(9) Provisions, contingent liabilities and contingent assets
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable
that the Company 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, considering the risks and uncertainties surrounding the obligation. When a provision is measured using the
cash flows estimated to settle the present obligation, it's carrying amount is the present value of those cash flows (when the effect
of the time value of money is material).
A contingent liability is disclosed unless the possibility of an outflow of resources embodying the economic benefits is remote.
Contingent assets are neither recognised nor disclosed in the financial statements.
Provisions, contingent liabilities, and contingent assets are reviewed at each balance sheet date and adjusted to reflect the current
best estimates.
(10) Commitments
Commitments are future liabilities for contractual expenditure, classified and disclosed as follows:
(a) estimated amount of contracts remaining to be executed on capital account and not provided for;
(b) uncalled liability on shares and other investments partly paid;
(c) funding related commitment to associate companies; and
(d) other non-cancellable commitments, if any, to the extent they are considered material and relevant in the opinion of the
management.
(11) Foreign currencies
(i) The functional currency and presentation currency of the Company is Indian Rupee (Rs.). Functional currency of the Company
has been determined based on the primary economic environment in which the Company operates considering the currency
in which funds are generated, spent and retained.
(ii) Transactions in currencies other than the Company's functional currency are recorded on initial recognition using the exchange
rate at the transaction date. At each balance sheet date, foreign currency monetary items are reported at the prevailing closing
spot rate. Non-monetary items that are measured in terms of historical cost in foreign currency are not retranslated.
Exchange differences that arise on settlement of monetary items or on reporting of monetary items at each balance sheet date at
the closing spot rate are recognised in the statement of profit and loss in the period in which they arise.
(12) Cash and cash equivalents
Cash and cash equivalents include cash at banks and cash on hand, demand deposits with banks, other short-term highly liquid
investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are
subject to an insignificant risk of changes in value.
(13) Segment reporting
Operating segments are those components of the business whose operating results are regularly reviewed by the chief operating
decision making body in the Company to make decisions for performance assessment and resource allocation. The reporting of
segment information is the same as provided to the management for the purpose of the performance assessment and resource
allocation to the segments. Segment accounting policies are in line with the accounting policies of the Company.
(14) Financial instruments
(a) Recognition of financial instruments
Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisions of the
financial instruments.
(b) Initial measurement of financial instruments
Financial assets and financial liabilities are initially measured at fair value. However, trade receivables that do not contain a significant
financing component are measured at transaction price. Transaction costs that are directly attributable to the acquisition or issue
of financial assets and financial liabilities (other than financial assets and financial liabilities at FVTPL) are added to or deducted
from their respective fair value on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or
financial liabilities at FVTPL are recognised immediately in the statement of profit and loss.
A financial asset and a financial liability is offset and presented on a net basis in the balance sheet when there is a current legally
enforceable right to set-off the recognised amounts and it is intended to either settle on net basis or to realise the asset and settle
the liability simultaneously.
(c) Classification and subsequent measurement of financial instruments
Financial assets
All regular way purchases or sales of financial assets are recognised and derecognised on a trade-date basis. Regular way
purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by
regulation or convention in the marketplace.
All recognised financial assets are subsequently measured in their entirety at either amortised cost or fair value, depending on the
classification of the financial assets.
- 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 assets 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 amortised cost (except for debt instruments that
are designated as at fair value through profit or loss on initial recognition).
• the asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows; and
• the contractual terms of the instrument give rise on specified dates to cash flows that are solely payments of principal and
interest on the principal amount outstanding.
Effective Interest Rate Method
The Effective Interest Rate Method is a method of calculating the amortized cost of a debt instrument and of allocating interest income
over the relevant period. The Effective Interest Rate is the rate that exactly discounts estimated future cash receipts (including all
fees that form an integral part of the effective interest rate, transaction costs and premiums or discounts) through the expected life
of the instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.
- 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 gives 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 asset is held within a business model whose objective is achieved both by collecting contractual cash flows and selling
financial assets; and
• the contractual terms of the instrument give rise on specified dates to cash flows that are solely payments of principal and
interest on the principal amount outstanding.
Movements in the carrying amount of such financial assets are recognised in other comprehensive income (OCI). When the
investment is disposed-off, the cumulative gain or loss previously accumulated in this reserve is reclassified to the statement of
profit and loss.
- Financial assets at fair value through profit or loss (FVTPL)
A financial asset which is not classified in any of the above categories is measured at FVTPL.
Debt instruments that do not meet the amortised cost criteria or FVTOCI criteria are measured at FVTPL. In addition, debt instruments
that meet the amortised cost criteria or the FVTOCI criteria but are designated at FVTPL are measured at FVTPL.
