l) Provisions and Contingencies:
The Company recognizes provisions when a present
obligation (legal or constructive) as a result of a
past event exists and it is probable that an outflow
of resources embodying economic benefits will be
required to settle such obligation and the amount of
such obligation can be reliably estimated. The amount
recognised as a provision is the best estimate of the
consideration require to settle the present obligation
at the end of reporting period, taking into account the
risk & uncertainties surrounding the obligation.
If the effect of time value of money is material,
provisions are discounted using a current pre-tax rate
that reflects, when appropriate, the risks specific to
the liability. When discounting is used, the increase in
the provision due to the passage of time is recognized
as a finance cost.
The Company in the normal course of its business,
comes across client claims/ regulatory penalties/
inquiries, etc. and the same are duly clarified/
addressed from time to time. The penalties/ actions if
any are being considered for disclosure as contingent
liability only after finality of the representation of
appeals before the lower authorities.
A disclosure for a contingent liability is made when
there is a possible obligation or a present obligation
that may, but probably will not, require an outflow
of resources embodying economic benefits or the
amount of such obligation cannot be measured
reliably. When there is a possible obligation or a
present obligation in respect of which likelihood of
outflow of resources embodying economic benefits
is remote, no provision or disclosure is made.
Contingent assets are disclosed only where an inflow
of economic benefits is probable.
j) Statement of Cash Flows :
Statement of Cash Flows is prepared segregating
the cash flows into operating, investing and financing
activities. Cash flow from operating activities is
reported using indirect method adjusting the net
profit for the effects of:
- changes during the period in operating
receivables and payables transactions of a
noncash nature;
- non-cash items such as depreciation, provisions,
deferred taxes and unrealised foreign currency
gains and losses.
- all other items for which the cash effects are
investing or financing cash flows.
k) Cash and Cash Equivalents :
Cash and cash equivalents for the purpose of Cash
Flow Statement comprise cash and cheques in
hand, bank balances. Bank borrowings are used
for business purposes, and hence bank overdrafts
are not considered to be a part of cash and cash
equivalents in Cash flow statement.
l) Revenue Recognition
Revenue towards satisfaction of a performance
obligation is measured at the amount of transaction
price (net of variable consideration) allocated to that
performance obligation. The transaction price of
goods sold and services rendered is net of variable
consideration on account of various discounts
and schemes offered by the Company as part of
the contract
The Company recognizes revenue from contracts
with customers based on a five-step model as set
out in Ind AS 115:
Step 1: Identify contract(s) with a customer: A
contract is defined as an agreement between two
or more parties that creates enforceable rights and
obligations and sets out the criteria for every contract
that must be met.
Step 2: Identify performance obligations in the
contract: A performance obligation is a promise in
a contract with a customer to transfer a good or
service to the customer.
Step 3: Determine the transaction price: The
transaction price is the amount of consideration to
which the company expects to be entitled in exchange
for transferring promised goods or services to a
customer, excluding amounts collected on behalf of
third parties.
Step 4: Allocate the contract price to the performance
obligations in the contract: For contract that has
more than one performance obligation, the Company
allocates the transaction price to each performance
obligation in an amount that depicts the amount
of consideration to which the Company expects
to be entitled in exchange for satisfying each
performance obligation.
Step 5: Recognise revenue when (or as) the Company
satisfies a performance obligation.
The Company assesses its revenue arrangements
against specific criteria to determine if it is
acting as principal or agent. The Company has
concluded that it is acting as a principal in all of its
revenue arrangements.
Income from services rendered as a broker is
recognised upon rendering of the services on a
trade date basis, in accordance with the terms of
contract. Fees for subscription based services are
received periodically but are recognised as earned
on a pro-rata basis over the term of the contract.
Commissions from distribution of financial products
are recognised upon allotment of the securities to
the applicant. Commission and fees recognized as
aforesaid are exclusive of goods and service tax,
securities transaction tax, stamp duties and other
levies by SEBI and stock exchanges.
Advances received from customers in respect of
contracts are treated as liabilities and adjusted
against progress billing as per terms of the contract.
Progress payments received are adjusted against
amount receivable from customers in respect of the
contract work performed. Amounts retained by the
customers until the satisfactory completion of the
contracts are recognised as receivables.
m) Other Income
Interest is earned on delayed payments from
customers and amounts funded to them as well
as term deposits with banks. Interest income is
recognised on a time proportion basis taking into
account the amount outstanding from customers or
on the financial instrument and the rate applicable.
