You should read the following discussion and analysis of our financial condition and results of operations together with such Restated Consolidated Financial Information. For further details, please see "Financial Information" on page 156.
Our fiscal year ends on March 31 of each year, so all references to a particular fiscal year are to the twelve - month period ended March 31 of that year.
This discussion contains forward-looking statement and reflects our current plans and expectations, actual results may differ materially from those anticipated in these forward-looking statements. By their nature certain market risk disclosures are only estimates and could be materially different from those that have been estimated. Given these uncertainties, prospective investors are cautioned not to place undue reliance on such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the sections "Risk Factors", "Forward Looking Statements" and "Our Business" on page 17, 10, and 88.
Overview
We are one of the leading integrated wealth management companies in India, with client assets of 2,297.37billion and a network of 2,726 employees in more than 90 offices spread across the world, as of March 31, 2023. Our diversified client segments include affluent and high net worth individuals, ultra-high net worth individuals, affluent families and family offices, corporate and institutional clients.
Founded in 1993, we have grown our business offerings over the years. We now offer a complete suite of wealth management, asset management and capital markets services amongst others. This exhaustive suite of offerings differentiates our platform and enables us to deliver the right solutions to all our clients, harnessing all the capabilities of our platform. We are organized around client segments which allows us to specialize and sharpen our value proposition.
Our value proposition can be summarised as follows:
(a) Solution oriented approach, fulfilling all client goals;
(b) Comprehensive, superior and multi-product suite, which enables business monetization; and
(c) Integrated delivery of all platform capabilities to clients, thereby strengthening relationship. ourselves.
Significant Factors Affecting Our Results of Operations and Financial Condition
Our results of operations have been, and will continue to be, affected by a number of events and actions, some of which are beyond our control. However, there are some specific items that we believe have impacted our results of operations and, in some cases, will continue to impact our results on a consolidated and standalone basis. We believe that the following factors, amongst others, have, or could have, an impact on these results, the manner in which we generate income and incur the expenses associated with generating this income. For further details of such factors, please see the sections titled "Our Business" and "Risk Factors" on pages 88 and 17.
Our business volumes
Our results of operations are materially affected by value of our client assets in wealth management business and asset management business. Our growth and success in wealth management business and asset management business significantly depend upon the investment performance of our client assets. Investment performance in line with or exceeding the expectations of our clients on client assets increases the attractiveness of our products with clients and accordingly our revenue. Similarly, our performance and clients satisfaction in our capital market services, would impact our business volumes and fees earned therefrom.
While we will continue to explore opportunities to expand our business through organic and inorganic modes, we cannot be certain that the growth witnessed by us in the past will be maintained in the future.
Ability to attract RMs and key personnel in our businesses
Our wealth management business is a high client engagement business which thrives on relations forged by RMs over a period of time. The RMs are engaged in acquiring and servicing clients and delivering value addition, due to which their relationship with clients is strong. Our asset management business relies on investment and product specialists and our capital market businesses depend on our investment banking, research, and sales personnel among others. These resources are critical to our success. While we believe our scale, client reach, comprehensive suites of products and services across our businesses, technology platform and infrastructure, and alignment of economic interests enable us to attract and retain such critical resources, any inability to attract and retain them due to factors beyond our control would have an adverse impact on our business and future financial performance.
Personnel, business and establishment costs
We function in a highly competitive industry and accordingly, our ability to manage our expenses directly affects our business and results of operations. Personnel related expenses constitute a significant proportion of our total expense. However, it can be difficult and expensive to attract and retain talented and experienced employees, having regard to, demand-supply positions of such personnel, action of competitors and general market conditions. In addition, we also strive to ensure effective utilisation of our human resources and may need to adjust to the dynamic business environment as we increase our scope of operations, activities across the board and expand into new business products. As we grow our business, we will require additional human resources including relationship managers, investment professionals, dealers and operational, management and technology staff and these expenses may impact our financial condition and results of operations. Our business and establishment expenses may also increase in tandem with business growth and/ or general market and economic conditions, including inflation levels.
Regulatory and tax provisions
We operate in businesses that are regulated in India, and our activities are subject to supervision and regulation by multiple statutory and regulatory authorities including SEBI and RBI and the various stock / currency / commodity exchanges. In recent years, existing rules and regulations have been modified, new rules and regulations have been enacted and reforms have been implemented which are intended to provide tighter control and more transparency in the various regulations and policies. Similarly, changes in income tax provisions with regard to products and services we offer particularly in our wealth management and asset management businesses may render certain products unattractive to our clients. The above factors may require changes to our business model, products, pricing, and recognition of basis of fees and services, processes. While it may be possible that certain regulatory changes would be positive for some of our business operations, and we would be able to address some of the changes by modifying our product and service offerings it may also so happen that such changes could adversely affect our business volumes, revenues recognised, costs, results of operations and capital requirements.
Macroeconomic environment and fluctuation in underlying markets
All our businesses are exposed to conditions and sentiments prevailing in the financial markets, macro-economic environment and general economic conditions in India. Further, our businesses are also impacted by developments and sentiments prevailing in global economy and financial markets. Our products performance may be impacted by the aforesaid conditions and consequently, our volumes, revenues, and profitability.
Fluctuation in the performance of financial products has an impact on the perception of such products as investment options which can affect the demand for the financial products distributed/ managed by us in our wealth management and asset management businesses. While our business tends to benefit from increased client confidence in the overall economy and financial markets, for the financial services sector in particular, adverse development s in financial markets and macroeconomic conditions in India and globally may reduce the demand for our returns on the products distributed/ managed by us. Similarly, demand for products and services provided by our capital market segment is also influenced by these factors.
Other key factors affecting the performance of our businesses in India include changes in the political and social conditions in India, and changes in governmental policies with respect to taxation, laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.
Competition
We face competition from wealth management and advisory firms, asset management companies, domestic and multinational banks with private banking operations that target clients in the segment we operate in. Some of these firms have greater scale, resources and/or a more widely recognised brand than us, which may give them a competitive advantage. We also face competition from a number of players acting as intermediaries in our businesses, many of whom operate in a highly cost-competitive environment. We believe brand image, our scale, client reach and geographic presence in India, our understanding of client requirements, our wide product offering and our relationships with clients and intermediaries, will allow us to face such competition. However, any significant increase in competition may reduce our market share, decrease growth in our business and revenue, increase costs and have an impact on results of operations.
Information technology
Information technology systems are crucial to the success of our businesses and operations. We use the technology extensively in our businesses, operations and back-office, which help us improve overall client experience, efficiencies in transaction processing and productivity. Our technology includes hardware, software, applications operating systems, security architecture systems and even management tools. These are potentially vulnerable to damage or interruption from a variety of sources and breach of confidential client and company data. Further, for certain applications and infrastructure management we rely on third-party service providers. In case the third-party service providers fail to perform their contractual or other obligations satisfactorily, we may face difficulties and disruptions in our operations. A failure of our information technology systems could also cause damage to our reputation which could harm our business. While we have measures and systems in place to avoid or minimize such incidences, these could lead to disruptions in operations, loss of reputation and adversely impact results from operations. Further, with the rise in the use of technology, we may face competition from new entrants in the industry who may leverage technology to provide products and services similar to us or which our clients prefer over services provided by us. This increased competition may result in our inability to grow or maintain our market share. It may also result in reduced assets under management, which may adversely affect our results of operations.
Significant Accounting Policies
1. Basis of preparation of Restated Consolidated Financial Information
The Restated Consolidated Statement of Assets and Liabilities of the Group as at March 31, 2023, March 31, 2022, March 31, 2021, Restated Consolidated Statement of Profit and Loss including Other Comprehensive Income, Restated Consolidated Statement of Changes in Equity, Restated Consolidated Statement of Cash Flows and Notes to Restated Consolidated Financial Information for the year ended
March 31, 2023, March 31, 2022, March 31, 2021 (hereinafter collectively referred to as ‘Restated Consolidated Financial Information) have been compiled from the audited consolidated financial statements for the year ended March 31, 2023, March 31, 2022 and March 31, 2021 which were prepared in accordance with the Indian Accounting Standards (‘Ind AS) as per the Companies (Indian Accounting Standards) Rules, 2015 notified under Section 133 of the Companies Act, 2013 (‘the Act), amendments thereto and other relevant provisions of the Act.
The Restated Consolidated Financial Information as approved by the Board of the Directors at their meeting held on June 16, 2023 has been prepared for inclusion in the Information Memorandum (‘IM) prepared by the company in connection with the proposed listing of its equity shares ("Proposed Listing") prepared in accordance with the checklist provided by Bombay Stock Exchange ("BSE") and National Stock Exchange ("NSE") for in-principle approval in relation to any scheme of arrangement states that the IM should contain the information about the Company and its group companies in line with the disclosure requirement applicable for public issue. Further as per SEBI Master Circular dated November 23, 2021 and June 20, 2023 on Scheme of Arrangement by Listed entities also states about the requirements to be given in an advertisement before commencement of trading that it should contain Restated Audited Financials for the previous three financial years and stub period prior to the date of listing. Hence for the purpose of disclosure in the IM, IM should contain restated consolidated financial information, in line with disclosure requirements for public issues. The disclosure requirements applicable for public issues form part of Schedule VI of the Securities and Exchange Board of India
(Issue of Capital and Disclosure Requirements) Regulations, 2018, as amended ("SEBI ICDR Regulations") and accordingly, all disclosure requirements mentioned therein in relation to public issues would be applicable to the information memorandum. Further, Clause (11) of the SEBI ICDR
Regulations provides for ‘Financial Statements required to be disclosed in the offer document.
Accordingly, these consolidated restated financial information have been prepared in terms of requirements of: (a) SEBI ICDR regulations; and (b) The Guidance Note of Reports in Company
Prospectus (Revised 2019) issued by the Institute of Chartered Accountants of India ("ICAI"), as amended from time to time ("the Guidance Note).
These Restated Consolidated Financial Information have been prepared on a historical cost basis, except for certain financial instruments such as derivative financial instruments and other financial instruments held for trading, which have been measured at fair value and assets classified as held for sale, which have been measured at lower of carrying value and fair value less cost to sell. The Restated Consolidated Financial Information are presented in Indian Rupees (INR) and all values are rounded to the nearest million, except when otherwise indicated.
2. Presentation of Restated Consolidated Financial Information
The Group presents its Statement of Assets and Liabilities in order of liquidity in compliance with the Division III of the Schedule III to the Companies Act, 2013. An analysis regarding recovery or settlement within 12 months after the reporting date (current) and more than 12 months after the reporting date (noncurrent) is presented in note 49.
Financial assets and financial liabilities are generally reported gross in the balance sheet. They are only offset and reported net when, in addition to having an unconditional legally enforceable right to offset the recognised amounts without being contingent on a future event, the parties also intend to settle on a net basis in all of the following circumstances:
? The normal course of business
? The event of default
? The event of insolvency or bankruptcy of the Group and/or its counterparties
Derivative assets and liabilities with master netting arrangements e.g., ISDAs (International Swaps and Derivatives Association) are only presented net when they satisfy the eligibility of netting for all of the above criteria and not just in the event of default.
3. Basis of consolidation:
The Restated Consolidated Financial Information comprise the restated financial statements of the Company and its subsidiaries. The Company consolidates a subsidiary when it controls it. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Generally, there is a presumption that a majority of voting rights result in control. To support this presumption and when the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:
? The contractual arrangement with the other vote holders of the investee;
? Rights arising from other contractual arrangements;
? The Groups voting rights and potential voting rights; and
? The size of the Groups holding of voting rights relative to the size and dispersion of the holdings of the other voting rights holders.
The Group re-assesses whether or not it controls an investee, if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the restated consolidated financial information from the date the Group gains control until the date the Group ceases to control the subsidiary.
Restated Consolidated Financial Information are prepared using uniform accounting policies for like transactions and other events in similar circumstances. If a subsidiary/associate of the Group uses accounting policies other than those adopted in the restated consolidated financial information for like transactions and events in similar circumstances, appropriate adjustments are made to that Group subsidiarys/associates financial statements in preparing the restated consolidated financial information to ensure conformity with the Groups accounting policies. However, no subsidiaries and associates have followed different accounting policies than those followed by the Group for the preparation of these restated consolidated financial information.
