation from employment after serving for the stipulated years mentioned under 'The Payment of Gratuity Act, 1972. Liabilities with regard to the Gratuity Plan are determined by actuarial valuation at each Balance Sheet date using the Projected Unit Credit Method. The Company fully contributes all ascertained liabilities to The Trustees - Shriram Transport Finance Company Limited Employees Group Gratuity Assurance Scheme. Trustees administer contributions made to the trust and contributions are invested in a scheme of insurance with the IRDA approved Insurance Companies. The Company recognizes the net obligation of the gratuity plan in the Balance Sheet as an asset or liability, respectively in accordance with AS-15 'Employee Benefits. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are recognised in the Statement of Profit and Loss in the period in which they arise. Leave encashment Accumulated leave, which is expected to be utilized within the next twelve months, is treated as short-term employee benefit. The Company measures the expected cost of such absences as the additional amount that it expects to pay as a result of the unused entitlement that has accumulated at the reporting date. The Company treats accumulated leave expected to be carried forward beyond twelve months, as long-term employee benefit for measurement purposes. Such long-term compensated absences are provided for based on the actuarial valuation using the Projected Unit Credit Method at the reporting date. Actuarial gains/losses are immediately taken to the Statement of Profit and Loss and are not deferred. The Company brsents the entire leave as a current liability in the Balance Sheet, since it does not have an unconditional right to defer its settlement for twelve months after the reporting date. (l) Income tax Tax expense comprises of current tax and deferred tax. Current income tax is measured at the amount expected to be paid to the tax authorities in accordance with the Indian Income Tax Act, 1961 enacted in India and tax laws brvailing in the respective tax jurisdictions where the Company operates. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date. Deferred income taxes reflects the impact of current year timing differences between taxable income and accounting income for the year and reversal of timing differences of earlier years. Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the Balance Sheet date. Deferred tax liabilities are recognised for all taxable timing differences. Deferred tax assets are recognised for deductible timing differences only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised. In situations where the Company has unabsorbed debrciation or carry forward tax losses, all deferred tax assets are recognised only if there is virtual certainty supported by convincing evidence that they can be realised against future taxable profits. The un-recognised deferred tax assets are re-assessed by the Company at each Balance Sheet date and are recognised to the extent that it has become reasonably certain or virtually certain, as the case may be that sufficient future taxable income will be available against which such deferred tax assets can be realised. The carrying cost of the deferred tax assets are reviewed at each Balance Sheet date. The Company writes down the carrying amount of a deferred tax asset to the extent that it is no longer reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which deferred tax asset can be realised. Any such write down is reversed to the extent that it becomes reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available. (m) Segment reporting policies Identification of segments: The Company's operating businesses are organised and managed separately according to the nature of products and services provided, with each segment rebrsenting a strategic business unit that offers different products and serves different markets. The analysis of geographical segments is based on the areas in which major operating divisions of the Company operate. Unallocated items: Unallocated items include income and expenses which are not allocated to any reportable business segment. Segment policies : The Company brpares its segment information in conformity with the accounting policies adopted for brparing and brsenting the financial statements of the Company as a whole. (n) Earnings per share Basic earnings per share is calculated by dividing the net profit or loss for the year attributable to equity shareholders (after deducting attributable taxes) by the weighted average number of equity shares outstanding during the year. For the purpose of calculating diluted earnings per share, the net profit or loss for the year attributable to equity shareholders and the weighted average number of shares outstanding during the year are adjusted for the effects of all dilutive potential equity shares. (o) Provisions A provision is recognised when the Company has a brsent obligation as a result of past event; it is probable that outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not discounted to its brsent value and are determined based on best estimate required to settle the obligation at the Balance Sheet date. These are reviewed at each Balance Sheet date and adjusted to reflect the current best estimates. (p) Cash and cash equivalents Cash and cash equivalents in the cash flow statement comprise cash at bank and in hand, cheques on hand, remittances in transit and short term investments with an original maturity of three months or less. (q) Equity shares and debentures issue expenses Expenses incurred on issue of equity shares are charged to Statement of Profit and Loss on a straight line basis over a period of 10 years. Public issue expenses, other than the brokerage, incurred on issue of debentures are charged off on a straight line basis over the weighted average tenor of underlying debentures. The brokerage incurred on issue of debentures is treated as expenditure in the year in which it is incurred. Expenses incurred for private placement of debentures, are charged to Statement of Profit and Loss in the year in which they are incurred. (r) Borrowing costs Borrowing cost includes interest and exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost. Ancillary and other borrowing costs are charged to Statement of Profit and Loss in the year in which they are incurred. (s) Employee stock compensation costs In accordance with Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 and the Guidance Note on Accounting for Employee Share-based