Dividend income is recognised when the right to
receive the dividend is established.
Interest income or expense is recognised using the
effective interest method.
The 'effective interest rate' is the rate that exactly
discounts estimated future cash payments or
receipts through the expected life of the financial
instrument to:
- the gross carrying amount of the financial
asset; or
- the amortised cost of the financial liability
Gains / losses on dealing in securities are recognized
on a trade date basis.
n) Employee Benefits
Share-based payment arrangements:
Equity-settled share-based payments to employees
and others providing similar services are measured
at the fair value of the equity instruments at the
grant date. The fair value determined at the grant
date of the equity settled share-based payments is
expensed on a straight line basis over the vesting
period, based on the Company's estimate of
equity instruments that will eventually vest, with a
corresponding increase in equity. At the end of each
reporting period, the Company revises its estimate of
the number of equity instruments expected to vest.
The impact of the revision of the original estimates,
if any, is recognised in the Statement of Profit and
Loss such that the cumulative expense reflects the
revised estimate, with a corresponding adjustment
to the equity-settled employee benefits reserve.
When the terms of an equity-settled award are
modified, the minimum expense recognized is the
expense had the terms had not been modified, if the
original terms of the award are met. An additional
expense is recognized for any modification that
increases the total fair value of the share-based
payment transaction, or is otherwise beneficial to the
employee as measured at the date of modification.
Where an award is cancelled by the entity or by the
counterparty, any remaining element of the fair value
of the award is expensed immediately through the
statement of profit and loss.
The dilutive effect of outstanding options is reflected
as additional share dilution in the computation of
diluted earnings per share.
Securities premium includes the difference
between the face value of the equity shares and the
consideration received in respect of shares issued
pursuant to Stock Option Scheme. Expenses relating
to share issue has been reduced from share premium.
Short Term Employee Benefits:
All employee benefits payable wholly within twelve
months of rendering the service are classified as
short term employee benefits and they are recognized
in the period in which the employee renders the
related service if the company has a present legal or
constructive obligation to pay this amount as a result
of past service provided by the employee and the
obligation can be estimated reliably. The Company
recognizes the undiscounted amount of short term
employee benefits expected to be paid in exchange
for services rendered as a liability (accrued expense)
after deducting any amount already paid.
Post-Employment Benefits:
I. Defined contribution plans:
Defined contribution plans are post-employment
benefit plans under which the Company
pays fixed contributions into state managed
retirement benefit schemes and will have no
legal or constructive obligation to pay further
contributions, if any, if the state managed
funds do not hold sufficient assets to pay all
employee benefits relating to employee services
in the current and preceding financial years. The
Company contributions to defined contribution
plans are recognised in the Statement of Profit
and Loss in the financial year to which they
relate. The Company and its Indian subsidiaries
operate defined contribution plans pertaining
to Employee State Insurance Scheme and
Government administered Pension Fund
Scheme for all applicable employees and the
Company operates a Superannuation scheme
for eligible employees.
Recognition and measurement of defined
contribution plans: The Company recognizes
contribution payable to a defined contribution
plan as an expense in the Statement of Profit
and Loss when the employees render services to
the Company during the reporting period. If the
contributions payable for services received from
employees before the reporting date exceed the
contributions already paid, the deficit payable
is recognized as a liability after deducting the
contribution already paid. If the contribution
already paid exceeds the contribution due for
services received before the reporting date, the
excess is recognized as an asset to the extent
that the prepayment will lead to, for example, a
reduction in future payments or a cash refund.
II. Defined benefit plans:
Gratuity scheme: The Company, operates a
gratuity scheme for employees. The contribution
is paid to a separate fund in ICICI Prudential
named 5 Paisa Capital Limited Gratuity Fund,
towards meeting the Gratuity obligations.
Recognition and measurement of defined benefit
plans:
The cost of providing defined benefits is determined
using the Projected Unit Credit method with actuarial
valuations being carried out at each reporting date.
The defined benefit obligations recognized in the
Balance Sheet represent the present value of the
defined benefit obligations as reduced by the fair
value of plan assets, if applicable. Any defined benefit
asset (negative defined benefit obligations resulting
from this calculation) is recognized representing the
present value of available refunds and reductions in
future contributions to the plan.
