Swadhaar Finserve Private Limited. Significant Accounting Policies and Notes to Accounts for the year ended March 31, 2009:

Transcription

1 Swadhaar Finserve Private Limited Schedule 11: Significant Accounting Policies and Notes to Accounts for the year ended March 31, 2009: I NATURE OF BUSINESS: The Company is Non-banking Financial Company (NBFC) registered with the Reserve Bank of India ( RBI ) under section 45-IA of the Reserve Bank of India Act, 1934 and primarily engaged in lending and related activities. The Company received the Certificate of Registration from the RBI on 9 th May 2008, enabling the Company to carry on business as a Non-banking Financial Company. As the Company has incurred losses during the year, there has been no transfer to the Reserve Fund in accordance with the provisions of Section 45-IC of the RBI Act, (A) Significant Accounting Policies: 1. Basis of Preparation of Financial Statements : The accompanying financial statements are consistently prepared under the historical cost convention, on the accrual basis of accounting and comply with the accounting standards issued by the Institute of Chartered Accountants of India (to the extent applicable) and in accordance with the generally accepted accounting principles, the provisions of the Companies Act, 1956 and regulations of Reserve Bank of India, to the extent applicable. 2. Use of Estimates: The preparation of the financial statements in conformity with the generally accepted accounting principles requires the management to make estimates and assumptions that affect the reported amount of assets, liabilities, revenues and expenses and disclosure of contingent assets and liabilities. 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 may differ from the estimates and assumptions used in preparing the accompanying financial statements. Any differences of actual results to such estimates are recognized in the period in which the results are known / materialized. 3. Revenue Recognition: a) Interest income is recognized and accounted on accrual basis as per the agreed terms except in case of Non Performing Assets outstanding for more than 90 days, which is recognized on receipt basis, as per NBFC Prudential Norms. b) Application fees and loan processing fees are recognised when loans are disbursed. c) Collection charges are recognised on date of installment. d) All other incomes are recognised on accrual basis.

2 4. Fixed assets & Depreciation : Fixed Assets are stated at cost less accumulated depreciation thereon. The cost of fixed assets comprises purchase price and any other incidental cost of bringing the asset to its working condition for its intended use. The Company provides pro-rata depreciation from the date on which asset is acquired/ put to use. On all assets, except as mentioned below, depreciation has been provided using the Straight line method at the rates specified in Schedule XIV to the Companies Act, 1956: a) Assets costing Rs. 5,000/- or less are fully depreciated in the year of purchase. b) Improvements to Leased Assets are depreciated over the initial period of lease. c) Fixed Assets purchased from Swadhaar FinAccess are depreciated over a period of 4 years. 5. Intangible Assets & Amortization: Expenses incurred on Computer Software having enduring benefits are capitalized and will be amortized over a period of 3 years on a pro rata basis from the date of purchase. 6. Employee Benefits : Provident Fund: Contribution payable to the recognised provident fund, which is a defined contribution scheme, is charged to the profit and loss account in the period in which they occur. Gratuity: Gratuity is post employment benefit and is in the nature of Defined Benefit Plan. The Liability recognised in the balance sheet in respect of gratuity is the present value of defined benefit obligation at the balance sheet date, together with the adjustments for unrecognized actuarial gain or losses and the past service costs. The defined benefit obligation is calculated at or near the balance sheet date by an independent actuary. 7. Taxation : Income-tax expense comprises current tax (i.e. amount of tax for the period determined in accordance with the income-tax law), deferred tax charge or credit (reflecting the tax effect of timing differences between accounting income and taxable income for the period) and fringe benefit tax Current Tax: Provision for current tax is made on the basis of estimated taxable income for the accounting year in accordance with the Income Tax Act, However, for the current year, no provision for tax has been made since the Company has incurred losses. Deferred Tax Expense: Deferred tax expense or benefits is recognised on timing differences being the difference between taxable and accounting income and are capable of reversal in one or more future periods. Deferred tax assets and liabilities are measured using the tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date. Deferred tax assets are recognised only to the extent there is reasonable certainty that the asset can be realised in future; however, where there is unabsorbed depreciation or carried forward loss under taxation laws, deferred tax assets are recognised only if there is a virtual certainty of realisation of the assets. Deferred tax assets are reviewed as at