The restated financial information of all entities used for the purpose of consolidation are drawn up to same reporting date as that of the parent Group, i.e., year ended on March 31.
Consolidation procedure:
(a) Combine like items of assets, liabilities, equity, income, expenses and cash flows of the parent with those of its subsidiaries. For this purpose, income and expenses of the subsidiary are based on the amounts of the assets and liabilities recognised in the Restated Consolidated Financial Information at the acquisition date.
(b) Offset (eliminate) the carrying amount of the parents investment in each subsidiary and the parents portion of equity of each subsidiary.
(c) Eliminate in full intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between entities of the Group (profits or losses resulting from intragroup transactions that are recognised in assets, are eliminated in full). Income Taxes applies to temporary differences that arise from the elimination of profits and losses resulting from intragroup transactions.
Profit or loss and each component of OCI are attributed to the equity holders of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance.
All intra-group assets, liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.
A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Group loses control over a subsidiary, it:
a. Derecognises the assets (including goodwill) and liabilities of the subsidiary at their carrying amounts at the date when control is lost b. Derecognises the carrying amount of any non-controlling interests c. Derecognises the cumulative translation differences recorded in equity d. Recognises the fair value of the consideration received e. Recognises the fair value of any investment retained f. Recognises any surplus or deficit in profit or loss g. Recognises that distribution of shares of subsidiary to Group in Groups capacity as owners h. Reclassifies the parents share of components previously recognised in OCI to profit or loss or transferred directly to retained earnings, if required by other Ind ASs as would be required if the Group had directly disposed of the related assets or liabilities.
The Restated Consolidated Financial Information of all subsidiaries incorporated outside India are converted on the following basis: (a) Income and expenses are converted at the average rate of exchange applicable for the period/year and (b) All assets and liabilities are translated at the closing rate as on the Balance Sheet date. The exchange difference arising out of period/year end translation is debited or credited as "Foreign Exchange Translation Reserve" forming part of Other Comprehensive Income and accumulated as a separate component of other equity.
Investment in associates:
An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decision of the investee, but its not control or joint control over those policies.
The considerations made in determining significant influence are similar to those necessary to determine control over the subsidiaries.
The Groups investment in its associate is accounted for using the equity method. Under the equity method, the investment in an associate is initially recognised at cost. The carrying amount of the investment is adjusted to recognise changes in the Groups share of net assets of the associate since the acquisition date.
The statement of profit and loss reflects the Groups share of the results of operations of the associate. Any change in other comprehensive income (OCI) of those investees is presented as a part of the Groups other comprehensive income (OCI).
The restated financial statements of the associate are prepared for the same reporting period as the Group. When necessary, adjustments are made to bring the accounting policies in line with those of the Group.
After application of the equity method, the Group determines whether it is necessary to recognise an impairment loss on its investment in its associate. At each reporting date, the Group determines whether there is objective evidence that the investment in the associate is impaired. If there is such evidence, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and then recognises the loss in the statement of profit and loss.
4. Significant accounting policies
4.1 Revenue from contract with customer
Revenue is measured at transaction price i.e. the amount of consideration to which the Group expects to be entitled in exchange for transferring promised goods or services to the client, excluding amounts collected on behalf of third parties. The Group consider the terms of the contracts and its customary business practices to determine the transaction price. Where the consideration promised is variable, the Group excludes the estimates of variable consideration that are constrained. The Group applies the five-step approach for recognition of revenue:
(i) Identification of contract(s) with clients;
(ii) Identification of the separate performance obligations in the contract; (iii) Determination of transaction price; (iv) Allocation of transaction price to the separate performance obligations; and (v) Recognition of revenue when (or as) each performance obligation is satisfied
The group recognises revenue from the following sources:
a. Brokerage income including client subscription fees is recognised as per contracted rates at the point in time when transactions performance obligation is satisfied on behalf of the clients on the trade date.
b. Fee income including advisory fees, referral fees, commission income, fund accounting etc. is accounted on an accrual basis as per Ind AS 115 in accordance with the terms and contracts entered into between the Group and the counterparty and presented service transferred at point in time and over time.
Clearing fees income arises, when the performance obligation related to the trade is executed and a valid contract is generated for the trade.
Research services fee income and Interest on delayed payments is accounted when there is reasonable certainty as to its receipts.
4.2 Recognition of interest income and dividend income
4.2.1 Interest income:
Under Ind AS 109 interest income is recorded using the effective interest rate (EIR) method for all financial instruments measured at amortised cost and debt instrument measured at FVOCI. The EIR is the rate that exactly discounts estimated future cash flows through the expected life of the financial instrument or, when appropriate a shorter period to the gross carrying amount of financial instrument.
The EIR is calculated by taking into account any discount or premium on acquisition, fees and costs that are an integral part of the EIR. The Group recognises interest income using a rate of return that represents the best estimate of a constant rate of return over the expected life of the financial asset. Hence, it recognises the effect of potentially different interest rates charged at various stages, and other characteristics of the product life cycle including prepayments penalty interest and charges.
If expectations regarding the cash flows on the financial asset are revised for reasons other than credit risk, the adjustment is booked as a positive or negative adjustment to the carrying amount of the asset in the balance sheet with an increase or reduction in interest income.
The Group calculates interest income by applying the EIR to the gross carrying amount of financial assets other than credit-impaired assets.
When a financial asset becomes credit-impaired and is, therefore, regarded as ‘Stage 3, the Group calculates interest income by applying the EIR to the amortised cost (net of expected credit loss) of the financial asset. If the financial asset cures and is no longer credit-impaired, the Group reverts to calculating interest income on a gross basis.
4.2.2 Dividend income:
Dividend income is recognised when the right to receive payment is established, it is probable that the economic benefits associated with the dividend will flow to the entity and the amount of the dividend can be measured reliably.
4.3 Financial Instruments
4.3.1 Date of recognition
Financial assets and financial liabilities with exception of borrowings are initially recognised on the trade date, i.e., the date that the Group becomes a party to the contractual provisions of the instrument. This includes regular way trades; purchases or sales of financial assets that require delivery of assets within the time frame generally established by regulation or convention in the marketplace. The Group recognises borrowings when funds are received by the Group.
4.3.2 Initial measurement of financial instruments
Financial assets are classified, at initial recognition, as subsequently measured at amortised cost, fair value through other comprehensive income (OCI), and fair value through profit or loss.
The classification of financial assets at initial recognition depends on the financial assets contractual cash flow characteristics and the Groups business model for managing them. With the exception of trade receivables that do not contain a significant financing component or for which the Group has applied the practical expedient, the Group initially measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs. Trade receivables that do not contain a significant financing component or for which the Group has applied the practical expedient are measured at the transaction price determined under Ind AS 115. Refer to the accounting policies in section 5.1 Revenue from contracts with clients.
4.3.3 Day 1 profit or loss
When the transaction price of the financial instrument differs from the fair value at origination and the fair value is based on a valuation technique using only inputs observable in market transactions, the Group recognises the difference between the transaction price and fair value in net gain on fair value changes. In those cases where fair value is based on models for which some of the inputs are not observable, the difference between the transaction price and the fair value is deferred and is only recognised in statement of profit and loss when the inputs become observable, or when the instrument is derecognised.
4.3.4 Classification of financial instruments
The Group classifies all of its financial assets based on the business model for managing the assets and the assets contractual terms, measured at either:
Financial assets carried at amortised cost (AC)
A financial asset is measured at amortised cost if it is held within a business model whose objective is to hold the asset in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. The changes in carrying value of financial assets is recognised in profit and loss account.
Financial assets at fair value through other comprehensive income (FVTOCI)
A financial asset is measured at FVTOCI if it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. The changes in fair value of financial assets is recognised in Other Comprehensive Income.
Financial assets at fair value through profit or loss (FVTPL)
A financial asset which is not classified in any of the above categories are measured at FVTPL. The Group measures all financial assets classified as FVTPL at fair value at each reporting date. The changes in fair value of financial assets is recognised in Profit and loss account.
The Group measures financial assets that meet the following conditions at amortised cost:
? the financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and ? the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Debt instruments that meet the following conditions are subsequently measured at fair value through other comprehensive income (except for debt instruments that are designated as at fair value through profit or loss on initial recognition):
? the financial asset is held within a business model whose objective is achieved both by collecting contractual cash flows and selling the financial assets; and ? the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding
4.4 Financial assets and liabilities
4.4.1 Amortized cost and effective interest rate (EIR)
The effective interest rate is a method of calculating the amortised cost of a debt instrument and of allocating interest income over the relevant period.
For financial instruments other than purchased or originated credit-impaired financial assets, the effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) excluding expected credit losses, through the expected life of the debt instrument, or, where appropriate, a shorter period, to the gross carrying amount of the debt instrument on initial recognition. For purchased or originated credit impaired financial assets, a credit-adjusted effective interest rate is calculated by discounting the estimated future cash flows, including expected credit losses, to the amortised cost of the debt instrument on initial recognition.
The amortised cost of a financial asset is the amount at which the financial asset is measured at initial recognition minus the principal repayments, plus the cumulative amortisation using the effective interest method of any difference between that initial amount and the maturity amount, adjusted for any loss allowance. On the other hand, the gross carrying amount of a financial asset is the amortised cost of a financial asset before adjusting for any loss allowance.
4.4.2 Financial assets held for trading
The Group classifies financial assets as held for trading when they have been purchased or issued primarily for short-term profit making through trading activities or form part of a portfolio of financial instruments that are managed together, for which there is evidence of a recent pattern of short-term profit is taking. Held-for-trading assets and liabilities are recorded and measured in the balance sheet at fair value.
4.4.3 Financial assets at fair value through profit or loss
Financial assets and financial liabilities in this category are those that are not held for trading and have been either designated by management upon initial recognition or are mandatorily required to be measured at fair value under Ind AS 109. Management only designates an instrument at FVTPL upon initial recognition when one of the following criteria are met. Such designation is determined on an instrument-by-instrument basis.
? The designation eliminates, or significantly reduces, the inconsistent treatment that would otherwise arise from measuring the assets or liabilities or recognising gains or losses on them on a different basis; Or
? The liabilities are part of a group of financial liabilities, which are managed and their performance evaluated on a fair value basis, in accordance with a documented risk management or investment strategy; Or
? The liabilities containing one or more embedded derivatives, unless they do not significantly modify the cash flows that would otherwise be required by the contract, or it is clear with little or no analysis when a similar instrument is first considered that separation of the embedded derivative(s) is prohibited.
Financial assets and financial liabilities at FVTPL are recorded in the balance sheet at fair value. Changes in fair value are recorded in profit and loss with the exception of movements in fair value of liabilities designated at FVTPL due to changes in the Groups own credit risk. Such changes in fair value are recorded in the own credit reserve through OCI and do not get recycled to the profit or loss. Interest earned or incurred on instruments designated at FVTPL is accrued in interest income or finance cost, respectively, using the EIR, taking into account any discount/ premium and qualifying transaction costs being an integral part of instrument. Interest earned on assets mandatorily required to be measured at FVTPL is recorded using contractual interest rate.
4.4.4 Investment in equity instruments
The Group subsequently measures all equity investments at fair value through profit or loss, unless the management has elected to classify irrevocably some of its strategic equity investments to be measured at FVOCI, when such instruments meet the definition of equity under Ind AS and are not held for trading. Such classification is determined on an instrument-by-instrument basis. Investments in associate company is carried at cost.
4.4.5 Financial liabilities
All financial liabilities are measured at amortised cost except loan commitments, financial guarantees, and derivative financial liabilities.
4.4.6 Loan commitments
Undrawn loan commitments are commitments under which, the Group is required to provide a loan with pre-specified terms to the client during the duration of the commitment.
4.4.7 Derivative financial instruments
The Group enters into a variety of derivative financial instruments to manage its exposure to interest rate and market risk.
Derivatives are initially recognised at fair value at the date the derivative contracts are entered into and are subsequently re-measured to their fair value at the end of each reporting period. The resulting gain or loss is recognised in profit or loss.