All expenses represented by current service cost,
past service cost if any and net interest on the
defined benefit liability (asset) are recognized in the
Statement of Profit and Loss. Re-measurements of
the net defined benefit liability (asset) comprising
actuarial gains and losses and the return on the
plan assets (excluding amounts included in net
interest on the net defined benefit liability/asset), are
recognized in Other Comprehensive Income. Such
remeasurements are not reclassified to the Statement
of Profit and Loss in the subsequent periods.
Other Long Term Employee Benefits:
Entitlements to annual leave and sick leave are
recognized when they accrue to employees. Sick
leave can only be availed while annual leave can
either be availed or encashed subject to a restriction
on the maximum number of accumulation of leave.
The Company determines the liability for such
accumulated leaves using the Projected Accrued
Benefit method with actuarial valuations being
carried out at each Balance Sheet date.
Other Employee Benefits
Compensated absences which accrue to employees
and which can be carried to future periods but are
expected to be availed in twelve months immediately
following the year in which the employee has rendered
service are reported as expenses during the year in
which the employees perform the services that the
benefit covers and the liabilities are reported at the
undiscounted amount of the benefits.
o) Lease accounting :
The Company as a Lessee
The Company's lease asset classes primarily consist
of leases for land and buildings. The Company
assesses whether a contract contains a lease, at
inception of a contract. A contract is, or contains,
a lease if the contract conveys the right to control
the use of an identified asset for a period of time
in exchange for consideration. To assess whether a
contract conveys the right to control the use of an
identified asset, the Company assesses whether: (i)
the contract involves the use of an identified asset (ii)
the Company has substantially all of the economic
benefits from use of the asset through the period of
the lease and (iii) the Company has the right to direct
the use of the asset.
At the date of commencement of the lease, the
Company recognizes a right-of-use asset ("ROU”)
and a corresponding lease liability for all lease
arrangements in which it is a lessee, except for
leases with a term of twelve months or less (short¬
term leases) and low value leases. For these short¬
term and low value leases, the Company recognizes
the lease payments as an operating expense on a
straight-line basis over the term of the lease.
Certain lease arrangements includes the options to
extend or terminate the lease before the end of the
lease term. ROU assets and lease liabilities includes
these options when it is reasonably certain that they
will be exercised.
The right-of-use assets are initially recognized at
cost, which comprises the initial amount of the lease
liability adjusted for any lease payments made at or
prior to the commencement date of the lease plus
any initial direct costs less any lease incentives. They
are subsequently measured at cost less accumulated
depreciation and impairment losses.
Right-of-use assets are depreciated from the
commencement date on a straight-line basis over
the shorter of the lease term and useful life of the
underlying asset. Right of use assets are evaluated
for recoverability whenever events or changes in
circumstances indicate that their carrying amounts
may not be recoverable. For the purpose of
impairment testing, the recoverable amount (i.e. the
higher of the fair value less cost to sell and the value-
in-use) is determined on an individual asset basis
unless the asset does not generate cash flows that
are largely independent of those from other assets.
In such cases, the recoverable amount is determined
for the Cash Generating Unit (CGU) to which the
asset belongs.
The lease liability is initially measured at amortized
cost at the present value of the future lease payments.
The lease payments are discounted using the interest
rate implicit in the lease or, if not readily determinable,
using the incremental borrowing rates in the country
of domicile of these leases. Lease liabilities are
remeasured with a corresponding adjustment to the
related right of use asset if the Company changes its
assessment if whether it will exercise an extension
or a termination option.
Lease liability and ROU asset have been separately
presented in the Balance Sheet and lease payments
have been classified as financing cash flows.
The Company as a Lessor
Leases for which the Company is a lessor is classified
as a finance or operating lease. Whenever the terms
of the lease transfer substantially all the risks and
rewards of ownership to the lessee, the contract is
classified as a finance lease. All other leases are
classified as operating leases.
When the Company is an intermediate lessor, it
accounts for its interests in the head lease and the
sublease separately. The sublease is classified as a
finance or operating lease by reference to the right-
of-use asset arising from the head lease.
For operating leases, rental income is recognized on a
straight line basis over the term of the relevant lease.
