SIGNIFICANT ACCOUNTING POLICIES:

NOTE 1

SIGNIFICANT ACCOUNTING POLICIES:

i. Basis of brparation of financial statements:

The financial statements are brpared under the historical cost convention on accrual basis of accounting and in accordance with accounting principles generally accepted in India. Pursuant to Section 133 of the Companies Act, 2013 read with rule 7 of Companies (Accounts) Rule, 2014, and other relevant provisions of Companies Act, 2013, the National Housing Bank Act, 1987 and The Housing Finance Companies (NHB) Directions, 2010 as amended.

Accounting policies not specifically referred to otherwise are consistent with the generally accepted accounting principles followed by the Company.

ii. Presentation and Disclosure of Financial Statements:

All the assets and liabilities have been classified as current or non-current as per the Company’s normal operating cycle and other criteria set out in the Schedule III to the Companies Act, 2013. The company has ascertained its operating cycle as 12 months for the purpose of current or non-current classification of assets and liabilities.

iii. Use of Estimates:

The brparation of financial statements requires the Management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) as of the date of the financial statements and the reported income and expenses during the reporting period. The Management believes that the estimates used in brparation of the financial statements are prudent and reasonable. Future results could differ from these estimates. Any difference between the actual results and estimates are recognized in the period in which the results are known/materialize. Any revision to accounting estimates is recognized prospectively in the current and future period.

1. REVENUE RECOGNITION:

a) INCOME ON LOANS :

i. Repayment of loans is by way of Equated Monthly Installments (EMI) comprising principal and interest. Interest is calculated on the outstanding loan balance at the beginning of every month. EMIs commence once the entire loan is disbursed. Pending commencement of EMIs, Pre-EMI interest is payable every month.

ii. Interest on Loans which are classified as Non-performing assets is recognized on realization as per the directives/ guidelines laid down by National Housing Bank.

iii. Fees are recognized as and when accrued.

iv. Penal Interest and other charges are recognized when received.

b) INVESTMENT INCOME :

i. Dividend and interest income:

Dividend income is recognized when the unconditional right to receive the income is established. Income from interest on deposits and interest bearing securities is recognized on the time proportionate method taking into account the amount outstanding and the rate applicable.

ii. Income on Investments which are classified as Non-performing is recognized only on realization as per the directives/guidelines laid down by National Housing Bank.

2. CASH AND CASH EQUIVALENT:

For purpose of the Cash Flow Statement, Cash comprises Cash in Hand, Balance with Banks and Demand Deposits with Banks.

3. CASH FLOW STATEMENT:

Cash flows are reported using the indirect method, where by net profit before tax is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments and item of income or expenses associated with investing or financing cash flows. The cash flows from operating, investing and financing activities are segregated.

4. FIXED ASSETS:

Fixed Assets are stated at cost of acquisition, or construction inclusive of expenses incidental thereto less accumulated debrciation and accumulated impairment loss, if any. Subsequent expenditure related to an item of Fixed Assets are added to its book value only if they increase the future benefits from the existing assets beyond its brviously assessed standard of performance.

5. DEbrCIATION:

Debrciation on Fixed Assets is provided on the reducing balance method over the estimated useful life of the assets as brscribed under Schedule II to the Companies Act, 2013. Assets costing upto Rs. 5,000 are fully debrciated in the year of purchase.

6. INTANGIBLE ASSETS AND AMORTIZATION:

Intangible assets are recognized only if it is probable that the future economic benefits attributable to asset will flow to the enterprise and the cost of asset can be measured reliably. Intangible assets are stated at acquisition cost, net off accumulated amortization and accumulated impairment losses, if any. Intangible assets are amortized on straight line basis over their estimated useful life.

The amortization period and the amortization method are reviewed at least at each financial year end. If expected life of asset is significantly different from brvious estimates the amortization period is changed accordingly. Computer Application Software is amortized over the period of 3 years on straight line basis or useful life, whichever is shorter.

7. IMPAIRMENT OF ASSETS:

Assessment is done at each Balance Sheet date as to whether there is any indication that an asset [tangible and intangible] is impaired. If any such indication exists, an estimate of the recoverable amount of the asset/cash generating unit is made.

Assets whose carrying value exceeds the recoverable amount are written down to the recoverable amount. Recoverable amount is the higher of an asset’s net selling price and its value in use. Value in use is the brsent value of estimated future cash flows expected to arise from the continuing use of the asset and from its disposal at the end of its useful life. Net selling price is the amount obtainable from sale of the asset in an arm’s length transaction between knowledgeable, willing parties, less the costs of disposal. Assessment is also done at each Balance Sheet date as to whether there is any indication that an impairment loss recognized for an asset in prior accounting period may no longer exists or may have decreased.