Embedded derivatives
An embedded derivative is a component of a hybrid instrument that also includes a non-derivative host contract with the effect that some of the cash flows of the combined instrument vary in a way similar to stand-alone derivative. An embedded derivative causes some or all of the cash flows that otherwise would be required by the contract to be modified according to a specified interest rate, foreign exchange rate or other variable, provided that, in case of a non-financial variable, it is not specific to a party to the contract.
Derivatives embedded in all other host contracts are accounted for as separate derivatives and recorded at fair value if their economic characteristics and risks are not closely related to those of the host contracts and the host contracts are not held for trading or designated at fair value through profit or loss. These embedded derivatives are measured at fair value with changes in fair value recognised in profit or loss, unless designated as effective hedging instruments.
4.4.8 Debt securities and other borrowed funds
After initial measurement, debt issued and other borrowed funds are subsequently measured at amortised cost. Amortised cost is calculated by taking into account any discount or premium on issue funds, and costs that are an integral part of the EIR.
The Group issues certain non-convertible debentures, the return of which is linked to performance of specified indices over the period of the debenture. Such debentures have a component of an embedded derivative which is fair valued at a reporting date. The resultant ‘net unrealised loss or gain on the fair valuation of these embedded derivatives is recognised in the statement of profit and loss. The debt component of such debentures is measured at amortised cost using yield to maturity basis.
4.4.9 Financial guarantee
Financial guarantees are contracts that require the Group to make specified payments to reimburse the holder for loss that it incurs because a specified debtor fails to make payment when it is due in accordance with the terms of a debt instrument.
Financial guarantees issued or commitments to provide a loan at below market interest rates are initially measured at fair value and the initial fair value is amortised over the life of the guarantee or the commitment. Subsequently, they are measured at higher of the amount of loss allowance determined as per impairment requirements of Ind AS 109 and the amount recognised less cumulative amortisation.
4.4.10 Financial liabilities and equity instruments
Financial instruments issued by the Group are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.
An equity instrument is a contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Group entity are recognised at the proceeds received, net of direct issue costs.
Repurchase of the Groups own equity instruments is recognised and deducted directly in equity. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the Groups own equity instruments.
4.5 Reclassification of financial assets and liabilities
The Group does not reclassify its financial assets subsequent to their initial recognition, apart from the exceptional circumstances in which the Group acquires, disposes of, or terminates a business line.
4.6 Derecognition of financial Instruments
4.6.1 Derecognition of financial asset
A financial asset (or, where applicable a part of a financial asset or a part of a group of similar financial assets) is derecognised when the rights to receive cash flows from the financial asset have expired. The Group also derecognises the financial asset if it has both transferred the financial asset and the transfer qualifies for derecognition.
The Group has transferred the financial asset if, and only if, either
? The Group has transferred the rights to receive cash flows from the financial asset or
? It retains the contractual rights to receive the cash flows of the financial asset, but assumed a contractual obligation to pay the cash flows in full without material delay to third party under pass through arrangement.
Pass-through arrangements are transactions whereby the Group retains the contractual rights to receive the cash flows of a financial asset (the original asset), but assumes a contractual obligation to pay those cash flows to one or more entities (the eventual recipients), when all of the following three conditions are met:
? The Group has no obligation to pay amounts to the eventual recipients unless it has collected equivalent amounts from the original asset, excluding short-term advances with the right to full recovery of the amount lent plus accrued interest at market rates
? The Group cannot sell or pledge the original asset other than as security to the eventual recipients
? The Group has to remit any cash flows it collects on behalf of the eventual recipients without material delay. In addition, the Group is not entitled to reinvest such cash flows, except for investments in cash or cash equivalents including interest earned, during the period between the collection date and the date of required remittance to the eventual recipients.
A transfer only qualifies for derecognition if either:
? The Group has transferred substantially all the risks and rewards of the asset; or
? The Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
The Group considers control to be transferred if and only if, the transferee has the practical ability to sell the asset in its entirety to an unrelated third party and is able to exercise that ability unilaterally and without imposing additional restrictions on the transfer.
4.6.2 Derecognition of financial liabilities
A financial liability is derecognised when the obligation under the liability is discharged, cancelled or expires. Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability. The difference between the carrying value of the original financial liability and the consideration paid is recognised in statement of profit or loss.
4.7 Impairment of financial assets
The Group records allowance for expected credit loss (ECL) for all financial assets, other than financial assets held at FVTPL together with loan commitments and financial guarantee contracts. Equity instruments are not subject to impairment.
Simplified approach
The Group follows ‘simplified approach for recognition of impairment loss allowance on trade receivables. The application of simplified approach does not require the Group to track changes in credit risk. Rather, it recognises impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition. The Group uses a provision matrix to determine impairment loss allowance on portfolio of its receivables. The provision matrix is based on its historically observed default rates over the expected life of the receivables and is adjusted for forward-looking estimates. However, if receivables contain a significant financing component, the Group chooses as its accounting policy to measure the loss allowance by applying general approach to measure ECL.
General approach
For all other financial instruments where ECL is to be recognised, the Group recognises lifetime ECL when there has been a significant increase in credit risk since initial recognition. If, on the other hand, the credit risk on the financial instrument has not increased significantly since initial recognition, the Group measures the loss allowance for that financial instrument at an amount equal to 12-month expected credit losses (12-month ECL). The assessment of whether lifetime ECL should be recognised is based on significant increases in the likelihood or risk of a default occurring since initial recognition.
Lifetime ECL represents the expected credit losses that will result from all possible default events over the expected life of a financial instrument. In contrast, 12-month ECL represents the portion of lifetime ECL that is expected to result from default events on a financial instrument that are possible within 12 months after the reporting date.
The measurement of expected credit losses is a function of the probability of default, loss given default (i.e. the magnitude of the loss if there is a default) and the exposure at default. The assessment of the probability of default and loss given default is based on historical data adjusted by forward-looking information. As for the exposure at default (EAD), for financial assets, this is represented by the assets gross carrying amount at the reporting date; for loan commitments and financial guarantee contracts, the exposure includes the amount drawn down as at the reporting date, together with any additional amounts expected to be drawn down in the future by default date determined based on historical trend, the Groups understanding of the specific future financing needs of the debtors/borrowers, and other relevant forward-looking information.
Group categorises its financial assets as follows:
Stage 1 assets:
Stage 1 assets includes financial instruments that have not had a significant increase in credit risk since initial recognition or that have low credit risk at the reporting date. For these assets, 12-month ECL (resulting from default events possible within 12 months from reporting date) are recognised.
Stage 2 assets:
Stage 2 assets include financial instruments that have had a significant increase in credit risk since initial recognition. For these assets, lifetime ECLs are recognised.
Stage 3 assets:
Stage 3 for assets considered credit-impaired, the Group recognises the lifetime ECL for these loans. The method is similar to that for Stage 2 assets, with the PD set at 100%.
For financial assets, the expected credit loss is estimated as the difference between all contractual cash flows that are due to the Group in accordance with the contract and all the cash flows that the Group expects to receive, discounted at the original effective interest rate. The Group recognises an impairment gain or loss in profit or loss for all financial instruments with a corresponding adjustment to their carrying amount through a loss allowance account.
The Groups product offering includes facilities with a right to Group to cancel and/or reduce the facilities with one days notice. The Group does not limit its exposure to credit losses to the contractual notice period, but instead calculates ECL over a period that reflects the Groups expectations of the client behaviour, its likelihood of default and the Groups future risk mitigation procedures, which could include reducing or cancelling the facilities.
Significant increase in credit risk
ECL is measured as an allowance equal to 12-month ECL for stage 1 assets, or lifetime ECL for stage 2 or stage 3 assets. An asset moves to stage 2 when its credit risk has increased significantly since initial recognition. In assessing whether the credit risk of an asset has significantly increased the Group takes into account qualitative and quantitative reasonable and supportable forward-looking information.
The measurement of impairment losses across all categories of financial assets requires judgement, in particular, the estimation of the amount and timing of future cash flows and collateral values when determining impairment losses and the assessment of a significant increase in credit risk. These estimates are driven by a number of factors, changes in which can result in different levels of allowances.
The Groups ECL calculations are outputs of models with a number of underlying assumptions regarding the choice of variable inputs and their interdependencies. Elements of the ECL models that are considered accounting judgements and estimates include:
? PD calculation includes historical data, assumptions and expectations of future conditions.
? The Groups criteria for assessing if there has been a significant increase in credit risk and so allowances for financial assets should be measured on a life-time expected credit loss and the qualitative assessment.
? The segmentation of financial assets when their ECL is assessed on a collective basis.
? Development of ECL models, including the various formulas and the choice of inputs.
? Determination of associations between macroeconomic scenarios and, economic inputs, such as unemployment levels and collateral values, and the effect on PDs, EAD and LGD.
? Selection of forward-looking macroeconomic scenarios and their probability weightings, to derive the economic inputs into the ECL models
It is Groups policy to regularly review its models in the context of actual loss experience and adjust when necessary.
4.8 Collateral valuation
To mitigate its credit risks on financial assets, the Group seeks to use collateral, where possible. The collateral comes in various forms, such as cash, securities, letters of credit/guarantees, collateral, unless repossessed, is not recorded on the balance sheet. However, the fair value of collateral affects the calculation of ECLs. It is generally assessed, at a minimum, at inception and re-assessed on a periodical basis. However, some collateral, for example, cash or securities relating to margin requirements, is valued daily.
To the extent possible, the Group uses active market data for valuing financial assets held as collateral. Other financial assets which do not have readily determinable market values are valued using financial models.
4.9 Collateral repossessed
The Groups policy is to determine whether a repossessed asset can be best used for its internal operations or should be sold. Assets determined to be useful for the internal operations are transferred to their relevant asset category at the lower of their repossessed value or the carrying value of the original secured asset. Assets for which selling is determined to be a better option are transferred to assets held for sale at their fair value (if financial assets) and fair value less cost to sell for non-financial assets at the repossession date in, line with the Groups policy.
4.10 Determination of Fair value
The Group measures financial instruments, such as, derivatives at fair value at each balance sheet date. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
? In the principal market for the asset or liability, or
? In the absence of a principal market, in the most advantageous market for the asset or liability.
The principal or the most advantageous market must be accessible by the Group.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. A fair value measurement of a non-financial asset takes into account a market participants ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. In order to show how fair values have been derived, financial instruments are classified based on a hierarchy of valuation techniques, as summarised below:
Level 1 financial instruments:
Those where the inputs used in the valuation are unadjusted quoted prices from active markets for identical assets or liabilities that the Group has access to at the measurement date. The Group considers markets as active only if there are sufficient trading activities with regards to the volume and liquidity of the identical assets or liabilities and when there are binding and exercisable price quotes available on the balance sheet date.
Level 2 financial instruments
Those where the inputs that are used for valuation and are significant, are derived from directly or indirectly observable market data available over the entire period of the instruments life.
Level 3 financial instruments
Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable
For assets and liabilities that are recognised in the restated financial statements on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period. The Group periodically reviews its valuation techniques including the adopted methodologies and model calibrations.
Therefore, the Group applies various techniques to estimate the credit risk associated with its financial instruments measured at fair value, which include a portfolio-based approach that estimates for the expected net exposure per counterparty over the full lifetime of the individual assets, in order to reflect the credit risk of the individual counterparties for non-collateralised financial instruments.
The Group evaluates the levelling at each reporting period on an instrument-by-instrument basis and reclassifies instruments when necessary based on the facts at the end of the reporting period.
4.11 Write-offs
Financial assets are written off either partially or in their entirety only when the Group has no reasonable expectation of recovery.