The Company does not have any lease arrangement
where it is a lessor as on the balance sheet date.
p) Borrowing Cost:
Borrowing cost includes interest, amortization
of ancillary costs incurred in connection with
the arrangement of borrowings and exchange
differences arising from foreign currency borrowings
to the extent they are regarded as an adjustment to
the interest cost. Borrowing costs, if any, directly
attributable to the acquisition, construction or
production of an asset that necessarily takes a
substantial period of time to get ready for its intended
use or sale are capitalized, if any. All other borrowing
costs are expensed in the period in which they occur.
q) Earning Per Share:
Basic earnings per share are calculated by dividing
the net profit or loss for the period attributable to
equity shareholders by the weighted average number
of equity shares outstanding during the period.
For the purpose of calculating diluted earnings per
share, the net profit or loss for the period attributable
to equity shareholders and the weighted average
number of shares outstanding during the period
are adjusted for the effects of all dilutive potential
equity shares.
r) Segment Reporting :
The Company's business is to provide broking
services, to its clients, in the capital markets in India.
All other activities of the Company are ancillary the
main business. As such, there are no reportable
segments that need to be reported separately as
defined in Ind AS 108, Operating Segments.
2.2 KEY ACCOUNTING ESTIMATES AND JUDGEMENTS
The preparation of the financial statements in conformity
with Ind AS requires the Management to make estimates,
judgements and assumptions. These estimates, judgements
and assumptions affect the application of accounting
policies and the reported amounts of assets and liabilities,
the disclosures of contingent assets and liabilities at the
date of the financial statements and reported amounts
of revenues and expenses during the period. Accounting
estimates could change from period to period. Actual results
could differ from those estimates. Appropriate changes in
estimates are made as the Management becomes aware
of changes in circumstances surrounding the estimates.
Estimates and underlying assumptions are reviewed on
ongoing basis. Changes in estimates are reflected in the
financial statements in the period in which changes are
made and, if material, their effects are disclosed in the notes
to the financial statements.
The Company makes certain judgments and estimates
for valuation and impairment of financial instruments,
fair valuation of employee stock options, useful life of
property, plant and equipment, deferred tax assets and
retirement benefit obligations. Management believes that
the estimates used in the preparation of the financial
statements are prudent and reasonable.
The key assumptions concerning the future and other key
sources of estimation uncertainty at the reporting date,
that have a significant risk of causing a material adjustment
to the carrying amounts of assets and liabilities within the
next financial year, are described below:
a. Income taxes
The Company tax jurisdiction is India. Significant
judgements are involved in estimating budgeted
profits for the purpose of paying advance tax,
determining the provision for income taxes,
including amount expected to be paid/recovered
for uncertain tax positions. Further Deferred tax
assets and liabilities are recognized for the future
tax consequences of temporary differences between
the carrying values of assets and liabilities and their
respective tax bases.
b. Determination of the estimated useful lives of
tangible assets
The charge in respect of periodic depreciation is derived
after determining an estimate of an asset's expected
useful life and the expected residual value at the end of
its life. The useful lives and residual values of Company's
assets are determined by the management at the
time the asset is acquired and reviewed periodically,
including at each financial year end. The lives are
based on historical experience with similar assets as
well as anticipation of future events, which may impact
their life, such as changes in technical or commercial
obsolescence arising from changes or improvements
in production or from a change in market demand of
the product or service output of the asset.
c. Defined Benefit Obligation
The obligation arising from defined benefit plan is
determined on the basis of actuarial assumptions.
Key actuarial assumptions include discount rate,
trends in salary escalation, actuarial rates and life
expectancy. The discount rate is determined by
reference to market yields at the end of the reporting
period on government bonds. The period to maturity
of the underlying bonds corresponding to the probable
maturity of the post-employment benefit obligations.
Due to complexities involved in the valuation and
its long term nature, defined benefit obligation is
sensitive to changes in these assumptions. Further
details are disclosed in Note 25.
d. Fair value measurement of Financial Instruments
When the fair values of financials assets and
financial liabilities recorded in the Balance Sheet
cannot be measured based on quoted prices in
active markets, their fair value is measured using
valuation techniques, including the discounted
cash flow model, which involve various judgements
and assumptions.
e. Impairment of financial assets
The provision for expected credit loss involves
estimating the probability of default and loss given
default based on the Company own experience &
forward looking estimation.
f. Provision for litigations
In estimating the final outcome of litigation, the
Company applies judgment in considering factors
including experience with similar matters, past
history, precedents, relevant and other evidence and
facts specified to the matter. Application of such
judgment determines whether the Company requires
an accrual or disclosure in the financial statements.
g. Fair valuation of employee share options
The fair valuation of the employee share options is
based on the Black-Scholes model used for valuation
of options. Key assumptions made with respect to
expected volatility includes share price, expected
dividends and discount rate, under this option pricing
model. Further details are disclosed in notes.
h. Determining whether an arrangement containing a
lease
In determining whether an arrangement is, or contains
a lease is based on the substance of the arrangement
at the inception of the lease. The arrangement is, or
contains, a lease date if fulfilment of the arrangement
is dependent on the use of a specific asset or assets
and the arrangement conveys a right to use the
asset, even if that right is not explicitly specified in
the arrangement.
