Notes forming part of financial statements for the year ended March 31, 2016 1 COMPANY OVERVIEW Fortune Financial Services (India) Limited ('Fortune' or the Company) was incorporated on June 14, 1991 as a private limited company. It was subsequently converted into a public limited company on October 20, 1994. The company had made an initial public offer in February, 1995. The Company is brsently listed on The BSE Limited. The Company is engaged in Investment Advisory Services besides holding investment in subsidiaries. The Group business consist of equity and commodity broking, finance, financial services , Investment banking and third party distribution activities which are carried out by separate subsidiaries of Fortune. 2 SIGNIFICANT ACCOUNTING POLICIES 2.1 Basis of brparation of financial statements The accompanying financial statements are brpared under the historical cost convention on an accrual basis. The financial statements have been brpared in accordance with the generally accepted accounting principles to comply in all material respects with Accounting Standards ("AS") specified under Section 133 of the Companies Act, 2013("the Act") read with Rule 7 of the Companies (Accounts) rules, 2014 and other relevant provisions of the Act to the extent notified and applicable, as well as applicable guidance note and pronouncements of the Institute of Chartered Accountants of India (ICAI). 2.2 Use of estimates The brparation of financial statements in conformity with the generally accepted accounting principles requires Management to make estimates and assumptions that affect the reported amount of assets and liabilities on the date of the financial statements and the reported amount of revenues and expense during the reporting period. Although these estimates are based upon Management's best knowledge of current events and actions, actual results could differ from these estimates. Difference between the actual result and estimates are recognized in the period in which the results are known / materialized. 2.3 Revenue recognition Revenue is recognized to the extent it is probable that the economic benefits will flow to the Company and the revenue can be reliable measured. a. Investment banking income is accounted on the basis of the terms of agreement with the clients. b. Placement fees, professional fees and other service charges are accounted when there is reasonable certainty of its ultimate realization / collection. c. Income from distribution is accounted when there is reasonable certainty of its ultimate realization/collection. d. Interest income is recognized on an accrual (time proportion) basis. e. Dividend income is recognized when the right to receive dividend is established. f. Profit / loss on sale of investment is determined at the time of actual sale/ redemption 2.4 Employee benefits a) Short term employee benefits Employee benefits such as salaries, allowances short term compensated absences, estimated cost of bonus, exgratia and employee benefits under defined contribution plans such as provident fund and other funds which fall due within twelve months of rendering the service are classified as short term employee benefits and charged as expense to the Statement of Profit and Loss in the period in which the service is rendered b) Long term employee benefits Defined contribution plan such as provident fund etc. are charged to the statement of profit and loss as incurred. Defined benefit plans - The brsent value of obligation under such a plan is determined based on the actuarial valuation using the Projected Unit Credit Method, acturial gains and losses arising on such valuation are recognized immediately in the statement of profit and loss. In case of funded defined benefit plans the fair value of the plan assets is reduced from the gross obligation under the defined benefit plans, to recognize the obligation on net basis. Other long term employee benefit are recognized in the same manner as defined benefit plans. 2.5 Tangible assets Tangible fixed assets are stated at cost of acquisition net of tax / duty credits less accumulated debrciation. Cost includes all expenses incurred incidental to the acquisition of fixed assets. 2.6 Intangible assets Intangible assets are stated at cost of acquisition, net of tax / duty credits availed less amortization and impairment losses, if any. An asset is recognized when it is probable that the future economic benefits attributable to the assets will flow to the enterprise and where it's cost can be reliably measured. 2.7 Debrciation and amortization The Company provides for debrciation and amortization as under: The Company provides for debrciation as under: a. On written down value basis, in accordance with the useful life brscribed in Schedule II to the Companies Act, 2013. b. On a pro-rata basis on assets purchased / sold during the year. c. On leasehold improvements, over the primary period of the lease. d. On intangible assets, over a period of five years from the date of acquisition. 2.8 Impairment An asset is treated as impaired when the carrying cost of the asset exceeds its recoverable value. An impairment loss is charged to the Statement of Profit and Loss account in the year in which an asset is identified as impaired. The impairment loss recognized in a prior accounting period is reversed if there is a change in the estimate of the recoverable amount. 2.9 Taxation Provision for tax comprises current tax and deferred tax charge or credit. Current taxes are measured on the basis of the taxes expected to be paid on the taxable income determined in accordance with the brvailing tax rates applicable to the relevant assessment year Deferred tax is the tax effect of the timing differences between the accounting income and taxable income. Deferred tax charge or benefit and the corresponding deferred tax liabilities and assets are recognised using the rates that have been enacted or substantially enacted as at the balance sheet date. Deferred tax assets are recognised only to the extent there is a reasonable certainty that there will be sufficient taxable income against which it can be realised on account of other timing differences ; however, where there is unabsorbed debrciation or carried forward loss under taxation laws, deferred tax assets are recognised only if there is virtual certainty of realisation of assets. Deferred tax assets, if any, are re-assessed periodically. Minimum alternate tax credit ( MAT credit) is recognised as an assets only to the extent there is convincing evidence that the company will pay normal tax during the specified period . Such asset is reviewed at each balance sheet date and carrying amount of the MAT credit asset is written down to the extent there is no longer convincing evidence to the effect that the company will pay normal tax during the specified period. 