8. INVESTMENTS:

Investments are classified into current and noncurrent investments

In accordance with the Guidelines issued by National Housing Bank (NHB), current investments are carried at lower of cost and fair value. Long term investments are carried at cost. However, provision for diminution in value of long-term investments is made to recognize decline, other than temporary, on an individual investment basis.

Unquoted investments in the units of mutual funds in the nature of current investments are carried at lower of cost and the net asset value declared by mutual funds in respect of each particular scheme.

9. PROVISIONING FOR LOANS AND INVESTMENTS:

i. Loans are classified into “Performing” and “Non-Performing” assets in terms of guidelines/ directions laid down/ given by the National Housing Bank. Loans are further classified as standard, sub-standard, doubtful and loss assets.

ii. Provisions for performing assets and non-performing assets and investments are made on a periodic review in accordance with the directives/guidelines laid down by the National Housing Bank.

10. EMPLOYEE BENEFITS:

Defined contribution plan:

A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to Employees’ Pension Scheme, Employee State Insurance Scheme and EDLI, which are defined contribution plans are recognized as an employee benefit expense in the statement of profit and loss as and when the services are received from the employees.

Defined benefit plans:

A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Company’s net obligation in respect of provident fund plan, leave encashment plan and gratuity plan, which are defined benefit plans, and certain other defined benefit plans are calculated separately for each plan by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its brsent value.

Any unrecognized past service costs and the fair value of any plan assets are deducted. The discount rate is the yield at the reporting date on risk free government bonds that have maturity dates approximating the terms of the Company’s obligations and that are denominated in the same currency in which the benefits are expected to be paid. The calculation is performed annually by a qualified actuary using the projected unit credit method.

Retirement and other employee benefits:

All employee benefits payable wholly within twelve months of rendering the service are classified as short-term employee benefits. Benefits such as salaries, wages, performance incentive, paid annual leave, leave travel assistance, medical allowance, contribution to provident fund and superannuation etc. recognized as actual amounts due in period in which the employee renders the related services.

i. The Company has formed a Provident Fund Trust for its employees. Contributions are made to the Trust, which is administered by the Trustees. Trust makes investments and also settles claims of members. Interest payable to the members shall not be at a rate lower than the statutory rate. In case of short fall in the interest accrued, the same is contributed by the Company. Contribution to Provident Fund is charged to accounts on accrual basis.

For this Scheme, contributions are made by the Company, based on current salaries, to recognized Fund maintained by the Company; simultaneously contributions are also made by the employees to Provident fund scheme.

ii. The Company’s gratuity benefit scheme is a defined benefit plan. The Company’s net obligation in respect of the gratuity benefit scheme is calculated by estimating the amount of future benefit that employees have earned in return for their service in current and prior periods. For this purpose the Company has obtained qualifying group gratuity insurance policy from Life Insurance Corporation of India.

iii. The Company provides benefits to its employees under the Leave Encashment pay plan which is a non-contributory defined benefit plan. The employees of the Company are entitled to receive certain benefits in lieu of the annual leave not availed of during service, at the time of retirement. The benefits payable takes into account the Salary and the leave balance to the credit of the employees on the date of retirement.

11. SEGMENT REPORTING:

The segments have been identified taking into account the nature of the products/services, geographical locations, nature of risks and returns, internal organization structure and internal financial reporting system. 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.

12. LEASES:

Assets acquired on lease where significant portions of the risk and rewards incidental to the ownership are retained by the lessors are classified as operating leases. Rental expenses on assets obtained under operating lease arrangements are recognized on a straight line basis as expense in the Statement of Profit and Loss over the lease term of respective lease arrangement.

13. EARNINGS PER SHARE:

Basic earnings per share are calculated by dividing the net profit or loss for the period attributable to equity shareholders (after deducting attributable taxes) by the weighted average number of equity shares outstanding during the period.

For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.

14. TAXATION:

Tax expense comprises of current and deferred tax charge or credit.

Current Tax is determined as the amount of income tax payable to the taxation authorities in respect of taxable income for the period.

Deferred tax charge or credit reflects the tax effects of timing differences between accounting income and taxable income for the period. The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognized using the tax rates that have been enacted or substantially enacted by the balance sheet date. Deferred tax assets are recognized only to the extent there is reasonable certainty that the assets can be realized in future; however, where there is unabsorbed debrciation or carry forward of losses, deferred tax assets are recognized only if there is a virtual certainty of realization of such assets.

Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and deferred tax liabilities relate to the taxes on income levied by same governing taxation laws. A deferred tax asset are reviewed at each balance sheet date and is written-down or written-up to reflect the amount that is reasonably/virtually certain (as the case may be) to be realized.

15. PROVISIONS AND CONTINGENCIES :

Provisions are recognized when the Company has a legal and constructive obligation as a result of a past event, for which it is probable that the cash outflow will be required and a reliable estimate can be made of the amount of the obligation.