(a) Terms of loans:
(i) Working Capital Demand Loan (WCDL) and bank overdraft are secured by way of fist pari-passu charge on all receivables
and current assets to the tune of 1.75 times of the outstanding facility amount. Bank overdraft secured against Bank
deposit Please refer to note 31 for details of asset pledged.
(ii) Loan from related parties are unsecured.
(b) Tenor of repayment :
(i) For WCDL it varies from 7 days to 365 days of each tranche, principal amount of each tranche is to be paid as bullet
payment on maturity date.
(ii) For bank overdraft the same is repayable on demand
(iii) For loan from related parties the same is repayable on demand.
(c) Interest Rate :
(i) For WCDL the rate of interest is fixed (Lending banks MCLR rate Spread varies (0.75% to 1.50%), Interest is payable
monthly basis on the last date of each month.
(ii) For Bank Overdraft Interest rate is FD rate Spread varies (0.50% to 1.00%), Interest is payable monthly basis on the last
date of each month.
(iii) For related parties interest rate is in the range of 11.25% to 11.50% p.a. as approved by the board.
Footnotes: Nature and purpose reserves
i) Capital reserves : Capital reserve is created as per scheme of arrangement where undertaking including all assets and liabilities
of undertaking were transferred to and vested by IIFL Finance Limited (previously known as IIFL Holding Limited).
ii) Securities premium : Securities premium represents the surplus of proceeds received over the face value of shares, at the
time of issue of shares.
iii) Retained earnings : The balance in retained earnings primarily represents the surplus/deficit after payment of dividend
(including tax on dividend) and transfer to reserves.
iv) General Reserve : General reserve is created on account on employee stock option lapsed/exercised, in accordance with the
Companies Act, 2013.
v) Employee stock option reserve : Employee stock option reserve accounts represents reserve created on fair value of options
against the options to be granted by the Company and outstanding as at balance sheet date.
(a) The estimate of future salary increase, considered in the actuarial valuation, takes into account inflation, seniority,
promotion, increments and other relevant factors.
(b) The Expected Rate of Return on Plan Assets is determined considering several applicable factors, mainly the composition
of Plan Assets held assessed risks, historical results of return on Plan Assets and the Company's policy for Plan
Assets management.
(viii) Sensivity analysis :
Significant Actuarial Assumptions for the determination of the defined benefit obligation are discount trade ,expected salary
increase and employee turnover. The sensitivity analysis below, have been determined based on reasonably possible changes
of the assumptions occurring at end of the reporting year, while holding all other assumptions constant. The result of Sensitivity
analysis is given below:
Investment risk The present value of the defined benefit plan liability is calculated using a discount rate which is determined
by reference to market yields at the end of the reporting period on government bonds. If the return on plan asset is below this
rate, it will create a plan deficit. Currently, for the plan in India, it has a relatively balanced mix of investments in government
securities, and other debt instruments.
Interest risk :- A fall in the discount rate which is linked to the G.Sec. Rate will increase the present value of the liability
requiring higher provision. A fall in the discount rate generally increases the mark to market value of the assets depending
on the duration of asset.
Salary risk The present value of the defined benefit plan liability is calculated by reference to the future salaries of members.
As such, an increase in the salary of the members more than assumed level will increase the plan's liability.
Asset Liability Matching Risk: The plan faces the ALM risk as to the matching cash flow. Since the plan is invested in lines
of Rule 101 of Income Tax Rules, 1962, this generally reduces ALM risk.
Mortality risk: Since the benefits under the plan is not payable for life time and payable till retirement age only, plan does not
have any longevity risk.
Concentration Risk: Plan is having a concentration risk as all the assets are invested with the insurance company and a default
will wipe out all the assets. Although probability of this is very less as insurance companies have to follow regulatory guidelines.