4.12 Forborne and modified loans
The Group sometimes makes concessions or modifications to the original terms of loans as a response to the borrowers financial difficulties, rather than taking possession or to otherwise enforce collection of collateral. The Group considers a loan forborne when such concessions or modifications are provided as a result of the borrowers present or expected financial difficulties and the Group would not have agreed to them if the borrower had been financially healthy. Indicators of financial difficulties include defaults on covenants, or significant concerns raised by the Credit Risk Department. Forbearance may involve extending the payment arrangements and the agreement of new loan conditions. Once the terms have been renegotiated, any impairment is measured using the original EIR as calculated before the modification of terms. It is the Groups policy to monitor forborne loans to help ensure that future payments continue to be likely to occur. Derecognition decisions and classification between Stage 2 and Stage 3 are determined on a case-by-case basis. If these procedures identify a loss in relation to a loan, it is disclosed and managed as an impaired Stage 3 forborne asset, until it is collected or written off.
4.13 Property, Plant and Equipment, Right-of-use assets and Capital work in progress
Property, plant and equipment is stated at cost excluding the costs of day-to-day servicing, less accumulated depreciation and accumulated impairment in value. Changes in the expected useful life are accounted for by changing the amortization period or methodology, as appropriate, and treated as changes in accounting estimates.
Depreciation is recognized so as to write off the cost of assets less their residual values over their useful lives. Depreciation is provided on a written down value basis from the date the asset is ready for its intended use. In respect of assets sold, depreciation is provided up to the date of disposal.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. The carrying amount of those components which have been separately recognised as assets is derecognised at the time of replacement thereof. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.
As per the requirement of Schedule II of the Companies Act, 2013, the Group has evaluated the estimated useful lives of the respective fixed assets which are as per the provisions of Part C of Schedule II of the Act for calculating the depreciation.
The estimated useful lives of the Property, plant and equipment are as follows:
| Class of asset | Useful life |
| Building (other than factory building) | 60 years |
| Furniture and fixtures | 10 years |
| Vehicles | 8 years |
| Office equipment | 5 years |
| Computers and data processing units End user devices, such as desktops, laptops | 3 years |
| etc. |
For transition to Ind AS, the Company has elected to continue with the carrying value of all of its property, plant and equipment and intangible asset recognised as of 1 April 2017 (transition date) measured as per the previous GAAP and use that carrying value as its deemed cost as of the transition date.
Measurement of building under revaluation model:
Increases in the carrying amount arising on revaluation of land and buildings are credited to other comprehensive income and shown as a revaluation reserve in shareholders equity. An exception is a gain on revaluation that reverses a revaluation decrease (impairment) on the same asset previously recognised as an expense. Decreases that offset previous increases of the same asset are charged in other comprehensive income and debited against the revaluation reserve directly in equity; all other decreases are charged to profit or loss. Each year the difference between depreciation based on the revalued carrying amount of the asset charged to profit or loss and depreciation based on the assets original cost is transferred from the revaluation reserve to retained earnings.
Right-of-use assets are presented together with property, plant and equipment in the statement of financial position refer to the accounting policy Right-of-use assets are depreciated on a straight-line basis over the lease term.
The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at each financial year end and adjusted prospectively, if appropriate.
Leasehold improvements are amortized on a straight-line basis over the estimated useful lives of the assets or the period of lease whichever is shorter.
4.14 Intangible assets
The Groups intangible assets mainly include the value of computer software and asset management rights. An intangible asset is recognised only when its cost can be measured reliably and it is probable that the expected future economic benefits that are attributable to it will flow to the Group.
Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. Intangible assets with finite lives are amortized over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired
An intangible asset is derecognised upon disposal (i.e., at the date the recipient obtains control) or when no future economic benefits are expected from its use or disposal. Any gain or loss arising upon derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of profit or loss.
The estimated useful lives of the intangible assets are as follows:
| Class of asset | Useful life |
| Computers and data processing units Servers and networks | 6 years |
| Computer software | 3-5 years |
| Asset management rights | 5 years |
4.15 Investment properties
Investment Properties are properties held to earn rentals and/or capital appreciation and are measured. Upon initial recognition, an investment property is measured at cost, including transaction costs. Subsequent to the initial recognition, investment property is reported at cost less accumulated depreciation.
Depreciation is recognised using written down method so as to write off the cost of the investment property less their residual values over their useful lives specified in schedule II to the Companies Act, 2013 or in the case of assets where the useful life was determined by technical evaluation, over the useful life so determined.
Depreciation method is reviewed at each financial year end to reflect the expected pattern of consumption of the future benefits embodied in the investment property. The estimated useful life and residual values are also reviewed at each financial year end and the effect of any change in the estimates of useful life/residual value is accounted on prospective basis.
4.16 Impairment of non-financial assets
The Group assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Group estimates the assets recoverable amount. An assets recoverable amount is the higher of an assets or cash-generating units (CGU) fair value less costs of disposal and its value in use. The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.
4.17 Cash and cash equivalents
Cash at banks and on hand and short-term deposits with an original maturity of three months or less, that are readily convertible to a known amount of cash and subject to an insignificant risk of changes in value.
4.18 Foreign currency transactions
The Restated Consolidated Financial Information are presented in Indian Rupees which is also functional currency of the Company. Transactions in currencies other than Indian Rupees (i.e. foreign currencies) are recognised at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
Exchange differences on monetary items are recognised in profit or loss in the period in which they arise. The gain or loss arising on translation of non-monetary items measured at fair value is treated in line with the recognition of the gain or loss on the change in fair value of the item (i.e., translation differences on items whose fair value gain or loss is recognised in OCI or profit or loss are also recognised in OCI or profit or loss, respectively)
Group companies
On consolidation: (a) Income and expenses are converted at the average rate of exchange applicable for the period/year and (b) All assets and liabilities are translated at the closing rate as on the Balance Sheet date. The exchange difference arising out of period/year end translation is debited or credited as "Foreign Exchange Translation Reserve" forming part of Other Comprehensive Income and accumulated as a separate component of other equity.
4.19 Retirement and other employee benefits
Provident fund and national pension scheme
The Group contributes to a recognized provident fund and national pension scheme which is a defined contribution scheme. The contributions are accounted for on an accrual basis and recognized in the restated consolidated statement of profit and loss.
Gratuity
The Groups gratuity scheme is a defined benefit plan. The Groups net obligation in respect of the gratuity benefit scheme is calculated by estimating the amount of future benefit that the employees have earned in return for their service in the current and prior periods, that benefit is discounted to determine its present value, and the fair value of a plan assets, if any, is deducted. The present value of the obligation under such benefit plan is determined based on independent actuarial valuation using the Projected Unit Credit Method. Benefits in respect of gratuity are funded with an Insurance Group approved by Insurance Regulatory and Development Authority (IRDA).
Re-measurement, comprising of actuarial gains and losses, the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability, are recognised immediately in the balance sheet with a corresponding debit or credit to retained earnings through OCI in the period in which they occur.
Remeasurements are not reclassified to profit or loss in subsequent periods.
Compensated Leave Absences
The eligible employees of the Group are permitted to carry forward certain number of their annual leave entitlement to subsequent years, subject to a ceiling. The Group recognises the charge to the consolidated statement of profit and loss and corresponding liability on account of such accumulated leave entitlement based on a valuation by an independent actuary. The cost of providing annual leave benefits is determined using the projected unit credit method.
Share-based payment arrangements
Equity-settled share-based payments to employees by the Company and by the erstwhile ultimate parent Group are measured by reference to the fair value of the equity instruments at the grant date.
The fair value of Equity-settled share-based payments determined at the grant date is expensed over the vesting period, based on the Groups estimate of equity instruments that will eventually vest, with a corresponding increase in equity.. In cases where the share options granted vest in instalments over the vesting period, the Group treats each instalment as a separate grant, because each instalment has a different vesting period, and hence the fair value of each instalment differs.
4.20 Income tax expenses
Income tax expense represents the sum of the tax currently payable and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the year. Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date in the countries where the Group operates and generates taxable income. Current income tax relating to items recognised outside profit or loss is recognised outside profit or loss (either in other comprehensive income or in equity). Current tax items are recognised in correlation to the underlying transaction either in OCI or directly in equity. The Groups current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.
Deferred tax
Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date.
Deferred tax liabilities are recognised for all taxable temporary differences, except:
? When the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss
? In respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.
? Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised, except:
? When the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.
? In respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are re-assessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
In assessing the recoverability of deferred tax assets, the Group relies on the same forecast assumptions used elsewhere in the financial statements and in other management reports, which, among other things, reflect the potential impact of climate-related development on the business, such as increased cost of production as a result of measures to reduce carbon emission.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised, or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.
Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss (either in other comprehensive income or in equity). Deferred tax items are recognised in correlation to the underlying transaction either in OCI or directly in equity.
Tax benefits acquired as part of a business combination, but not satisfying the criteria for separate recognition at that date, are recognised subsequently if new information about facts and circumstances change. Acquired deferred tax benefits recognised within the measurement period reduce goodwill related to that acquisition if they result from new information obtained about facts and circumstances existing at the acquisition date. If the carrying amount of goodwill is zero, any remaining deferred tax benefits are recognised in OCI/ capital reserve depending on the principle explained for bargain purchase gains. All other acquired tax benefits realised are recognised in profit or loss.
The Group offsets deferred tax assets and deferred tax liabilities if and only if it has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.
Policy on MAT:
Minimum alternate tax (MAT) paid in a year is charged to the statement of profit and loss as current tax for the year. The deferred tax asset is recognised for MAT credit available only to the extent that it is probable that the concerned company will pay normal income tax during the specified period, i.e., the period for which MAT credit is allowed to be carried forward. In the year in which the company recognizes MAT credit as an asset, it is created by way of credit to the statement of profit and loss and shown as part of deferred tax asset. The company reviews the "MAT credit entitlement" asset at each reporting date and writes down the asset to the extent that it is no longer probable that it will pay normal tax during the specified period.
4.21 Leases
Group as a lessee:
The Group assesses at contract inception whether a contract is, or contains, a lease namely if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The Group applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. The Group recognises lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets.
Right of use assets
The Group recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease term and the estimated useful lives of the assets.
Lease Liabilities
At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. In calculating the present value of lease payments, the Group uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the lease payments (e.g., changes to future payments resulting from a change in an index or rate used to determine such lease payments) or a change in the assessment of an option to purchase the underlying asset.
Variable lease payments that do not depend on an index or a rate are recognised as expenses (unless they are incurred to produce inventories) in the period in which the event or condition that triggers the payment occurs.
Short-term leases and leases of low-value assets
The Group applies the short-term lease recognition exemption to its short-term leases of machinery and equipment (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases of office equipment that are considered to be low value. Lease payments on short-term leases and leases of low-value assets are recognised as expense on a straight-line basis over the lease term
Group as a lessor
Leases in which the Group does not transfer substantially all the risks and rewards incidental to ownership of an asset is classified as operating leases. Rental income is accounted for on a straight-line basis over the lease terms. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same basis as rental income. Contingent rents are recognised as revenue in the period in which they are earned.
Leases are classified as finance leases when substantially all of the risks and rewards of ownership transfer from the Group to the lessee. Amounts due from lessees under finance leases are recorded as receivables at the Groups net investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the net investment outstanding in respect of the lease.
4.22 Earnings per share
The Group reports basic and diluted earnings per share in accordance with Indian Accounting Standard
33 - Earnings Per Share. Basic earnings per share is calculated by dividing the net profit or loss attributable to equity holders of parent company (after deducting preference dividends and attributable taxes) by the weighted average number of equity shares outstanding during the year.
For the purpose of EPS, the potential ordinary shares that would be issued on conversion are included in the weighted average number of ordinary shares used in the calculation of basic EPS (and, therefore, also diluted EPS) from the date of issue of the instrument, since their issue is solely dependent on the passage of time
Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue equity shares were exercised or converted during the year. Diluted earnings per share is computed by dividing the net profit after tax attributable to the equity shareholders for the year by the weighted average number of equity shares considered for deriving basic earnings per share and weighted average number of equity shares that could have been issued upon conversion of all potential equity shares.
4.23 Provisions and other contingent liabilities
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation.
A contingent liability is:
(a) a possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity; or
(b) a present obligation that arises from past events but is not recognised because:
(i) it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or (ii) the amount of the obligation cannot be measured with sufficient reliability.
Given the subjectivity and uncertainty of determining the probability and amount of losses, the Group takes into account a number of factors including legal advice, the stage of the matter and historical evidence from similar incidents.
