Note 1 : Significant Accounting Policies 1 BASIS OF brPARATION OF FINANCIAL STATEMENTS: The financial statements of the Company are brpared under the historical cost convention, on the accrual basis of accounting and comply in all material respects with the generally accepted accounting principles in India, the applicable accounting standards notified under Section 133 of the Companies Act, 2013, read with rule 7 of the Companies (Accounts) Rules, 2014 issued by Institute of Chartered Accountant of India, the provisions of the Companies Act, 2013 and regulations of Reserve Bank of India to the extent applicable. The accounting policies have been consistently applied by the Company and except for the changes, if any, in accounting policy discussed below, are consistent with those used in the brvious year. All assets and liabilities have been classified as current or noncurrent as per the Company's normal operating cycle and other criteria set out in the schedule III to the Companies Act 2013. 2 USE OF ESTIMATES: The brparation 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 on the date of the financial statements. Actual results may differ from the estimates and assumptions used in brparing 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 FIXED ASSETS & DEbrCIATION: Fixed assets are stated at cost less accumulated debrciation and impairment thereon. The cost of fixed assets comprises purchase price and any attributable cost of bringing the asset to its working condition for its intended use. Debrciation is based on the cost of an asset less its residual value as notified in Schedule II to the Companies Act, 2013. In pursuant of Schedule II of the Companies Act 2013, the fixed assets of the significant value are componentized with separate useful life. In case of addition, debrciation is provided pro-rata for entire month in which addition is made and in case of deletions, debrciation is provided till month brceding month of disposal of such assets. On all assets, except as mentioned below, debrciation has been provided based on Written Down Value method using the useful life as specified in Schedule II to the Companies Act, 2013. Improvements to leased Assets are debrciated over the initial period of lease on Straight Line Basis. 4 INTANGIBLE ASSET AND AMORTIZATION: Expenses incurred on Computer Software having enduring benefits are capitalized and amortized on Straight Line Method (SLM) basis over a period of five years. 5 BORROWING COST: Interest and other costs in connection with the borrowing of the funds to the extent related/ attributed to the acquisition/ construction of qualifying fixed assets are capitalized up to the date when such assets are ready for its intended use and other borrowing costs are charged to Statement of Profit & Loss. 6 INVESTMENTS: Investments are classified into long term investments and current investments. Investments that are intended to be held for one year or more are classified as long-term investments and investments that are intended to be held for less than one year are classified as current investments. Long term investments are valued at cost. Provision for diminution in value of Long term is made if in the opinion of management such a decline is other than temporary. Current investments are valued at cost or market/fair value, whichever is lower. On disposal of an investment, the difference between its carrying amount and net disposal proceeds is charged or credited to the statement of Profit and loss. Investment Property An investment in Building which is not intended to occupy substantially for use by, or in the operation of the company, is classified as investment property. Investment properties are stated at cost, net of accumulated debrciation and accumulated impairment losses, if any. 7 REVENUE RECOGNITION: Revenue is recognized to the extent it is probable that the economic benefit will flow to the company & revenue is reliably measured. a) Interest Income is recognized on the time proportionate basis starting from the date of disbursement of loan. In case of Non Performing Assets, interest income is recognized on receipt basis, as per NBFC Prudential norms. b) Dividend income is recognized when the right to receive payment is established. c) Income from investment in Private Equity Funds ("the fund") is booked as and when the same is distributed by the Fund. Return of capital contribution is reduced from the original cost of investment. d) Income from arbitrage and trading in securities and derivatives comprises profit/loss on sale determined based on the Weighted Average cost of the securities/currency sold. e) In respect of other heads of income the Company accounts the same on accrual basis. 8 FOREIGN CURRENCY TRANSACTIONS: Foreign currency transactions are recorded at the rates of exchange brvailing on the date of the transaction. Exchange differences, if any arising out of transactions settled during the year are recognized in the Statement of Profit and Loss. 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 recognized in the Statement of Profit and Loss and related assets and liabilities are accordingly restated in the balance sheet. 9 EMPLOYEE BENEFITS: Provident Fund: Contribution payable to the recognized provident fund, which is a defined contribution scheme, is charged to the Statement of Profit and Loss in the period in which they occur. Gratuity: Gratuity is post employment benefit and is in the nature of Defined Benefit Plan. The Liability recognized in the balance sheet in respect of gratuity is the brsent 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 using the projected unit credit method. Actuarial gains and losses comprise experience adjustment and the effects of changes in actuarial assumptions are recognized immediately in the Statement of Profit and Loss. Compensated Absences: As per the policy of the Company, an employee can carry forward maximum 10 days of leave to next financial year. No leave is allowed to be encashed. An obligation arises as employees render service that increases their entitlement to future compensated absences. Provision is made for expected cost of accumulating compensated absences as a result of unused leave entitlement which has accumulated as at the balance sheet date. Ex-gratia (Bonus): The Company recognizes the costs of bonus payments when it has a brsent obligation to make such payments as a result of past events and the reliable estimate of the obligation can be made. 10 TAXATION: Tax expense comprises current tax (i.e. amount of tax for the period determined in accordance with the income-tax law) and deferred tax charge or credit (reflecting the tax effect of timing differences between accounting income and taxable income for the period). 