MCX vide its final order dated July 01,2024 has imposed penalty of f 25.98 Mn in respect of non-reporting of certain technical glitches / delayed
submission of RCAs thereafter, observed during the course of joint inspection for the period between 01-04-2022 to 31-12-2023. MCX has also
passed an order restricting on-boarding of new clients for a period of 14 days from the date of receipt of the order. The company has filed an appeal
against the said order before the Securities Appellate Tribunal (SAT). SAT vide its order dated July 05, 2024 has stayed the effect and operation of
the said order subject to deposit of 50% of the penalty amount with MCX which the company has since deposited. On a prudent basis, the company
has made provision in the books for the said penalty amount.
Note 32 Financial Risk Management
32 A.1. Credit Risk
Credit risk refers to risk that a counterparty will default on its contractual obligations resulting in financial loss to the Company.
Credit risk arises primarily from financial assets such as trade receivables, investments, derivative financial instruments, other
balances with banks, loans and other receivables and other financial asset.
Credit quality analysis
The following tables sets out information about the credit quality of financial assets measured at amortised cost, FVOCI debt
investments. Unless specifically indicated, for financial assets, the amounts in the table represent gross carrying amounts.
32 A.2. Collateral held
The Company holds collateral of securities and other credit enhancements against its credit exposures.
32 A.3. Measurement of Expected Credit Loss
The Company has applied the impairment requirements of Ind AS 109 and has used reasonable and supportable information on
best efforts basis & that is available without undue cost or effort to determine the credit risk at the reporting date.
32 B. Liquidity risk
Liquidity risk arises from the Company's inability to meet its cash flow commitments on time. Prudent liquidity risk management
implies maintaining sufficient stock of cash and marketable securities and maintaining availability of standby funding through
an adequate line up of committed credit facilities. It uses a range of products mix to ensure efficient funding from across well-
diversified markets and investor pools. Treasury monitors rolling forecasts of the company's cash flow position and ensures that
the company is able to meet its financial obligation at all times including contingencies.
The table below analyse the company financial liability into relevant maturity companying based on their contractual maturity.
The amount disclosed in the table are the contractual undiscounted cash flows. Balance due within 1 year equals their carrying
balances as the impact of discounting is not significant.
32 C. Market risk
Market risk is the risk of any loss in future earnings, in realizable fair values or in futures cash flows that may result from a change
in the price of a financial instrument.
32 C.1. Interest rate risk
Interest rate 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. Interest rate change does not affects significantly short term borrowing and current investment therefore
the Company's exposure to the risk of changes in market interest rates relates primarily to the Company's long-term debt and Non
current investment.
Company business is volatile and hence borrowings are done bases on requirement, generally borrowings are done for short term
and are on market based interest rate.
32 C.2. Fair value sensitivity analysis for fixed-rate instruments
The Company does not have any fixed-rate instruments presented in financial liabilities.
32 C.3. Exposure to currency risks
The Company does not have any exposure to foreign exchange risk arising form foreign currency transaction.
32 C.4. Exposure to derivative risks
The Company does not have any long-term contracts including derivative contracts for which there are any material foreseeable losses.
32 C.5. Exposure to Price Risk
The Company does not have any investments classified at fair value through profit or loss as at the reporting date. Accordingly,
the Company is not exposed to price risk arising from changes in the fair value of financial instruments.
32 D. Capital Management
The company's objective when managing capital are to
- Safeguard their ability to continue as going concern, so that they can continue to provide returns for the share holders and
benefits for other stake holders, and
- Maintain an optimal capital structure to reduce the cost of capital.
The Company manages its capital structure and makes adjustments in light of changes in economic conditions and the
requirements of the financial covenants. To maintain or adjust the capital structure, the Company may adjust the dividend payment
to shareholders, return capital to shareholders or issue new shares. The Company monitors capital using debt equity ratio.
The company measures fair values using the following fair value hierarchy, which reflects the significance of the inputs used in
making the measurements.
- Level 1: Inputs that are quoted market prices (unadjusted) in active markets for identical instruments.
- Level 2: Inputs other than quoted prices included within Level 1 that are observable either directly (i.e. as prices) or indirectly
(i.e. derived from prices). This category includes instruments valued using: quoted market prices in active markets for similar
instruments; quoted prices for identical or similar instruments in markets that are considered less than active; or other valuation
techniques in which all significant inputs are directly or indirectly observable from market data.