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 Restated Consolidated Financial Information. 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.
4.24 Assets classified as held for sale and discontinue operation.
The Group classifies non-current assets and disposal groups as held for sale if their carrying amounts will be recovered principally through a sale rather than through continuing use.
Non-current assets and disposal groups classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell. Costs to sell are the incremental costs directly attributable to the disposal of an asset (disposal group), excluding finance costs and income tax expense.
The criteria for held for sale classification is regarded as met only when the sale is highly probable, and the asset or disposal group is available for immediate sale in its present condition. Actions required to complete the sale/ distribution should indicate that it is unlikely that significant changes to the sale will be made or that the decision to sell will be withdrawn. Management must be committed to the sale and the sale is expected within one year from the date of classification.
For these purposes, sale transactions include exchanges of non-current assets for other non-current assets when the exchange has commercial substance. The criteria for held for sale classification is regarded met only when the assets or disposal group is available for immediate sale in its present condition, subject only to terms that are usual and customary for sale of such assets (or disposal groups), its sale is highly probable; and it will genuinely be sold, not abandoned. The Group treats sale of the asset or disposal group to be highly probable when
? The appropriate level of management is committed to a plan to sell the asset (or disposal group)
? An active programme to locate a buyer and complete the plan has been initiated (if applicable)
? The asset (or disposal group) is being actively marketed for sale at a price that is reasonable in relation to its current fair value
? The sale is expected to qualify for recognition as a completed sale within one year from the date of classification and
? Actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn
Property, plant and equipment and intangible are not depreciated, or amortised assets once classified as held for sale.
Assets classified as held for sale are presented separately from other items in the balance sheet.
A disposal group qualifies as discontinued operation if it is a component of an entity that either has been disposed of, or is classified as held for sale, and:
? Represents a separate major line of business or geographical area of operations
? Is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations or
? Is a subsidiary acquired exclusively with a view to resale
Discontinued operations are excluded from the results of continuing operations and are presented as a single amount as profit or loss after tax from discontinued operations in the statement of profit and loss.
All other notes to the Restated Consolidated Financial Information mainly include amounts for continuing operations, unless otherwise mentioned.
4.25 Business Combinations
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred measured at acquisition date fair value and the amount of any non-controlling interests in the acquiree. For each business combination, the Group elects whether to measure the non-controlling interests in the acquiree at fair value or at the proportionate share of the acquirees identifiable net assets. Acquisition-related costs are expensed as incurred.
The Group determines that it has acquired a business when the acquired set of activities and assets include an input and a substantive process that together significantly contribute to the ability to create outputs. The acquired process is considered substantive if it is critical to the ability to continue producing outputs, and the inputs acquired include an organised workforce with the necessary skills, knowledge, or experience to perform that process or it significantly contributes to the ability to continue producing outputs and is considered unique or scarce or cannot be replaced without significant cost, effort, or delay in the ability to continue producing outputs.
At the acquisition date, the identifiable assets acquired, and the liabilities assumed are recognised at their acquisition date fair values. For this purpose, the liabilities assumed include contingent liabilities representing present obligation and they are measured at their acquisition fair values irrespective of the fact that outflow of resources embodying economic benefits is not probable
Business combinations under common control
Common control business combinations includes transactions, such as transfer of subsidiaries or businesses, between entities within a Company. Group has accounted for all such transactions based on pooling of interest method, which is as below:
? The assets and liabilities of the combining entities are reflected at their carrying amounts in the books of transferrer entity.
? No adjustments are made to reflect fair values or recognise any new assets or liabilities.
? The financial information in the financial statements in respect of prior periods are restated as if the business combination had occurred from the beginning of the preceding period in the financial statements, irrespective of the actual date of the combination. The identity of the reserves shall be preserved and shall appear in the financial statements of the transferee in the same form in which they appeared in the financial statements of the transferor. The difference, if any, between the amount recorded as share capital issued plus any additional consideration in the form of cash or other assets and the amount of share capital of the transferor shall be transferred to capital reserve.
When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree.
If the business combination is achieved in stages, any previously held equity interest is re-measured at its acquisition date fair value and any resulting gain or loss is recognised in profit or loss or OCI, as appropriate.
Any contingent consideration to be transferred by the acquirer is recognised at fair value at the acquisition date. Contingent consideration classified as an asset or liability that is a financial instrument and within the scope of Ind AS 109 Financial Instruments, is measured at fair value with changes in fair value recognised in profit or loss in accordance with Ind AS 109. If the contingent consideration is not within the scope of Ind AS 109, it is measured in accordance with the appropriate Ind AS and shall be recognised in profit or loss. Contingent consideration that is classified as equity is not re-measured at subsequent reporting dates and its subsequent its settlement is accounted for within equity.
Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interests, and any previous interest held, over the net identifiable assets acquired and liabilities assumed. If the fair value of the net assets acquired is in excess of the aggregate consideration transferred, the Group re-assesses whether it has correctly identified all of the assets acquired and all of the liabilities assumed and reviews the procedures used to measure the amounts to be recognised at the acquisition date. If the reassessment still results in an excess of the fair value of net assets acquired over the aggregate consideration transferred, then the gain is recognised in OCI and accumulated in equity as capital reserve. However, if there is no clear evidence of bargain purchase, the entity recognises the gain directly in equity as capital reserve, without routing the same through OCI.
After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Groups cash-generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units.
Exceptional Item
Any amount described as unusual or exceptional should be classified by nature, in the same way as non-exceptional amounts. Their inclusion or exclusion in EBIDTA will depend on the nature of income/ expense described as exceptional.
If nature of unusual or exceptional item is in the nature of interest, tax, depreciation and amortization, then it should be excluded from EBIDTA.
5. Significant accounting judgements, estimates and assumptions
The preparation of the Groups Restated Consolidated Financial Information requires management to make judgements, estimates and assumptions that affect the reported amount of revenues, expenses, assets and liabilities, and the accompanying disclosures, as well as the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.
Judgements
In the process of applying the Groups accounting policies, management has made the following judgements, which have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year. a) Actuarial assumptions used in calculation of defined benefit plans. b) Assumptions used on discounted cash flows, growth rate and discount rate to justify the value of management rights reported under intangible assets. c) Assumptions used in estimating the useful lives of tangible assets reported under property, plant and equipment.
Provisions for Income Taxes
Significant judgments are involved in determining the provision for income taxes including judgment on whether tax positions are probable of being sustained in tax assessments. A tax assessment can involve complex issues, which can only be resolved over extended time periods.
Estimates and judgments are continually evaluated. They are based on historical experience and other factors, including expectation of future events that may have a financial impact on the Group and that are believed to be reasonable under the circumstances.
Business model assessment
Classification and measurement of financial assets depends on the results of the SPPI and the business model test. The Group determines the business model at a level that reflects how groups of financial assets are managed together to achieve a particular business objective. This assessment includes judgement reflecting all relevant evidence including how the performance of the assets is evaluated and their performance measured, the risks that affect the performance of the assets and how these are managed and how the managers of these assets are compensated.
The Group monitors financial assets measured at amortised cost that are derecognised prior to their maturity to understand the quantum, the reason for their disposal and whether the reasons are consistent with the objective of the business for which the asset was held. Monitoring is part of the Groups continuous assessment of whether the business model for which the remaining financial assets are held continues to be appropriate and if it is not appropriate, whether there has been a change in business model and so a prospective change to the classification of those assets.
6. Key sources of estimation uncertainty
The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, as described below. The Group based its assumptions and estimates on parameters available when the Restated Consolidated Financial Information were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances that are arising that are beyond the control of the Group. Such changes are reflected in the assumptions when they occur.
Effective interest rate method
The Groups EIR methodology, as explained in Note 5.2.1, recognises interest income / expense using a rate of return that represents the best estimate of a constant rate of return over the expected behavioural life of financial instruments and recognises the effect of characteristics of the product life cycle
This estimation, by nature, requires an element of judgement regarding the expected behavioral and life-cycle of the instruments, as well expected changes fee income/expense that are integral parts of the instrument.
Incremental borrowing rate
The Group cannot readily determine the interest rate implicit in the lease, therefore, it uses its incremental borrowing rate (‘IBR) to measure lease liabilities. Incremental borrowing rate is the rate of interest that the Group would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment.
Fair value of financial instruments
The fair value of financial instruments is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction in the principal (or most advantageous) market at the measurement date under current market conditions (i.e., an exit price) regardless of whether that price is directly observable or estimated using another valuation technique. When the fair values of financial assets and financial liabilities recorded in the balance sheet cannot be derived from active markets, they are determined using a variety of valuation techniques that include the use of valuation models. The inputs to these models are taken from observable markets where possible, but where this is not feasible, estimation is required in establishing fair values. Judgements and estimates include considerations of liquidity and model inputs related to items such as credit risk (both own and counterparty), funding value adjustments, correlation and volatility.
7. Standards issued but not yet effective
Ministry of Corporate Affairs ("MCA") notifies new standards or amendments to the existing standards under Companies (Indian Accounting Standards) Rules as issued from time to time. On 31 March 2023, MCA amended the Companies (Indian Accounting Standards) Amendment Rules, 2023, as below:
i) Ind AS 1 - Presentation of Financial Statements - This amendment requires the entities to disclose their material accounting policies rather than their significant accounting policies. The effective date for adoption of this amendment is annual periods beginning on or after 01 April 2023. The Group has evaluated the amendment and the impact of the amendment is insignificant in the
Companys restated consolidated financial information.
ii) Ind AS 8 - Accounting Policies, Changes in Accounting Estimates and Errors - This amendment has introduced a definition of accounting estimates and included amendments to Ind AS 8 to help entities distinguish changes in accounting policies from changes in accounting estimates. The effective date for adoption of this amendment is annual periods beginning on or after 01 April 2023. The Group has evaluated the amendment and there is no impact on its restated consolidated financial information.
iii) Ind AS 12 - Income Taxes - This amendment has narrowed the scope of the initial recognition exemption so that it does not apply to transactions that give rise to equal and offsetting temporary differences. The effective date for adoption of this amendment is annual periods beginning on or after 01 April 2023. The Group has evaluated the amendment and there is no material impact on its restated consolidated financial information.
FY 2021-22 and FY 2020-21:
There are no such Standards which are notified but not yet effective.
RESULTS OF OPERATIONS
The following table sets forth certain information with respect to our results of operations extracted from restated consolidated statement of profit and loss account for Fiscals 2023, Fiscal 2022 and Fiscal 2021:
(in million)
For the year ended |
|||
| Particulars | |||
| March 31, 2023 | March 31, 2022 | March 31, 2021 | |
| Revenue From Operations | 22,147.18 | 17,731.84 | 12,727.74 |
| Other Income | 156.75 | 101.24 | 971.54 |
| Total revenue | 22,303.93 | 17,833.08 | 13,699.28 |
| Expenses: | 18,252.52 | 14,808.34 | 12,263.50 |
| Finance Costs | 3,964.07 | 2,779.08 | 2,463.31 |
| Employee Benefit Expenses | 7,287.02 | 6,004.02 | 5,016.28 |
| Impairment of financial instruments | 82.44 | 57.95 | 98.39 |
| Goodwill written off | - | - | 433.52 |
| Depreciation, Amortisation and impairment | 885.82 | 713.24 | 501.11 |
| Other Expenses | 6,033.17 | 5,254.05 | 3,750.89 |
For the year ended |
||||||||
Particulars |
||||||||
| March 31, 2023 | March 31, 2022 | March 31, 2021 | ||||||
| Profit before share of profit of associates, exceptional items | ||||||||
| 4,051.41 | 3,024.74 | 1,435.78 | ||||||
| and tax | ||||||||
| Share in profit of associates | 9.53 | 10.03 | (0.93) | |||||
| Profit before exceptional items and tax | 4,060.94 | 3,034.77 | 1,434.85 | |||||
| Tax Expenses | 1,010.25 | 779.76 | 582.04 | |||||
| Profit from | continuing operations after tax and before |
|||||||
| 3,050.69 | 2,255.01 | 852.81 | ||||||
| exceptional items | ||||||||
| Exceptional items | - | 6,316.32 | (6,366.77) | |||||
| Profit/(Loss) | after | tax from continuing operations (after |
||||||
| 3,050.69 | 8,571.33 | (5,513.96) | ||||||
| exceptional items) | ||||||||
| Profit/(Loss) | after | tax for | the | Year from | discontinuing | |||
| - | 2.60 | 764.13 | ||||||
| operations | ||||||||
| Profit after | tax for | the | Year | (including | discontinuing | |||
| 3,050.69 | 8,573.93 | (4,749.83) | ||||||
| operations and exceptional items) | ||||||||
| Other Comprehensive Income/(Loss) after tax | 31.13 | (2.40) | 70.80 | |||||
| Total Comprehensive Income/ (Loss) | 3,081.82 | 8,571.53 | (4,679.03) | |||||
Principal Components of the Restated Consolidated Statements of Profit and Loss (including other comprehensive income)
Income
Revenue from operations
Our revenue from operations includes Fee and commission income, Interest income, Dividend income and Net gain on fair value changes on our holding of financial instruments and securities
? Fee and commission income includes income from broking, distribution fees, commission income, asset management & portfolio management fees and advisory fees.