3 each balance sheet date and written down or written-up to reflect the amount that is reasonable/virtually certain (as the case may be) to be realised. Fringe Benefit Tax: Provision for Fringe Benefit Tax ( FBT ) is made on the basis of applicable FBT rates on the taxable value of chargeable expenditure of the Company as prescribed under the Income Tax Act, Operating Leases: Lease payments in respect of operating lease are recognized as an expense in the statement of profit and loss account on a straight-line basis over the lease term. 9. Provision and Contigencies: The Company creates a provision when there is present obligation as a result of a past event that probably requires an outflow of resources and a reliable 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 present obligation that may, but probably will not, require an outflow of resources. When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made. Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. If it is no longer probable that the outflow of resources would be required to settle the obligation, the provision is reversed. Contingent assets are not recognised in the financial statements. However, contingent assets are assessed continually and if it is virtually certain that an economic benefit will arise, the asset and related income are recognised in the period in which the change occurs. 10. Impairment of Assets: The Company assesses at each balance sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset or the recoverable amount of the cash generating unit which the asset belongs to, is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognized in the profit and loss account. If at the balance sheet date there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of depreciable historical cost. 11. Foreign Currency Transactions: Foreign currency transactions are recorded at the rates of exchange prevailing on the date of the transaction. Exchange differences, if any arising out of transactions settled during the year are recognised in the profit and loss account. Monetary assets and liabilities denominated in foreign currencies as at the balance sheet date are translated at the closing exchange rate on that date. The exchange differences, if any, are recognised in the profit and loss account and related assets and liabilities are accordingly restated in the balance sheet except those related to acquisition of fixed assets which are adjusted in the carrying amount of the related fixed assets.

4 12. Provision for doubtful debts: The provisioning norms followed by the Company are more stringent than those prescribed by the Reserve Bank of India and are as follows: No. of days portfolio outstanding overdue (days) Provision (% on outstanding principal) % % % % Over due debts outstanding for more than 180 days are written off. (B) Notes to the Accounts: 1. Equity Share Capital raised during the year: During the year, the Company has raised a capital of Rs. 94,390,000/- by way of issue of 9,439,000 equity shares of Rs. 10/- each. 2. Payment towards Business Transfer: During the year, the Company took over the current micro credit portfolio of Rs. 6,065,313/- and 1,786 active clients from Swadhaar FinAccess (SFA), a non profit company sharing common promoters with the Company. In addition, the Company has acquired assets worth Rs.3,609,296/-. The necessary approval from the Central Government was taken for the aforementioned transfer of micro credit portfolio and assets from SFA. Extraordinary Item: The Company has absorbed 76 employees of SFA at a cost of Rs. 2,691,490/- as staff recruitment and training costs. SFA had incurred costs in recruiting and training these employees in the past and therefore SFPL compensated SFA for the cost incurred in recruiting and training these employees at three month s cost to SFA. The Company has also paid Rs. 651,688/- as market development costs to SFA. SFA had undertaken considerable efforts to bring the clientele in its books. Hence SFA has been Rs. 200/- for every loan client transferred from SFA to the Company. 3. Gratuity: The detailed actuarial working as required under AS-15 is attached as an annexure to the accounting policies. 4. Auditor s remuneration (Inclusive of Service Tax):

5 Particulars Rs. Rs. As Auditors: Statutory Audit Fees 264,720/- 56,180/- Tax Audit Fees 66,180/- NIL Any other (including Certification): 172,190/- 11,236/- Out of pocket expenses: 859/- NIL Total 503,949/- 67,416/- 5. Managing Director s remuneration: Particulars Current Year Previous Year Salary Rs. 2,066,667/- NIL Bonus NIL NIL Company s contribution to P.F NIL NIL Monetary Value of other Perquisites/ benefits NIL NIL 6. Deferred tax Assets/(Liability) for the year comprise timing differences on account of: PARTICULARS Current Year Previous Year Opening balance 474,284/- NIL Deferred Tax Liability (389,715/-) NIL Depreciation 309,261/- NIL Preliminary Expenses 80,454/- NIL Unabsorbed Losses NIL NIL Deferred Tax Asset 56,247/- 474,284/- Preliminary Expenses NIL 321,817/- Unabsorbed Losses NIL 152,467/- Provision for Gratuity 56,247/- NIL Net Deferred Tax Asset/ (Liability) 140,816/- 474,284/- 7. Basic & Diluted Earnings/(Loss) per share: Particulars Current year Previous Year Net Profit/(Loss) attributable to equity shareholders [A] (Rs) (26,043,686) (921,081/-) Weighted Average of equity shares issued [B] 7,687,534/- 690,927/- Basic & Diluted Earnings/(Loss) per share (Annualized EPS) [A/B] (Rs.) (3.39) (1.33)