Payments, issued by The Institute of Chartered Accountants of India, the Company measures compensation cost relating to employee stock options using the intrinsic value method. Compensation expense is amortised over the vesting period of the option on a straight line basis. (t) Contingent liabilities A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Company or a brsent obligation that is not recognised because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognised because it cannot be measured reliably. The Company does not recognize a contingent liability but discloses its existence in the financial statements. b. Terms/Rights attached to equity shares The Company has only one class of equity shares having a par value of Rs. 10/- per share. Each holder of equity shares is entitled to one vote per share. The dividend is subject to the approval of the shareholders in the ensuing annual general meeting. During the year ended March 31, 2016, the amount of per equity share dividend recognized as distributions to equity shareholders was Rs. 10.00 (March 31, 2015 : Rs. 10.00). Out of the total dividend declared during the year ended March 31, 2016, amount of interim dividend paid was Rs. 4.00 per equity share (March 31, 2015: Rs. 4.00) and amount of final dividend proposed was Rs. 6.00 per equity share (March 31, 2015: Rs. 6.00). In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all brferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders. c. Shares reserved for issue under options During the year ended March 31, 2016 Nil (March 31, 2015: Nil) equity shares were vested and exercised. d. Aggregate number of equity shares issued for consideration other than cash during the period of five years immediately brceeding the reporting date: The Company has issued total 722,068 equity shares (March 31, 2015 : 1,364,918) during the period of five years immediately brceding the reporting date on exercise of options granted under the employee stock option plan (ESOP) wherein part consideration was received in form of employee service, and includes 500,868 (March 31, 2015 : 500,868) equity shares issued on account of merger of Shriram Holdings (Madras) Private Limited. LONG-TERM BORROWINGS (Contd.) Nature of security Secured by equitable mortgage of immovable property. Further secured by charge on plant and machinery, furniture and other fixed assets of the Company, charge on Company's hypothecation loans, other loans, advances and investments of the Company subject to prior charges created or to be created in favour of the Company's bankers, financial institutions and others. Debentures may be bought back subject to applicable statutory and/or regulatory requirements, upon the terms and conditions as may be decided by the Company. * Amount pertains to debentures issued prior to notification of the RBI Circular DNBD(PD) CC No. 330/03.10.001/2012-13 dated June 27, 2013. SEGMENT INFORMATION The Company operates in a single reportable segment that is financing, which has similar risks and returns for the purpose of AS-17 on 'Segment Reporting' notified under the Companies (Accounting Standard) Rules, 2014 (as amended). The Company operates in a single geographical segment i.e. domestic. LEASES IN CASE OF ASSETS TAKEN ON LEASE The Company has taken various office brmises, furniture and fixtures, computers and plant and machinery under operating lease. The lease payments recognized in the Statement of Profit and Loss are Rs. 8,683.95 lacs (March 31, 2015: Rs. 7,869.58 lacs). Certain agreements provide for cancellation by either party or certain agreements contains clause for escalation and renewal of agreements. The non-cancellable operating lease agreements are ranging for a period 11 to 180 months. There are no restrictions imposed by lease arrangements. DETAILS OF NET ASSETS TAKEN OVER ON AMALGAMATION Pursuant to the scheme of amalgamation ('the Scheme') of erstwhile Shriram Equipment Finance Company Limited (SEFCL) with the Company under Sections 391 to 394 of the Companies Act, 1956 sanctioned by Hon'ble High Court of Madras on March 31, 2016 entire business and all assets and liabilities of Shriram Equipment Finance Company Limited were transferred and vested in the Company effective from April 01, 2015. Accordingly the Scheme has been given effect to in these financial statements. SEFCL was non banking finance Company 'NBFC' engaged in business of equipment financing. The amalgamation has been accounted for under the "Pooling of Interest" method as brscribed by the Accounting Standard 14 "Accounting for Amalgamations" notified under the Companies (Accounting Standards) amendment Rules, 2014. Accordingly, the accounting treatment has been given as under:- (i) The assets and liabilities as at April 01, 2015 were incorporated in the financial statement of the Company at its book value. (ii) Debit balance in the Statement of Profit and Loss of SEFCL as at April 01, 2015 amounting to Rs. 3,503.89 lacs was adjusted in "Surplus in Statement of Profit and Loss". (iii) Credit balance in the Statutory Reserve pursuant to section 45- IC of the RBI Act, 1934 of SEFCL as at April 01, 2015 amounting to Rs. 4,655.65 lacs was adjusted in "Statutory Reserve pursuant to section 45- IC of the RBI Act, 1934". (iv) SEFCL being wholly owned subsidiary, the entire share capital i.e. 10,000,000 Equity Shares of Rs.10 each fully paid and 25,000,000 0.01% Preference Share of Rs. 100 each in Shriram Equipment Finance Company Limited, held as investment by the Company stands cancelled PENALTIES During the year ended March 31, 2016, no penalties have been levied by any regulator on the Company. brvious year comparatives Pursuant to the amalgamation of Shriram Equipment Finance Company Limited (Refer note 33), the figures of the current year are not strictly comparable to those of the brvious year. Previous year's figures have been regrouped / reclassified wherever necessary, to conform to current year's classification. As per our report of even date For S.R. BATLIBOI & Co. LLp Chartered Accountants per Shrawan Jalan Partner Membership No. 102102 For G. D. Apte & Co. ICAI Firm Registration No. 301003E / E300005 ICAI Firm Registration No. 100515W Ameya D. Tambekar Partner Membership No. 128355 Chartered Accountants For and on behalf of the Board of Directors of Shriram Transport Finance Company Limited S. Lakshminarayanan Chairman DIN:02808698 Umesh Revankar Managing Director DIN:00141189 parag Sharma Vivek M. Achwal Chief Financial Officer Company Secretary PLACE : Mumbai DATE : April 29, 2016 |