A financial asset that meets the amortised cost criteria or debt instruments that meet the FVTOCI criteria may be designated at
FVTPL upon initial recognition if such designation eliminates or significantly reduces a measurement or recognition inconsistency
that would arise from measuring assets or liabilities or recognising the gains and losses on them on different bases.
Financial assets at FVTPL are measured at fair value at the end of each reporting period, with any gains or losses arising on
remeasurement recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any dividend or interest
earned on the financial asset and is included in the 'Revenue from operations' line item.
Impairment of financial assets
The Company applies the expected credit loss model for recognising impairment loss on financial assets measured at amortised
cost, debt instruments at FVTOCI and other contractual rights to receive cash or other financial assets.
Expected credit losses are the weighted average of credit losses with the respective risks of default occurring as the weights. Credit
loss is the difference between all contractual cash flows that are due to the Company in accordance with the contract and all the
cash flows that the Company expects to receive (i.e. all cash shortfalls), discounted at the original effective interest rate (or credit-
adjusted effective interest rate for purchased or originated credit-impaired financial assets). The Company estimates cash flows by
considering all contractual terms of the financial instrument (for example, prepayment, extension, call and similar options) through
the expected life of that financial instrument.
For loans, cash credit and term loans measured at amortised cost
(1) Definition of default:
A default shall be considered to have occurred when any of the following criteria are met:
i) An account shall be tagged as NPA once the day end process is completed for the 91st day past due.
ii) If one facility of borrower is NPA, all the facilities of that borrower are to be treated as NPA.
For the purpose of counting of days past due for the assessment of default, special dispensations in respect of any class of assets,
if any (e.g. under COVID-19 relief package of RBI) are applied in line with the notification by the RBI in this regard.
(2) Portfolio segmentation:
The entire portfolio is segmented into homogenous risk segments. Common factors for segmentation includes asset classes,
internal rating grade, size, geography, product etc.
(3) Probability of Default (PD):
An internally developed statistical model that computes rating at a loan level and categorizes them from Least Risk to High Risk
is used for the computation of PD. These internal credit score bands along with external default performance from bureau have
been observed and calibrated to derive benchmarked 12-month PD rates. These benchmarked 12-month PD rates have been
categorized across 5 Bands viz Risk Band 1 (RB1 - Least Risk) to Risk Band 5 (RB5 - Highest Risk) for secured and unsecured
asset types respectively.
Since, PD benchmarks for each Risk band have been determined separately for “Secured” and “Unsecured” category, therefore,
from a segmentation point, all the business segments are classified into either Secured or Unsecured category. Business segments,
wherever risk coverage is available, is factored over and above the PD benchmarks depending on the nature of coverage.
The PD applied in the ECL (Expected Credit Loss) computation model is based on the recomputed/refreshed/updated Risk band/
rating at a loan level. All the loans are rated and Risk Bands are recomputed every quarter using the latest credit bureau scrub. For
the loan disbursed in the current/latest quarter, wherever the band from credit bureau scrub is not available, the Risk Band at point
of origination is applied. Wherever the band is not available at a loan level (either at origination/scrub), the average PD across the 5
Risk Bands shall be applicable for the respective Secured and Unsecured categories.
The 12-month PD shall continue to be applicable in calculating expected credit loss for Stage 1 assets and Lifetime PD shall be
applicable for Stage 2 assets.
Life-time PD:
Life-time PD is applied for Stage 2 accounts.
Life-time PDs are computed based on survival approach. Survival analysis is statistics for analysing the expected duration of time
until default event happens.
(4) Loss given default:
Loss given default (LGD) is defined as the expected/estimated amount or percentage of exposure that may not be recovered when
a loan defaults. UGRO Capital Limited calculates LGD at a loan level considering the type of advance (Secured/Unsecured) & the
collateral (financial/ property/ machine/ physical) available.
Derecognition of financial assets
The Company derecognizes a financial asset when the contractual rights to the cash flows from the asset expire or when it transfers
the financial asset and substantially all the risks and rewards of ownership of the asset to another party.
If the Company enters into transactions whereby it transfers assets recognised on its balance sheet but retains either all or
substantially all of the risks and rewards of the transferred assets, the transferred assets are not de-recognised, and the proceeds
received are recognised as a collateralised borrowing.
On derecognition of a financial asset in its entirety, the difference between the asset's carrying amount and the sum of the
consideration received and receivable and the cumulative gain or loss that had been recognised in other comprehensive income
and accumulated in equity is recognised in the statement of profit and loss.
Financial liabilities and equity instruments
- Classification as debt or equity
Debt and equity instruments issued by the Company 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.