- Level 3: Inputs that are unobservable. This category includes all instruments for which the valuation technique includes inputs
that are not observable and the unobservable inputs have a significant effect on the instrument's valuation. This category includes
instruments that are valued based on quoted prices for similar instruments for which significant unobservable adjustments or
assumptions are required to reflect differences between the instruments.
The company uses widely recognised valuation models to determine the fair value of common and simple financial instruments,
such as interest rate and currency swaps, that use only observable market data and require little management judgement and
estimation. Observable prices or model inputs are usually available in the market for listed debt and equity securities, exchange-
traded derivatives and simple OTC derivatives such as interest rate swaps. The availability of observable market prices and model
inputs reduces the need for management judgement and estimation and also reduces the uncertainty associated with determining
fair values.
The following table analyses financial instruments measured at fair value at the reporting date, by the level in the fair value hierarchy
into which the fair value measurement is categorised. The amounts are based on the values recognised in the statement of financial
position. The fair values include any deferred differences between the transaction price and the fair value on initial recognition when
the fair value is based on a valuation technique that uses unobservable inputs.
32 E.2. Financial instruments not measured at fair value
The following table sets out the fair values of financial instruments not measured at fair value and analyses them by the level in
the fair value hierarchy into which each fair value measurement is categorised.
Below are the methodologies and assumptions used to determine fair values for the above financial instruments which are
not recorded and measured at fair value in the Company's Financial Statement. These fair value is calculated for disclosures
purpose only.
Short Term financial assets and liabilities
For Financial assets and liabilities that have a short term nature, the carrying amount, which is net of impairment, are a reasonable
approximation of their fair value. Such instruments include cash and bank balances, trade receivables, other receivables, balances
other than cash and cash equivalents and trade payables.
Note 33 Segment Reporting
In the opinion of the management, there is only one reportable business segment as envisaged by Ind AS 108 on 'Operating
Segment' issued by Institute of Chartered accountant of India. Accordingly, no separate disclosure for segment reporting is required
to be made in the financial statements of the Company. Secondary segmentation based on geography has not been presented as
the Company operates primarily in India and the Company perceives that there is no significant difference in its risk and returns in
operating from different geographic areas within India.
(c) *The Company has granted 2,00,000 ESOP (P.Y. 5,25,250 ESOP, 16,40,000 RSU respectively) options during the year.
Fair Value Methodology
The fair value of the Options granted has been estimated using the Black-Scholes option pricing Model. Each tranche of vesting
have been considered as a separate grant for the purpose of valuation.
Stock Price: The fair value of the underlying stock based on the latest available closing Market Price on NSE has been
considered for valuing the grant.
Volatility: Volatility is a measure of the amount by which a price has fluctuated or is expected to fluctuate during the period. The
measure of volatility is used in the Black Scholes option-pricing model is the annualized standard deviation of the continuously
compounded rates of return on the stock over a period of time.
The period to be considered for volatility has to be adequate to represent a consistent trend in the price movements. It is
also important that movement due to abnormal events get evened out. There is no research that demonstrates conclusively
how long the historical period used to estimate expected long-term future volatility should be. However, informal tests and
preliminary research tends to confirm that estimates of expected future long term volatility should be based on historical
volatility for a period that approximates the expected life of the options being valued.”
Risk-free rate of return: The risk-free rate being considered for the calculation is the interest rate applicable for a maturity
equal to the expected life of the options based on the zero-coupon yield curve for Government Securities.
Exercise Price: The Exercise Price as communicated to us by the management of the Company have been considered in
the valuation.
Time to Maturity: Time to Maturity / Expected Life of Options is the period for which the Company expects the Options to
be live. The minimum life of a stock option is the minimum period before which the Options cannot be exercised and the
maximum life is the period after which the Options cannot be exercised.
Expected dividend yield: The management's representation of the Expected dividend yield of 0% has been accepted for the
purpose of this valuation.
Note 38
1. The wholly owned subsidiary of the Company namely 5paisa P2P Limited ("the Company”) was incorporated on December
17, 2017 with the objective to provide an online marketplace to the participants involved in peer to peer lending and also to
act as a distributor of financial products. The company has received approval from RBI to commence its business as NBFC
P2P and the company has started its P2P business operations.