6 7A. A schedule as required in terms of Paragraph 13 of Non-Banking Financial (Non- Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007) is attached as annexure 2 to the accounting policies. 8. Related Party Disclosure : Names of Related Parties:- Name of the Key Managerial Personnel Ms. Veena Mankar Mr. Srinivas Bhaskar Rao Ms. Pearl Tiwari Ms. Geeta Dutta Goel Ms. Anita Ramachandran Mr. Siddhartha Chowdri Ms. Lalita D Gupte Name of the enterprise in which the Key Managerial Personnel exercises significant influence R A Net India Private Limited Mena Factors LLC, Dubai Egypt Factors S.A.E., Cairo Swadhaar FinAccess India Consult Kanhaiya Holdings Private Limited Gopi Vallabh Holdings Private Limited Nilyam Holdings Private Limited Madhav Reality Holdings Private Limited DCA Holdings Private Limited Madhurima International Private Limited Brijraj Holdings Private Limited Ambuja Cement Foundation Arohan Financial Services Cerebrus Consultants Private Limited Connexus Consultant Private Limited HCL Infosystem Geometric Limited Force Motors Limited Godrej & Boyce Mfg Company Limited UTI AMC Private Limited ACCION Technical Advisors India ICICI Venture Fund Management Company Limited Bharat Forge Limited Firstsource Solutions Limited Kirloskar Brothers Limited Nokia Corporation HPCL Mittal Energy Limited Godrej Properties Limited

7 G.S.Mhaskar Private Limited East West Ethnic Foods Private Limited B) Key Management Personnel: Ms. Lalita D Gupte Chairperson Ms. Veena Mankar - Managing Director Ms. Geeta Dutta Goel Nominee Director Ms. Anita Ramachandran Nominee Director Ms. Pearl Tiwari Nominee Director Mr. Srinivas Bhaskar Rao Nominee Director Mr. Siddhartha Chowdri Nominee Director Transactions with related parties for the year ended : Transaction Enterprise in which the Key Managerial Personnel exercises significant influence Key Management Personnel Managerial Remuneration: 2,066,667/- Swadhaar FinAccess: Purchase of Fixed Assets 2,101,296/- Purchase of Computer Software 1,508,000/- Staff Training and Recruitment Cost 2,691,490/- Market Development Costs 651,688/- Purchase of Loan Portfolio 6,065,313/- Loans 3.000,000/- Reimbursement of Expenses(Sharing of Kiosk) 931,348/- Interest on Loan (123,750/-) ACCION: Professional Charges 1,993,877/- Note: 'Income/receipts figures are shown in brackets. 9. Segment Reporting: The Company is engaged in single segment and there are no separate reportable segments as defined in AS Foreign Currency Transactions: Expenditure in Foreign Currency (on accrual basis):

8 Particulars Current year(rs) Previous Year(Rs) Travel 48,896/- NIL Total 48,896/- NIL 11. Foreign Exchange gain/ loss: The Company did not have any foreign exchange/ currency on hand as on the date of Balance Sheet. 12. Capital work in progress: This includes the following: a) Amount paid for the up gradation of micro finance portfolio accounting software (Bankers Realm) Rs. 576,694/- b) Amount paid for the payroll software (Greytip Software Pvt Ltd) Rs.101,815/- 13. MSMED Act, 2006: The Company is in process of receiving intimations from Suppliers regarding their status under Micro, Small and Medium Enterprise Development Act, 2006 and hence disclosures, if any, relating to amounts unpaid as at the year end together with interest paid / payable as required under the said Act have not been given. 14. Previous Period Comparatives: Previous period figures have been regrouped and rearranged to the extent considered necessary. Schedule 1 to 8 to the Balance Sheet and Profit and Loss account form an integral part of these accounts FOR HARIBHAKTI & CO. CHARTERED ACCOUNTANTS FOR AND ON BEHALF OF THE BOARD OF SWADHAAR FINSERVE PRIVATE LIMITED RAKESH RATHI ANSHU MUNDHRA VEENA MANKAR LALITA D GUPTE PARTNER COMPANY SECRETARY MANAGING DIRECTOR CHAIRPERSON Place: Mumbai Dated:13 May 2009