- Equity instruments
An Equity Instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its
liabilities.
- Compound financial instruments
The component parts of compound financial instruments issued by the Company are classified separately as financial liabilities and
equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity
instrument. A conversion option that will be settled by the exchange of a fixed amount of cash or another financial asset for a fixed
number of the Company's own equity instruments is an equity instrument.
At the date of issue, the fair value of the liability component is estimated using the prevailing market interest rate for similar non¬
convertible instruments. This amount is recognised as a liability on an amortised cost basis using the effective interest rate method
until extinguished upon conversion or at the instrument's maturity date.
Financial liabilities
A financial liability is any liability that is:
> Contractual obligation:
• to deliver cash or another financial asset to another entity; or
• to exchange financial assets or financial liabilities with another entity under conditions that are potentially unfavourable to the
entity; or
> a contract that will or may be settled in the entity's own equity instruments.
All financial liabilities are subsequently measured at amortised cost using the effective interest rate method or at FVTPL.
- Derecognition of financial liabilities
The Company derecognises financial liabilities when, and only when, the Company's obligations are discharged, cancelled or have
expired. An exchange with a lender of debt instruments with substantially different terms is accounted for as an extinguishment of
the original financial liability and the recognition of a new financial liability. Similarly, a substantial modification of the terms of an
existing financial liability (whether or not attributable to the financial difficulty of the debtor) is accounted for as an extinguishment
of the original financial liability and the recognition of a new financial liability. The difference between the carrying amount of the
financial liability derecognised and the consideration paid and payable is recognised in the statement of profit and loss.
Write-off
Loans and debt securities are written-off when the Company has no reasonable expectations of recovering the financial asset
(either in its entirety or a portion of it). This is the case when the Company determines that the borrower does not have assets or
sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off. A write-off constitutes a
de-recognition event. The Company may apply enforcement activities to financial assets written-off. Recoveries resulting from the
Company's enforcement activities will result in impairment gains.
(15) Derivative financial instruments
The Company enters into derivative financial instruments to manage its exposure to interest rate risk and foreign exchange rate risk.
Derivatives held include interest rate swaps and cross-currency interest rate swaps.
Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured
to their fair value at each balance sheet date. The resulting gain/loss is recognised in the statement of profit and loss immediately
unless the derivative is designated and is effective as a hedging instrument, in which event the resulting gain/loss is recognised
through other comprehensive income (OCI). The Company designates certain derivatives as hedges of highly probable forecast
transactions (cash flow hedges). A derivative with a positive fair value is recognised as a financial asset whereas a derivative with a
negative fair value is recognised as a financial liability.
(16) Hedge
The Company makes use of derivative instruments to manage exposures to interest rate and foreign currency. In order to manage
particular risks, the Company applies hedge accounting for transactions that meet specific criteria. At the inception of a hedge
relationship, the Company formally designates and documents the hedge relationship to which the Company wishes to apply hedge
accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes the Company's
risk management objective and strategy for undertaking hedge, the hedging/ economic relationship, the hedged item or transaction,
the nature of the risk being hedged, hedge ratio and how the Company would assess the effectiveness of changes in the hedging
instrument's fair value in offsetting the exposure to changes in the hedged item's fair value or cash flows attributable to the hedged
risk. Such hedges are expected to be highly effective in achieving offsetting changes in fair value or cash flows and are assessed
on an on-going basis to determine that they actually have been highly effective throughout the financial reporting periods for which
they were designated.
(17) Cash flow hedge
A cash flow hedge is a hedge of the exposure to variability in cash flows that is attributable to a particular risk associated with
a recognised asset or liability (such as all or some future interest payments on variable rate debt) or a highly probable forecast
transaction and could affect the statement of profit and loss. For designated and qualifying cash flow hedges, the effective portion of
the cumulative gain or loss on the hedging instrument is initially recognised directly in OCI within equity (cash flow hedge reserve).
The ineffective portion of the gain or loss on the hedging instrument is recognised immediately in finance cost in the statement
of profit and loss. When the hedged cash flow affects the statement of profit and loss, the effective portion of the gain or loss
on the hedging instrument is recorded in the corresponding income or expense line of the statement of profit and loss. When a
hedging instrument expires, is sold, terminated, exercised, or when a hedge no longer meets the criteria for hedge accounting, any
cumulative gain or loss that has been recognised in OCI at that time remains in OCI and is recognised when the hedged forecast
transaction is ultimately recognised in the statement of profit and loss. When a forecast transaction is no longer expected to occur,
the cumulative gain or loss that was reported in OCI is immediately transferred to the statement of profit and loss.