? Interest income includes interest income on loans given to the clients, interest income from investments, interest on fixed deposits with banks and others including margin monies from brokers.
? Dividend income includes dividend earned from securities held for trading purposes.
? Net gain on fair value changes includes of gain / loss on our investments, derivatives instruments and securities held for trading. This includes both realised gains/ losses on account of sale/ liquidation of such assets and unrealised gains/losses on account of fair value changes on reporting date.
Other income
Our other income mainly includes rental income, fund accounting fees, income on income tax refunds, profit on termination of lease, and other miscellaneous income.
Expenses
Our expenses include Finance costs, Employee benefit expenses, Impairment of financial instruments, Goodwill written-off, Depreciation, amortisation and impairment and Other expenses.
? Finance costs mainly includes interest and related costs associated with the borrowings, debt securities subordinated liabilities and interest on lease liabilities.
? Employee benefits expenses include salary, wages and bonus to employees, contribution to provident and other funds, expenses on share-based payments and staff welfare expenses.
? Impairment of financial instruments mainly includes provision for expected credit loss made on the loans (attributable to lending activities) trade debtors and certain other assets.
? Other expenses mainly include (i) expenses incurred in connection with business and revenue earned such as fee, commission and brokerage expenses, securities transaction tax, stock exchange expenses, stamp duty charges, advertisement and business promotion, clearing and custodian charges, dematerialisation charges and (ii) establishment and other expenses such as computer and software expenses, communication, traveling and conveyance, legal and professional fees, rent and electricity, printing, stationary and courier, rates and taxes, outside services cost, CSR expenses, insurance, repairs and maintenance, directors fees and commission, auditors remuneration.
? Depreciation, amortisation and impairment These include depreciation on tangible assets and amortisation of intangible assets.
Fiscal 2023 compared to Fiscal 2022
A) Total Income
Our total income increased by 25.1% to 22,303.93 million in Fiscal 2023 from 17,833.08 million in Fiscal
2022, primarily driven by an increase in revenue from operations due to reasons discussed below.
(i) Revenue from operations
Our revenue from operations increased by 24.9% to 22,147.18 million in Fiscal 2023 from
17,731.84 million in Fiscal 2022. The increase is mainly due to increase in:
? Fees and commission income, which increased by 25.4% to 13,229.53 million in Fiscal 2023 from 10,551.97 million in Fiscal 2022. Of which:
o distribution, advisory and other fees increased by 55.9 % to 8,133.89 million in Fiscal 2023 from 5,216.26 million in Fiscal 2022; and o income from broking decreased by 4.5% to 5,095.64 million in Fiscal 2023 from 5,335.71 million in Fiscal 2022.
? Interest income, which increased by 29.0 % to 6,606.69 million in Fiscal 2023 from 5,120.12 million in Fiscal 2022. Of which: o Interest income from loans increased by 46.4% to 3,612.37 million in Fiscal 2023 from
2,466.98 million in Fiscal 2022 mainly attributed to increase in lending activities. The closing loan book increased by 20.3% to 35,533.36 million in Fiscal 2023 from 29,530.64 million in Fiscal 2022. o Interest income from securities/investment increased by 336.1% to 322.87 million in Fiscal 2023 from 74.03 million in Fiscal 2022. o Other interest income increased by 3.6% to 2,671.45 million in Fiscal 2023 from 2,579.11 million in Fiscal 2022, mainly on account of increase in interest on fixed deposits to 2,407.43 million in Fiscal 2023 from 2,092.82 million in Fiscal 2022.
? Net gain on fair value changes on financial instruments comprising of investments, securities and derivatives increased by 12.4 % to 2,302.70 million in Fiscal 2023 from 2,049.25 million in
Fiscal 2022.
? Dividend income on securities held for trading and investment, decreased by 21.3 % to 8.26 million in Fiscal 2023 from 10.50 million in Fiscal 2022.
(ii) Other income
Our other income, mainly comprising of rental income, fund accounting fees, profit on termination of lease increased by 54.8% to 156.75 million in Fiscal 2023 from 101.24 million in Fiscal 2022.
B) Expenses
Our total expenses increased by 23.3% to 18,252.52 million in Fiscal 2023 from 14,808.34 million in Fiscal
2022. This is mainly due to the increase in:
(i) Finance costs
Finance costs increased by 42.6% to 3,964.07 million in Fiscal 2023 from 2,779.08 million in Fiscal
2022, primarily due to:
? Increase in borrowing cost by 43.4% to 3,842.65 million in Fiscal 2023 from 2,679.21 million in Fiscal 2022. This increase in borrowing cost is in line with the increase in loan and investment activities, the requirement to arrange for margin funding for institutional and retail broking businesses and other requirements for business purposes. The aggregate borrowings including subordinated debt increased by 52.5% to 54,131.50 million as of March 31, 2023, from
35,489.51 million as at March 31, 2022.
? Interest on lease liabilities attributable to premises for office use availed on lease / rental basis increased by 21.6% to 121.42 million in Fiscal 2023 from 99.87 million in Fiscal 2022. This increase was mainly attributable to availing of new premises on lease.
(ii) Employee benefits expenses
Employee costs increased by 21.4% to 7,287.02 million in Fiscal 2023 from 6,004.02 million in
Fiscal 2022. The increase was mainly due to:
? Payment/ provision for salary, wages and bonus to our employees, which increased by 19.4% to
6,515.50 million in Fiscal 2023 from 5,456.87 million in Fiscal 2022. The increase in salary, wages and bonus was largely on account of annual increments and provision / payment of bonus and incentives to our employees.
? The expenses on contribution of provident and other funds increased by 22.5% to 289.58 million in Fiscal 2023 from 236.44 million in Fiscal 2022 in line with increase in the salary cost.
? Expense on share-based payments increased by 71.4% to 285.86 million in Fiscal 2023 from
166.75 million in Fiscal 2022 on account of ESOPs granted to employees.
? Staff welfare expenses increased by 36.2% to 196.08 million in Fiscal 2023 from 143.96 million in Fiscal 2022.
(iii) Impairment of financial instruments
Provision for impairment of financial instruments includes impairment provision on loans, debtors and other assets. Impairment provision increased by 42.3% to 82.44 million in Fiscal 2023 from 57.95 million in Fiscal 2022. This increase is primarily on account of impairment provision on capital advances 66.92 million in Fiscal 2023.
(iv) Depreciation, amortisation and impairment
Our depreciation, amortization and impairment expense increased by 24.2% to 885.82 million in Fiscal 2023 from 713.24 million in Fiscal 2022, primarily on account of the following:
? Right to Use Assets in respect of premises taken on rent/lease, which increased by 42.3% to 372.45 million in Fiscal 2023 from 261.77 million in Fiscal 2022
? Intangible assets, which increased by 35.3% to 272.43 million in Fiscal 2023 from 201.32 million in Fiscal 2022 primarily on account of accelerated depreciation and impairment charges on certain intangible assets in Fiscal 2023 amounting to 70.30 million.
? Decrease in such charges on Property, plant and Equipment by 3.7% to 240.94 million in Fiscal 2023 from 250.15 million in Fiscal 2022.
(v) Other Expenses
Other expenses increased by 14.8% to 6,033.17 million in Fiscal 2023 from 5,254.05 million in
Fiscal 2022. The increase was mainly due to:
? Increase in the expenses incurred in connection with business and revenue earned, by 15.5 % to Rs 3,255.13 million in Fiscal 2023 from Rs 2,819.24 million in fiscal 2022. Fiscal 2023 included branding expenses relating to launch of Nuvama Brand amounting to 126.08 million. There were no such expenses in Fiscal 2022.
? Increase in Establishment and other expenses by 14.1% to 2,778.04 million in Fiscal 2023 from 2,434.81 million in Fiscal 2022. Establishment and other expenses for Fiscal 2023 included Impairment of intangible assets under development 71.11 million.
C) Profit before share of profit of associates, exceptional items and tax
As a result of the foregoing factors, our profit before share of profit of associates, exceptional items and tax increased by 33.9% to 4,051.41million in Fiscal 2023 from 3,024.74 million in Fiscal 2022.
D) Share of Profit of associate
Share of profit of associate marginally declined by 5.0% to 9.53 million in Fiscal 2023 from 10.03 million in Fiscal 2022.
E) Profit before exceptional items and tax
As a result of the foregoing factors, our profit before exceptional items and tax increased by 33.8% to 4,060.94 million in Fiscal 2023 from 3,034.77 million in Fiscal 2022.
F) Tax expenses
Our tax expense increased by 29.6% to 1,010.25 million in Fiscal 2023 from 779.76 million in Fiscal
2022. This was primarily due to increase in the Profit before exceptional items and tax as above.
G) Profit from continuing operations after tax and before exceptional items
As a result of the foregoing factors, our profit from continuing operations after tax and before exceptional items from continuing operations increased by 35.3% to 3,050.69 million in Fiscal 2023 from 2,255.01 million in Fiscal 2022.
H) Exceptional Items and Discontinuing Operations
(i) Exceptional Items
o There was no impact on Restated Consolidated Statement of Profit and Loss Account on account of Exceptional Items in FY23.
o Exceptional items in FY22 are due to reversal of impairment provision on investment in the associate and in the subsidiary aggregating to 6,316.32 million.
During the financial year ended March 31, 2021, the controlling stake in the Nuvama Group was transferred by its erstwhile ultimate parent viz Edelweiss Financial Services Limited
("EFSL"), to Edelweiss Global Wealth Management Limited (‘EGWML), the new parent entity, as a part of the overall transaction consummated with PAGAC Ecstasy Pte. Ltd (‘PAG). PAG had infused Compulsorily Convertible Debentures ("CCDs") in EGWML whereby it acquired interest in relation to the wealth management business only.
As a part of the overall restructuring process to enable the transaction
(i) the asset management business of the Group is carved out to facilitate effective transfer of interest over the wealth management business to PAG. (ii) the Groups subsidiary, Nuvama Clearing Services Limited, in accordance with the directions of the Securities and Exchange Board of India, has transferred the custodial and designated depository participant services to another entity i.e., Edelweiss Capital Services Limited, in which 51% is held by EFSL and 49% is held by the Group.
(iii) The Board of Directors of the Group, EGWML and Edelweiss Securities and Investments
Private Limited ("ESIPL"), had applied for a Composite Scheme of Arrangement under
Sections 230 - 232 and other applicable provisions of the Companies Act, 2013
(‘Scheme) to the National Group Law Tribunal Bench at Mumbai (‘Tribunal) for an envisaged demerger of the asset management business (Demerged Undertaking 1, as defined in the Scheme) of ESL into the ESIPL and demerger of the Wealth Management business (Demerged Undertaking 2, as defined in the Scheme) of EGWML into the ESL, with Appointed Date for the demergers, as provided in the Scheme.