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 recognized 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 recognized because it cannot be measured reliably. The Company does not recognize a contingent liability but discloses its existence in the financial statements.

NOTE 1 NOTES FORMING PART OF THE ACCOUNTS:

1. Housing loans are secured by:

a) Equitable mortgage of property and/or;

b) Assignment of Life Insurance Policies and/or guarantee of solvent guarantors and/or any other acceptable collateral securities wherever applicable, and,

c) Corporate Guarantees, wherever applicable.

2. Contingent Liabilities:

a) The Company has pending Income Tax disputes of Rs. 276 Lacs (Previous Year – Rs. 326 Lacs). It has brferred appeal/s against the same and also has made payments under protest.

b) Bank Guarantees:

i) Rs. 75 Lacs given in favour of Kotak Mahindra Old Mutual Life Insurance Ltd. in lieu of brmium deposit for “Kotak Term Group Plan” Policy contract to avail Term Group Plan cover for borrowers. (Previous Year – Rs. 75 Lacs).

ii) Rs. 50 Lacs given in favour of Future Generali India Life Insurance Company Ltd. in lieu of brmium deposit for “Future Generali Loan Suraksha Plan” policy contract to avail Credit Life Group Plan Cover for borrowers (Previous Year - Rs. NIL).

3. During the year the Company has incurred expenditure on foreign travel amounting to Rs. NIL (Previous Year Rs. NIL).

4. Housing Loans include loans against which the company has commenced action under Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 including possession of properties and part recovery of auction proceeds aggregating to Rs. 5,166 Lacs (Previous Year Rs. 3,781 Lacs).

5. Employee Benefits:

Defined Contribution Plan:

The Company makes contribution to Employees’ Pension Scheme, 1995 for all employees and Employee State Insurance Scheme for all eligible employees to defined contribution plans. The Company recognized Rs. 17 Lacs (Previous year Rs. 15 Lacs) for Employees’ Pension Scheme and Rs. 1 Lacs (Previous year Rs. 1 Lacs) for Employee State Insurance Scheme in the Statement of Profit and Loss. The contributions payable by the Company are at rates specified in the rules of the schemes.

Defined Benefit Plans:

Provident Fund

An amount of Rs. 140 Lacs (Previous year Rs. 102 Lacs) has been charged to Statement of Profit and Loss on account of this defined benefit scheme.

Leave Encashment

An amount of Rs. 72 Lacs (Previous year Rs. 105 Lacs) has been charged to Statement of Profit and Loss for this benefit scheme during the year.

Gratuity Plan

Gratuity is payable to all the members at the rate of 15 days salary for each completed year of Service.

7. Segment Reporting:

The Company’s main business is to provide loans for the purchase or construction of residential units. Hence, there are no separate reportable segments as per Accounting Standard on Segment Reporting (AS-17) issued by the Institute of Chartered Accountants of India and notified under the Companies (Accounting Standards) Amendment Rules, 2014.

9. Leases:

Company has entered into agreements for taking on lease basis certain office brmises. Lease payments recognized in the Statement of Profit and Loss for the year is Rs. 488 Lacs (Previous Year Rs. 475 Lacs)

Future lease rental obligation under these leases:

a) Not later than one year: Rs. 94 Lacs (Previous Year Rs. 60 Lacs)

b) Later than one year and not later than five years : Rs. 270 Lacs (Previous Year Rs. 243 Lacs)

c) Later than five years : Rs. 28 Lacs (Previous Year Rs. 19 Lacs)

10. The Classification of Assets and Liabilities into Current and Non-Current is carried out based on their residual maturity profile as per the requirement of Schedule III to the Companies Act, 2013.

11. Disclosure regarding penalty or adverse comments as per Housing Finance Companies (NHB) Directions, 2010. During the current financial year:

a) No penalty has been imposed by National Housing Bank on the Company.

b) NHB during their annual inspection had observed that the Company had overstated NOF & CRAR by Rs. 251 Lacs & 0.05%, respectively for the financial year 2013-14 due to negative amortization cases amounting to Rs. 1,828 Lacs not considered as NPA. This has no impact for the current financial year.

12. Figures for brvious year have been regrouped / reclassified wherever necessary.

13. Figures have been rounded off to the nearest Rupees in Lacs wherever necessary.

As per our Report attached of even date

CNK & Associates LLP

Chartered Accountants

ICAI Firm Reg. No. 101961W

(Suresh S. Agaskar)

Partner

Membership No. 110321

For and on behalf of the Board of Directors

Alice G. Vaidyan Chairperson

Y. Ramulu Director

Warendra Sinha Managing Director & CEO

S. Sridharan Chief Financial Officer (Sr. Vice President & Company Secretary)

Date: 29th April, 2016

Place: Mumbai