2. The Wholly owned subsidiary of the Company namely 5paisa Insurance Brokers Limited was incorporated on Oct 27, 2018.
3. The wholly owned subsidiary of the Company namely 5paisa Trading Limited had incorporated on February 27,2020.
4. The wholly owned subsidiary of the Company namely 5Paisa International Securities (Ifsc) Limited had incorporated on
Jun15,2022.
Note 39 : -
The Company operates from and uses the premises, infrastructure and other facilities and services as provided to it by group
companies which are termed as 'Shared Services'. Hitherto, such shared services consisting of administrative and other revenue
expenses paid for by the company were identified and recovered from them based on reasonable management estimates, which
are constantly refined in the light of additional knowledge gained relevant to such estimation. These expenses are recovered on
an actual basis and the estimates are used only where actual were difficult to determine.
Note 40 :- Code on Social Security
The Code on Social Security, 2020 ('Code') relating to employee benefits during employment and postemployment received
Indian Parliament approval and Presidential assent in September 2020. The Code has been published in the Gazette of India and
subsequently on November 13, 2020 draft rules were published and invited for stakeholders' suggestions. The Central Government
on 30th March 2021 has deferred the implementation of the said Code and the date on which the Code will come into effect has not
been notified. The Company will assess the impact of the Code when it comes into effect and will account for the related impact
in the period the Code becomes effective.
NOTE 41 :- RATIOS
Additional regulatory information required under (WB)(xvi) of Division III of Schedule III amendment, disclosure of rations, is not
applicable to the Company as it is in broking business and not an NBFC registered under Section 45-IA of Reserve Bank of India
Act, 1934.
NOTE 42 ADDITIONAL REGULATORY INFORMATION AS PER DIVISION III SCHEDULE III OF COMPANIES ACT, 2013
a) No funds have been advanced or loaned or invested by the company to or in any other persons or entities, including foreign
entities ("Intermediaries”), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall,
whether, directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of
the company ("Ultimate Beneficiaries”) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
b) No funds have been received by the company from any persons or entities, including foreign entities ("Funding Parties”), with
the understanding, whether recorded in writing or otherwise, that the company shall, whether, directly or indirectly, lend or invest
in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party ("Ultimate Beneficiaries”)
or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries
c) The Company does not have any long-term contracts including derivative contracts for which there are any material
foreseeable losses.
d) There were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company.
e) No proceedings have been initiated or pending against the company for holding any benami property under the Benami
Transactions (Prohibition) Act, 1988 (45 of 1988).
f) The Company has not been declared as wilful defaulter by any bank or financial Institution or other lender.
g) During the year, the company has not entered into any transactions with companies struck off under section 248 of the
Companies Act, 2013 or section 560 of Companies Act, 1956.
h) There are no transactions which have not been recorded in the books of accounts and which have been surrendered or
disclosed as income during the year in the tax assessments under the Income Tax Act, 1961.
i) The quarterly returns / statements of current assets filed by the Company, with banks from whom borrowings have been
availed on the basis of security of current assets, are in agreement with the books of account.
j) There are no charges or satisfaction yet to be registered with the registrar of companies beyond the statutory period.
k) The company does not have layers beyond the number prescribed under clause (87) of section 2 of the Act read with
Companies (Restriction on number of Layers) Rules, 2017.
l) The company has not traded or invested in Crypto Currency or Virtual Currency during the financial year.
Note 43 Income Tax Survey, Search and Seizure
During January 2025, the Income Tax Department conducted a search operation at the premises of 5paisa Capital Ltd. The
company extended full cooperation to the Income Tax officials and provided all requisite information, documents, and clarifications
as sought during the proceedings. As of the date of this report, the company has not received any formal communication from
the department regarding the outcome of the search. Accordingly, the impact, if any, on the company's financial results cannot be
determined at this stage.
Note 44 :- Comparatives
Previous year figures are re-grouped, re-classified and re-arranged, wherever considered necessary to confirm to current
year's presentation.
As per our report of even date For and on behalf of Board of Directors
For V Sankar Aiyar & Co.
Chartered Accountants
Firm's Registration No.109208W
By the hand of
Asha Patel Gaurav Seth Gourav Munjal
Partner Managing Director & CEO Whole Time Director & CFO
Membership No.: 166048 (DIN : 10415364) (DIN : 06360031)
Place : Mumbai Namita Godbole
Dated : May 1, 2025 Company Secretary
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