2.10 Investments "All Investments are stated at cost. Investments that are readily realisable and intent to be held for not more than one year from the date on which investments are made are classified as current investments. All other investments are classified as non current investments . Current investments are carried at cost or fair value whichever is lower. Provision for diminution in value of current investments is made if the fair value of investments is less than its cost. Provision for diminution in the value of long-term investment is made only if such a decline is other than temporary. Provision for diminution in value of investments made during the year is charged to the Statement of Profit and Loss. '' 2.11 Derivative instruments Daily mark-to-market margins on the derivative trades are accounted separately as against the initial margin payments under Current Assets. The profit/loss on the final settlement of the derivative contracts, calculated as the difference between the final settlement price and the contract price of all the contracts in the series, is recognized on the expiry/square-up of the series of equity index/stock futures by transfer from the mark-to-market margin account. As on the date of the Balance Sheet, provision for anticipated loss is made for the debit balance if any, in the mark-to-market margin account (maintained scrip wise /index wise) on open futures contracts, credit balances if any, in the account attributable to anticipated income being ignored keeping in view the consideration of prudence. 2.12 Earnings per share The basic earnings per share is computed and disclosed by dividing the net profit after tax attributable to equity shareholders for the year by the weighted average number of equity shares outstanding during the year. Diluted earnings per share is computed and disclosed using the weighted average number of equity shares outstanding during the year, adjusted for the effects of all dilutive potential equity shares, if any. 2.13 Provisions, contingent liabilities and contingent assets A provision is recognised when there is a brsent obligation as a result of past events for which a probable outflow of resources embodying economic benefits are expected to settle the obligation and the amount of the obligation can be reliably estimated. Contingent liabilities are not recognised but are disclosed in the notes in case of: a) a brsent obligation arising from a past event, when it is not probable that an outflow of resources will be required to settle the obligation, b) a possible obligations, unless the probability of outflow of resources is remote. Contingent assets are neither recognised, nor disclosed. Provisions, contingent liabilities and contingent assets are reviewed at each balance sheet date. 2.14 Leases Operating lease where the lessor effectively retains substantially all the risks and benefits of ownership of the leased item are classified as operating leases. Lease payments for assets taken under operating leases are charged off to the statement of Profit and Loss over the lease term. 2.15 Foreign currency transactions Foreign currency transactions are recorded at the exchange rate brvailing on the date of transaction. Realized gains and losses on foreign currency transactions during the year are recognized in the Statement of Profit and Loss. Monetary items denominated in foreign currency are restated using the closing exchange rate of the date of the balance sheet and the resulting net exchange difference is recognized in the Statement of Profit and Loss. 2.16 Cash and cash equivalents Cash and cash equivalents comprise of cash on hand and deposits with bank. The Company considers all highly liquid investments/ bank deposits with a remaining maturity on the date of purchase of three months or less and that are readily convertible to known amounts of cash to be cash equivalents. 2 Segment reporting The Company is primarily engaged in the business of financial advisory and consultancy services. All the activities of the Company revolve around the main business. Further, the Company does not have any separate geographic segments other than India. There are no separate reportable segments as per Accounting Standard 17 on "Segment Reporting" (AS-17) issued by the Institute of Chartered Accountants of India. 3 Contingent Liabilities and Capital Commitments ( to the extent not provided for) a) Corporate guarantee issued in favour of a banks to secure credit facilities sanctioned by the banks to subsidiary companies Rs.22,500 lakhs ( Previous year Rs.28,000 lakhs) b) Claims not acknowledged by the Company relating to income tax Rs. 38.82 lakhs ( Previous year Rs.37.97 lakhs) 4 Exceptional Item rebrsents profit on sale of Investment in Fortune Integrated Assets Finance Limited. 5 Rights issue of the Company comprising 22,677,777 (Two crores twenty six Lakhs seventy seven thousand seven hundred seventy seven) equity shares of Rs. 10 each at a price of Rs. 90/- (including brmium of Rs.80/- each) per equity share aggregating to Rs 20,410.00 lakhs to its existing equity shareholders was made open for subscription on March 28, 2016 and concluded on April 12, 2016. The Share application money pending allotment received upto March 31, 2016 is held in escrow account. The Company has allotted aforesaid shares on April 25, 2016. 7 "The Scheme of Amalgamation ("Scheme") between ITI Wealth Management Private Limited ("Transferor Company") and Fortune Financial Services (India) Limited ("Transferee Company") with effect from "appointed date" of 1st January, 2016 is awaiting approval of High Court of Bombay and Chennai under section 391 to 394 of the companies Act, 1956 and to the extent applicable, provisions of the Companies Act, 2013. As the approval of Hon'ble High Court of Bombay and Chennai is awaited thus the amalgamation though effective from "appointed date" 1st January, 2016 shall be operative from "effective date" i.e. the last of date on which all the consents and approvals referred to in the Scheme are obtained or waived. As approvals and sanctions of the Scheme from the Hon'ble High Court of Bombay and Chennai are pending, Company's accounts have been brpared independently without giving effect of the Scheme. The effect of the above amalgamation will be given in the Annual Accounts of the Company, in the Financial Year in which all the sanctions or orders as specified in the Scheme of Amalgamation are obtained and/or filled. 8 There are no amounts payable to any micro, small and medium enterprises as identified by the management from the information available with the Company and relied upon by auditors. 9 In the opinion of the Management, the value of all Current Assets, Loans and Advances and other receivables is not less than their realisable value in the ordinary course of business. 10 Balances standing in debtors, creditors and loan and advances are subject to confirmation. 11 Previous year's figures are reworked, regrouped, rearranged and reclassified wherever necessary, to conform to the current year's classification. / As per our Report of even date For BATHIYA & ASSOCIATES LLP / Chartered Accountants ICAI Firm Registration No.101046W / W100063 Umesh B Lakhani Partner Membership No.044981 For and on behalf of the Board Chintan V Valia Director(DIN :05333936) Deena A Mehta Additional Independent Director (DIN: 00168992) S. G. Muthu Kumar Chief Financial Officer Haroon Mansuri Company Secretary Mumbai, May 24, 2016 |