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, 1961. Deferred Taxation: The deferred tax charge or credit and the corresponding deferred tax liabilities and assets are recognized using the tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax assets are recognized only to the extent there is reasonable certainty that the asset can be realized in future; however, where there is unabsorbed debrciation or carried forward loss under taxation laws, deferred tax assets are recognized only if there is a virtual certainty of realization of the assets. Deferred tax assets are reviewed as at 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 realized. The carrying amounts of deferred tax asset are review at each reporting date. The company writes down the carrying amount of deferred tax asset to the extent that it is no longer reasonably certain, as the case may be, that sufficient future taxable income will be available against which deferred tax asset can be realized. 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. Minimum Alternate Tax In case the Company is liable to pay income tax u/s 115 JB of the Income Tax Act, 1961, the amount of tax paid in excess of normal income tax is recognized as asset (MAT credit Entitlement) only if there is convincing evidence for realization of such asset during the specified period. MAT credit entitlement is reviewed at each Balance Sheet date. 23.11 PROVISIONS AND CONTINGENCIES: 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 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 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. 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 recognized 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 recognized in the period in which the change occurs. 12 PROVISIONING ON RECEIVABLES FROM FINANCING BUSINESS: a) Provision for standard assets is made on the basis of prudential norms brscribed for NBFCs by Reserve Bank of India. b) Non Performing Assets are identified by periodic appraisals of the portfolio by management and appropriate provisions are made based on the management's assessment of the degree of impairment of the loan asset and the level of provisioning required as per the prudential norms brscribed for NBFCs by Reserve Bank of India. 13 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 Statement of Profit and Loss. If at the balance sheet date there is an indication that a brviously 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 debrciable historical cost. 14 LEASES: Where the Company is 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 recognized as an expense in the Statement of Profit and Loss on a straight-line basis over the lease term. Where the Company is Lessor Leases in which the Company does not transfer substantially all the risks and benefits of ownership of the asset are classified as operating leases. Assets subject to operating leases are included in fixed assets. The Company recognizes lease rentals from the property leased out, on accrual basis as per the terms of agreements entered with the counter parties. Costs, including debrciation, are recognized as an expense in the Statement of Profit and Loss. 15 EARNING PER SHARE : Basic earnings per share are calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares, outstanding during the period. The weighted average numbers of equity shares, outstanding during the period are adjusted for event of bonus issue; bonus element in a right issue to existing shareholder; share spilt; and reverse share spilt (consolidation of shares). For the purpose of calculating diluted earning per share the net profit or loss for the period attributable to equity shareholder and the weighted average number of shares outstanding during the period are adjusted for the effect of all dilutive potential equity shares. 16 CASH AND CASH EQUIVALENT : Cash and cash equivalents for the purposes of cash flow statement comprise cash at bank and in hand and short term investment with original maturity of three months or less. Note 2 : In the opinion of the board of directors, all current assets, loans & advances would be realizable at least of an amount equal to the amount at which they are stated in the balance sheet. There is no impairment in the fixed assets. Note 3 : Segment Reporting As per AS 17 Para 4, Segment has been disclosed in Consolidated Financial Statement, Hence no separate disclosure has been given in standalone financial statement of the Company Note 3 : With effect from August 7th, 2015 the Motilal Oswal Insurance Broker Private Limited became 100% subsidiary of the Company after acquiring 10,000 shares having Face value of Rs. 10 each for consideration of Rs. 0.1 Million. Note4 : 1) Crisil Limited reaffirmed the Credit Rating of "CRISIL A1+" (pronounced 'CRISIL A One Plus') to the Short Term Debt Programme of 2500 million (brvious year 4000 million) of the Company. The rating indicates very strong degree of safety regarding timely servicing of financial obligations. 2) ICRA has re-affirmed the rating of ICRA AA rating with stable outlook (pronounced ICRA double A rating with Stable Outlook') to the Long Term Debt Programme of the Company for 1500 million (brvious year 1500 million). The raing indicates strong degree of safety regarding timely servicing of financial obligations. Note 5 : The Company has sent letters to vendors to confirm whether they are covered under micro, small and medium enterprise development act 2006 as well as they have filled required memorandum with brscribed authority. Out of the letter sent to the party, some confirmations have been received till the date of finalization of balance sheet. Based on the confirmation received, the outstanding amounts payable to the vendors under Micro, Small and Medium Enterprises Development Act 2006 are given below : Note 6 : During the current year, Company has made / (reversed) a provision (Rs. 5.93 millions) (brvious year Rs. 1.38 in Millions) being 0.30% (brvious year 0.25%) of its standard assets as per the Notification No. DNBR (PD) CC. No.043 / 03.10.119 / 2015-16 dated 1st July, 2015) issued by RBI. Note 7 : The Company gives secured loans to its customers, wherein towards such loan the customers give their owned securities (shares) as a security to the Company which are either pledged in favour of the Company or are transferred to Company's Depositary Participant account. Such shares are kept by the Company in a separate Depositary Participant account maintained by the Company for all such purposes Note 8 : Previous year figures have been regrouped/reclassified wherever necessary to make them comparable. As per our attached Report of even date For Haribhakti & Co. LLP Chartered Accountants ICAI Firm Reg No. 103523W Amit A. Hundia Partner Membership No. 120761 For and on behalf of the Board of Motlal Oswal Financial Services Ltd. Motlal Oswal Chairman & Managing Director DIN No. 00024503 Raamdeo Agarawal Joint Managing Director DIN No. 00024533 Sameer Kamath Chief Financial Officer Murli Krishnan Iyer Company Secretary Place : Mumbai Date : 30th April, 2016 |