The Scheme provided for non-reciprocal transfer of the Demerged Undertaking 1 to
Edelweiss Securities and Investments Private Limited ("ESIPL"), a wholly owned subsidiary of Edelweiss Financial Services Limited ("EFSL"). Such non-reciprocal transfers are recorded only when they are appropriately authorised and no longer discretionary. In this case, the approval of the Tribunal is required to consider such a transfer and as such the Board of Directors by applying for the Scheme have "proposed" for the transfer. Until such time, the assets and liabilities continue to remain as part of the Group. Since the transfer pursuant to the Scheme is non-reciprocal, the Group had impaired the carrying values of asset management business undertaking pursuant to Ind AS 36 in financial year ended March 31, 2021 and disclosed as an "Exceptional item" in the statement of profit and loss amounting to Rs 6,316.32 million (Investment in associate
5,779.22 million and Investment in subsidiary 537.10 million). Subsequently in financial year ended March 31, 2022, consequent to pronouncement of scheme and inline with IND AS requirement, the Company has given effect as per the scheme of arrangement. Correspondingly the Company has reversed the aforementioned impairment of asset management business undertaking and the same has been disclosed in the statement of profit and loss as an "Exceptional item".
Exceptional items represent impairment loss provision recorded as at March 31, 2021 consequent to a proposed Composite scheme of arrangement. This estimate was reversed as at March 31, 2022 once the Composite scheme of arrangement became effective and the provision was no longer required. This is a significant true up of an estimate as at March 31, 2022, hence the same has been not been adjusted as at March 31, 2021 as per the SEBI regulations relating to restatement. Please refer to Note no. 66 of the Restated Consolidated Financial Information for disclosure as required by relevant accounting standards, SEBI ICDR and ICAI guidance note for the year ended March 31, 2021 and March 31, 2022.
(ii) Discontinuing Operations
o There was no impact on Restated Consolidated Statement of Profit and Loss Account on account of Discontinuing Operations in FY23.
o Discontinued Operations in FY22
The Group had entered into an agreement dated March 17, 2021, with Nuvama Custodial Services Limited (Edelweiss Capital Services Limited), an associate entity, to sell its business of being a custodian of securities and designated depository participant, and securities lending and borrowing
(‘Transfer business). The sale transaction was concluded on June 18, 2021. Consequently, Profit after tax pertaining to the period April 1, 2021, to June 18, 2021 amounting to 2.60 million and corresponding profit after tax for the Fiscal 2021 amounting to 78.21 million is reported under the head Discontinued Operations. Please refer to Note no. 60 of the Restated Consolidated Financial Information for disclosure as required by relevant accounting standards, SEBI ICDR and ICAI guidance note for the year ended March 31, 2021 and March 31, 2022.
I) Profit after tax for the Year (including discontinuing operations and exceptional items)
Profit for the year after tax, including exceptional items, discontinuing operations declined by 64.4 %, to 3,050.69 million in Fiscal 23 from 8,573.93 in Fiscal 22, primarily on account of credits of 6,316.32 million attributed to Exceptional items in Fiscal FY22 as mentioned above.
J) Total Comprehensive Income for the year
Our total restated comprehensive income for the year was 3,081.82 million in Fiscal 2023, as compared to 8,571.53 million in Fiscal 2022.
Fiscal 2022 compared to Fiscal 2021
A) Total Income
Our total income increased by 30.2% to 17,833.08 million in Fiscal 2022 from 13,699.28 million in Fiscal 2021, primarily driven by an increase in revenue from operations due to reasons discussed below.
(i) Revenue from operations
Our revenue from operations increased by 39.3% to 17,731.84 million in Fiscal 2022 from 12,727.74 million in Fiscal 2021. The increase is mainly due to:
? Fees and commission income, which increased by 33.9% to 10,551.97 million in Fiscal 2022 from 7,882.83 million in Fiscal 2021. Of which:
o distribution, advisory and other fees increased by 62.8% to 5,216.26 million in Fiscal 2022 from 3,203.73 million in Fiscal 2021; and
o income from broking increased by 14.0% to 5,335.71 million in Fiscal 2022 from 4,679.10 million in Fiscal 2021.
? Interest income, which increased by 31.2% to 5,120.12 million in Fiscal 2022 from 3,901.87 million in Fiscal 2021. Of which:
o Interest income from loans increased by 73.4% to 2,466.98 million in Fiscal 2022 from
1,423.08 million in Fiscal 2021 mainly attributed to increase in lending activities. The closing loan book increased by 99.1% to 29,530.64 million in Fiscal 2022 from 14,832.58 million in Fiscal 2021.
o Interest income from securities / investment increased by 59.3% to 74.03 million in Fiscal 2022 from 46.46 million in Fiscal 2021.
o Other interest income increased by 6.0% to 2,579.11 million in Fiscal 2022 from 2,432.33 million in Fiscal 2021 mainly on account of increase in interest on fixed deposits to 2092.82 million in Fiscal 2022 from 1,819.73 million in Fiscal 2021.
? Dividend income on securities held for trading and investment increased to 10.50 million in Fiscal 2022 from 0.51 million in Fiscal 2021.
? Net gain on fair value changes on financial instruments comprising of investments, securities and derivatives which increased by 117.4% to 2,049.25 million in Fiscal 2022 from 942.53 million in Fiscal 2021.
(ii) Other income
Our other income decreased by 89.6% to 101.24 million in Fiscal 2022 from 971.54 million in Fiscal 2021, primarily due to:
? Profit on termination of lease, which decreased by 60.4% to million 18.91 in Fiscal 2022 from 47.79 million in Fiscal 2021
? Rental income, which increased by 362.4% to 32.18 million in Fiscal 2022 from 6.96 million in Fiscal 2021
? Fund Accounting fees, which increased by 44.3% to 27.20 million in Fiscal 2022 from 18.85 million in Fiscal 2021
? Miscellaneous income and rest of the other income, which decreased by 97.4% to 22.95 million in Fiscal 2022 from 897.94 million in Fiscal 2021. Decrease was mainly on account of profit on sale of investments in Fiscal 2021 amounting to 894.39 million.
B) Expenses
Our total expenses increased by 20.8% to 14,808.34 million in Fiscal 2022 from 12,263.50 million in
Fiscal 2021. This is mainly due to the increase in:
(i) Finance costs
Finance costs increased by 12.8% to 2,779.08 million in Fiscal 2022 from 2,463.31 million in Fiscal
2021, primarily due to:
? Increase in borrowing cost by 11.6% to 2,679.21 million in Fiscal 2022 from 2,399.71 million in Fiscal 2021. The aggregate borrowings increased by 148.6% to 35,489.51 million as at March 31, 2022, from 14,276.16 million as at March 31, 2021.
? Interest on lease liabilities attributable to premises for office use availed on lease / rental basis increased by 57.0% to 99.87 million in Fiscal 2022 from 63.60 million in Fiscal 2021. This increase was mainly attributable to availing of new premises on lease.
(ii) Employee benefits expenses
Employee costs increased by 19.7% to 6,004.02 million in Fiscal 2022 from 5,016.28 million in
Fiscal 2021. The increase was mainly due to:
? payment/ provision for salary, wages and bonus to our employees, which increased by 18.1% to 5,456.87 million in Fiscal 2022 from 4,622.45 million in Fiscal 2021. The increase in payment of salary, wages and bonus was attributable to increase on account of annual increments and provision / payment of bonus and incentives to our employees.
? The expenses on contribution to provident and other funds increased by 17.6% to 236.44 million in Fiscal 2022 from 201.01 million in Fiscal 2021.
? Expense on share-based payments increased by 45.7% to 166.75 million in Fiscal 2022 from
114.42 million in Fiscal 2021 on account of ESOPs granted to employees.
? Staff welfare expenses increased by 83.6% to 143.96 million in Fiscal 2022 from 78.40 million in Fiscal 2021.
(iii) Impairment of financial instruments
Provision for impairment of financial instruments includes impairment provision on loans, debtors and other assets. Impairment provision decreased by 41.1% to 57.95 million in Fiscal 2022 from 98.39 million in Fiscal 2021.
(iv) Depreciation, amortisation and impairment
Our depreciation, amortization and impairment expense increased by 42.3% to 713.24 million in Fiscal 2022 from 501.11 million in Fiscal 2022, primarily on account of increase in such charges on:
? Property, plant and Equipment (excluding Right to Use assets), which increased by 4% to 250.15 million in Fiscal 2022 from 240.57 million in Fiscal 2021
? Right to Use Assets in respect of premises taken on rent/lease, which increased by 91.3% to 261.77 million in Fiscal 2022 from 136.81 million in Fiscal 2021
? Intangible assets, which increased by 62.71% to 201.32 million in Fiscal 2022 from 123.73 million in Fiscal 2021.
(v) Other Expenses
Other expenses increased by 40.1% to 5,254.05 million in Fiscal 2022 from 3,750.89 million in
Fiscal 2021. The increase was mainly due to:
? Increase in the expenses incurred in connection with business and revenue by 76.5% to 2,819.24 million in Fiscal 2022 from 1,597.74 million in fiscal 2021.
? Increase in Establishment and other expenses by 13.1% to Rs 2,434.81 million in Fiscal 2022 from 2,153.15 million in Fiscal 2021.
C) Profit before share of profit of associates, exceptional items and tax
As a result of the foregoing factors, our profit before share of profit of associates, exceptional items and tax increased by 110.7% to 3,024.74 million in Fiscal 2022 from 1,435.78 million in Fiscal 2021.
D) Share of Profit of associate
Share of profit of associate increased to 10.03 million in Fiscal 2022 from share of loss of associates 0.93 million in Fiscal 2021.
E) Profit before exceptional items and tax
As a result of the foregoing factors, our profit before exceptional items and tax increased by 111.5% to 3,034.77 million in Fiscal 2022 from 1,434.85 million in Fiscal 2021.
F) Tax expense
Our tax expense increased by 34.0% to 779.76 million in Fiscal 2022 from 582.04 million in Fiscal 2021. This was primarily due to increase in the Profit before exceptional items and tax as above.
G) Profit from continuing operations after tax and before exceptional items
As a result of the foregoing factors, our profit after tax from continuing operations and before exceptional items increased by 164.4% to 2,255.01 million in Fiscal 2022 from 852.81 million in Fiscal 2021.
H) Exceptional Items and Discontinuing Operations
(i) Exceptional Items
o Exceptional items in Fiscal 2022 are due to reversal of impairment provision on investment in the associate and in the subsidiary aggregating to 6,316.32 million which was created in Fiscal 2021.
During the financial year ended March 31, 2021, the controlling stake in the Nuvama Group was transferred by its erstwhile ultimate parent viz Edelweiss Financial Services Limited
("EFSL"), to Edelweiss Global Wealth Management Limited (‘EGWML), the new parent entity, as a part of the overall transaction consummated with PAGAC Ecstasy Pte. Ltd (‘PAG). PAG had infused Compulsorily Convertible Debentures ("CCDs") in EGWML whereby it acquired interest in relation to the wealth management business only.
As a part of the overall restructuring process to enable the transaction
(i) the asset management business of the Group is carved out to facilitate effective transfer of interest over the wealth management business to PAG.
(ii) the Groups subsidiary, Nuvama Clearing Services Limited, in accordance with the directions of the Securities and Exchange Board of India, has transferred the custodial and designated depository participant services to another entity i.e. Edelweiss Capital Services Limited, in which 51% was held by EFSL and 49% was held by the Group.
(iii) The Board of Directors of the Group, EGWML and Edelweiss Securities and Investments
Private Limited ("ESIPL"), had applied for a Composite Scheme of Arrangement under
Sections 230 232 and other applicable provisions of the Companies Act, 2013
(‘Scheme) to the National Group Law Tribunal Bench at Mumbai (‘Tribunal) for an envisaged demerger of the asset management business (Demerged Undertaking 1, as defined in the Scheme) of ESL into the ESIPL and demerger of the Wealth Management business (Demerged Undertaking 2, as defined in the Scheme) of EGWML into the ESL, with Appointed Date for the demergers, as provided in the Scheme.
The Scheme provided for non-reciprocal transfer of the Demerged Undertaking 1 to
Edelweiss Securities and Investments Private Limited ("ESIPL"), a wholly owned subsidiary of Edelweiss Financial Services Limited ("EFSL"). Such non-reciprocal transfers are recorded only when they are appropriately authorised and no longer discretionary. In this case, the approval of the Tribunal is required to consider such a transfer and as such the Board of Directors by applying for the Scheme have "proposed" for the transfer. Until such time, the assets and liabilities continue to remain as part of the Group. Since the transfer pursuant to the Scheme is non-reciprocal, the Group had impaired the carrying values of Asset Management Business Undertaking pursuant to Ind AS 36 in financial year ended March 31, 2021 and disclosed as an "Exceptional item" in the statement of profit and loss amounting to Rs 6,316.32 million (Investment in associate - 5,779.22 million and Investment in subsidiary - 537.10 million). Subsequently in financial year ended March 31, 2022, consequent to pronouncement of scheme and inline with IND AS requirement, the Company has given effect as per the scheme of arrangement. Correspondingly the Company has reversed the aforementioned impairment of Asset Management Business Undertaking and the same has been disclosed in the statement of profit and loss as an "Exceptional item".
o Exceptional items represent impairment loss provision recorded as at March 31, 2021 consequent to a proposed Composite scheme of arrangement. This estimate was reversed as at March 31, 2022 once the Composite scheme of arrangement became effective and the provision was no longer required. This is significant estimate as at March 31, 2022, hence the same has been not been adjusted as at March 31, 2021 as per the SEBI regulations relating to restatement. Please refer to Note no. 66 of the Restated Consolidated Financial Information for disclosure as required by relevant accounting standards, SEBI ICDR and ICAI guidance note for the year ended March 31, 2021 and March 31, 2022.
(ii) Discontinued Operations
The net credit amount in the Statement of Profit and Loss from discontinuing operations comprised of the following
o Sale of Custody business
The Group had entered into an agreement dated March 17, 2021, with Nuvama Custodial Services Limited (Edelweiss Capital Services Limited), an associate entity, to sell its business of being a custodian of securities and designated depository participant, and securities lending and borrowing (‘Transfer business). The sale transaction was concluded on June 18, 2021.
Consequently, Profit after tax pertaining to the period April 1, 2021, to June 18, 2021, amounting to 2.60 million and corresponding profit after tax for the Fiscal 2021 amounting to 78.21 million is reported under the head Discontinued Operations. Please refer to Note no. 60 of the Restated Consolidated Financial Information for disclosure as required by relevant accounting standards, SEBI ICDR and ICAI guidance note for the year ended March 31, 2021 and March 31, 2022. o Profits in Fiscal 2021 relating to Assets held for distribution pursuant to the scheme of demerger approved by NCLT.
NCLT on 31 March 2022 approved a scheme of demerger allowing Company to demerge its asset management business undertaking. Please refer to note 66 of the Restated Consolidated Financial Information for disclosure as required by relevant accounting standards, SEBI ICDR and ICAI guidance note for the year ended March 31, 2021 and March 31, 2022.
Consequently, the Profits amounting to 685.92 million in Fiscal 2021 pertaining to the said asset management business undertaking under the head ‘Discontinued Operations.
I) Profit after tax for the Year (including discontinuing operations and exceptional items)
Profit for the year after tax, exceptional items, profit from discontinuing operations increased to 8,573.93 million in Fiscal 2022 from a loss of 4,749.83 million in Fiscal 2021, primarily on account of charge created on account of Exceptional items which was reversed in Fiscal 2022, as mentioned above.
J) Total Comprehensive Income for the year
Our total comprehensive income for the year was 8,571.53 million in Fiscal 2022, as compared to Loss of 4,679.03 million in Fiscal 2021.
Liquidity and capital resources
Historically, we have maintained liquidity for our business operations primarily from the cash generated from operations, bank borrowings and issuance of Shareholder equity. As of March 31, 2023, we had cash and cash equivalents of 7,881.95 million. In addition, we had unutilized sanctioned fund-based limits available from banks for use in our operations of 2,660.30 million.
Based on our current level of requirements, we believe that our current working capital, together with cash flows from operating activities, will be adequate to meet our anticipated cash requirements for capital expenditure and working capital for the next 12 months.
Cash flows
( in million)
| For the year ended | |||
| Particulars | |||
| March 31, 2023 | March 31, 2022 | March 31, 2021 | |
| Net cash used in operating activities -A | (18,649.12) | (14,252.50) | (11,076.79) |
| Net cash used in investing activities -B | (1,772.38) | (821.79) | (1,230.27) |
| Net cash generated from financing activities C | 18,251.62 | 21,385.21 | 8,771.23 |
| Net increase / (decrease) in cash and cash equivalents | (2169.88) | 6310.92 | (3,535.83) |
| (A+B+C) | |||
| Change in foreign exchange translation reserve | 46.85 | 16.67 | (7.17) |
| Cash and cash equivalent as at the beginning of the year | 10,004.98 | 3,677.39 | 7,220.39 |
| Cash and cash equivalent as at the end of the year | 7,881.95 | 10,004.98 | 3,677.39 |
Cash flow from / (used in) operating activities
Our net cash flow used in operating activities was 11,076.79 million in Fiscal 2021 and generation of operating cash flow before working capital changes for that period was 2,083.74 million. The cash flow usage after adjusting for the said generation of operating cash flow before working capital changes was primarily on account of:
? Increase in loans from our lending operations, bank balances other than cash and cash equivalents and other non-financial assets
? Payment of Income tax offset by
? Decrease in (i) trade receivables; (ii) securities held for trading; and (iii) other financial assets.
? Increase in (i) trade payables and (ii) other financial liabilities.
Our net cash flow used in operating activities was 14,252.50 million in Fiscal 2022 and generation of operating cash flow before working capital changes for that period was 3,809.93 million. The cash flow usage after adjusting for the said generation of operating cash flow before working capital changes was primarily on account of:
? Increase in loans arising from our lending operations; trade receivables; securities held for trading, other financial assets and other non-financial assets
? payment of Income tax
offset by
? decrease in bank balances other than cash and cash equivalents ? increase in trade payables and other financial liabilities.
Our net cash flow used in operating activities was 18,649.12 million in Fiscal 2023 and generation of operating cash flow before working capital changes for that period was 5,080.47 million. The cash flow usage after adjusting for the said generation of operating cash flow before working capital changes was primarily on account of:
? Increase in loans arising from our lending operations; trade receivables; bank balances other than cash and cash equivalents; securities held for trading and increase in other financial assets;
? Increase in other non financial assets;
? Decrease in other financial liabilities;
? Payment of income tax; offset by
? Increase in trade payables and non-financial liabilities.
Cash flow from / (used in) investing activities
Our net cash used in investing activities was 1,230.27 million in Fiscal 2021. This was primarily on account of net increase in investments, acquisition of stake in our subsidiaries (including additional stake); purchase of equity shares of associates; net purchase of other investments and purchase of property; plant and equipment, intangible assets including capital work in progress, offset by proceeds from sale of subsidiary and sale of investments.
Our net cash used in investing activities was 821.79 million in Fiscal 2022. This was primarily on account of purchase of equity shares of associates; net purchase of other investments and purchase of property; plant and equipment and intangible assets including capital work in progress; net purchase of investments and investments in AIF units, offset by proceeds realised from slump sale of custody business.
Our net cash used in investing activities was 1,772.38 million in Fiscal 2023. This was primarily on account of increase in investment in debt securities and purchase of property; plant and equipment; intangible assets including capital work in progress.
Cash flow from / (used in) financing activities
Our net cash generated from financing activities in Fiscal 2021 was 8,771.23 million. This was primarily on account of proceeds from issuance of share capital, issuance of compulsorily convertible debentures, net increase in borrowings by way of debt securities offset by net decrease in borrowings other than by way of securities and payment of dividend.
Our net cash generated from financing activities in Fiscal 2022 was 21,385.21 million. This was primarily on account of net increase in borrowings by way of debt securities and on account of composite scheme of arrangement, offset by net decrease in borrowings other than debt securities.
Our net cash generated from financing activities in Fiscal 2023 was 18,251.62 million. This was primarily on account of net increase in borrowings by way of debt securities and borrowings other than debt securities.
Net increase / (decrease) in cash and cash equivalents
Closing cash and cash equivalents as of March 31, 2023, was 7,881.95 million, as of March 31, 2022, was 10,004.98 and as of March 31, 2021, was 3,677.39 and as of March 31, 2020, was 7,220.39 million.
Accordingly, cash and cash equivalents decreased by 2,169.88 million in Fiscal 2023, increased by 6,310.92 million in Fiscal 2022 and decreased by 3,535.83 million in Fiscal 2021.
Related party transactions
We enter into various transactions with related parties in the ordinary course of business. These transactions principally include rent payments, capital advances, repayment of advances given, and remuneration paid to
Directors. For details, see "Related Party Transactions" on page 154.
Contingent liabilities
The following table sets out our contingent liability as per Ind AS 37 as on March 31, 2023, on a consolidated basis:
( in millions)
| Particulars | As of March 31, 2023 |
| Bank guarantees | 17,000.00 |
| Taxation matters in respect of which appeal is pending | 4.04 |
| Claims not acknowledged as debt | 227.98 |
| Pending litigation against the Company | 6.84 |
| Total | 17,238.86 |
Further, the following commitments are outstanding as on March 31, 2023:
? Estimated amount of contracts remaining to be executed on capital account (net of advances) and not provided for 93.96 million.
? Sponsor capital commitment (net of investments) 130.40 million.
Off-balance sheet transactions
There are no off-balance sheet arrangements that have or are reasonably likely to have a current or future material adverse effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that we believe are material to investors.
Quantitative and qualitative disclosures
Market risk
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risks: interest rate risk, currency risk and other price risk, including equity price risk.
Interest risk
Interest risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates, our exposure to changes in interest rates relates primarily to our outstanding floating debt rate included in borrowings.
Currency risk
Our business activities are within India, and we do not have significant exposure in foreign currency.
Inflation risk
India has lately been experiencing relatively benign rates of inflation. Inflation affects interest rates and hence, higher inflationary expectations lead to rise in borrowing costs and slowdown in credit offtake, which could affect our profitability. Adverse changes in credit offtake and savings caused by inflation also impacts the overall economy and business environment and consequently, could affect us. Higher interest rate also affects the market sentiments, which could have an adverse impact on our business and revenue thereon.
Unusual or infrequent events or transactions
Except as described in this Information Memorandum, to our knowledge, there have been no unusual or infrequent events or transactions that have in the past or may in the future affect our business operations or future financial performance.
Significant economic changes that materially affect or are likely to affect income from continuing operations.
Our business has been subject to, and we expect it to continue to be subject, to significant economic changes that materially affect or are likely to affect income from continuing operations identified in "Risk Factors" on page
17.
Known trends or uncertainties
To our knowledge there are no known trends or uncertainties that have or had or are expected to have a material adverse impact on the revenues or income of our Company from continuing operations other than those described in this Information Memorandum.
Publicly announced new products or business segments / material increases in revenue due to increased disbursements and introduction of new products
As on the date of this Information Memorandum, there are no new products or business segments that have or are expected to have a material impact on our business prospects, results of operations or financial condition.
Competitive conditions
We operate in a competitive environment. Please refer to the sections "Our Business", "Industry Overview" and
" Risk Factors" on pages 88, 67, and 17, respectively for further information on our industry and competition.
Change in accounting policies
There have been no changes in our accounting policies in the last three Fiscals.
Significant developments after March 31, 2023
Except as set out in this Information Memorandum, to our knowledge, no circumstances have arisen since the date of the last financial statements as disclosed in this Information Memorandum which materially or adversely affect or are likely to affect, our operations or profitability, or the value of our assets or our ability to pay our material liabilities within the next 12 months.
Recent Development
The Board of Directors of the Company at its meeting held on August 2, 2023, have approved the unaudited
Consolidated financial results for the quarter ended June 30, 2023 ("the Results"). The statutory auditors of the Company have carried out limited review of the aforesaid Results ("Limited Review Financial Results"). The full format of the consolidated financial results are available on the website of the Stock exchange (www.bseindia.com). The Limited Review Financial Results are as under:
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