The Company's hedging policy only allows for effective hedging relationships to be considered as hedges as per the relevant Ind
AS. Hedge effectiveness is determined at the inception of the hedge relationship, and through periodic prospective effectiveness
assessments to ensure that an economic relationship exists between the hedged item and hedging instrument. The Company
enters into hedge relationships where the critical terms of the hedging instrument match with the terms of the hedged item, and so
a qualitative and quantitative assessment of effectiveness is performed.
(18) Non-current assets held for sale
Assets acquired in satisfaction of debt (SOD) are treated as non-current assets held for sale. Assets acquired in satisfaction of debts
are disclosed in the balance sheet at outstanding principal loan amount or fair market value (as per valuation reports) whichever is
lower. In case the fair market value of assets acquired is lower than the outstanding principal loan amount, difference is charged to
the statement of profit and loss under impairment on financial instruments. In case of sale of repossessed assets, the gain/ loss on
sale is adjusted in the statement of profit and loss under impairment on financial instruments.
(19) Earnings per share
Basic earnings per share is computed by dividing the profit/ (loss) after tax by the weighted average number of equity shares
outstanding during the year. Diluted earnings per share is computed by dividing the profit/ (loss) after tax as adjusted for dividend,
interest and other charges to expense or income (net of any attributable taxes) relating to the dilutive potential equity shares, by the
weighted average number of equity shares considered for deriving basic earnings per share and the weighted average number of
equity shares which could have been issued on the conversion of all dilutive potential equity shares.
Potential equity shares are deemed to be dilutive only if their conversion to equity shares would decrease the net profit per share
from continuing ordinary operations. Potential dilutive equity shares are deemed to be converted as at the beginning of the period,
unless they have been issued at a later date.
(20) Statement of cash flows
The Statement of cash flows shows the changes in cash and cash equivalents arising during the year from operating activities,
investing activities and financing activities.
The cash flows from operating activities are determined by using the indirect method. Net income is therefore adjusted by non-cash
items, such as measurement gains or losses, changes in provisions, impairment of property, plant and equipment and intangible
assets, as well as changes from receivables and liabilities. In addition, all income and expenses from cash transactions that are
attributable to investing or financing activities are eliminated.
Cash and cash equivalents (including bank balances) shown in the statement of cash flows exclude items which are not available
for general use as on the date of the Balance Sheet.
(21) Recent accounting pronouncements
The Ministry of Corporate Affairs ('MCA') notifies new standards or amendments to the existing standards under the Companies
(Indian Accounting Standards) Rules, 2015 as amended from time to time. For the year ended March 31, 2025, the MCA has notified
Ind AS 117, Insurance Contracts, and amendments to Ind AS 116, Leases, relating to sale and leaseback transactions, applicable
to the Company, w.e.f., April 1, 2024. The Company has reviewed the new pronouncements and based on its evaluation, has
determined that the new pronouncement is not applicable to the Company.
The Company has total External Commercial Borrowings (ECBs) of Rs.3,495.53 lakh, Rs. 14,014.80 lakh, Rs. 8,205.00 lakh and
Rs.67,613.50 lakh having original maturity of two, three, four and five years respectively (Previous year Rs.17,124.23 lakh, Rs.8,205.00
lakh and Rs. 12,365.00 lakh having maturity of three, four and five years respectively) for financing prospective borrowers as per
the ECB guidelines issued by the Reserve Bank of India (“RBI”) from time to time. In terms of the RBI guidelines, the borrowings
has been swapped into rupees and fully hedged for the entire maturity by way of cross currency swaps and full currency swaps. The
charges for raising of the aforesaid ECBs have been amortised over the tenure of such ECBs.
Notes:
1) The rate of interest on the above borrowings vary from 9.00% to 13.00% for the year ended March 31,2025 and for the year ended March 31,
2024.
2) The above secured borrowings are secured by hypothecation of receivables under financing activities. The Company has maintained the
required security cover.
3) Out of the above, the Company holds sanctioned borrowings amounting to Rs.213,062 lakh as at March 31,2025 (Previous year: 120,500
lakh) which is guaranteed by a director.
4) Term Loans were used fully for the purpose for which the same were obtained.
5) There was no defaults in the repayment of the borrowings.
6) The balance tenure on the above borrowings is upto 5 years.
7) The amount disclosed above represent the principal outstanding as at 31st March, 2025 and as at 31st March, 2024.
8) The quarterly returns or statements filed by the Company with banks or financial institutions or trustees are in agreement with books of
account.
An Employee Benefit Trust ('Trust') had been constituted. The objective of the Trust is to distribute shares to employees under the
employee benefit program. The Trust is responsible for the purchase of shares of the Company from the secondary market for the
purpose of this program. The Trust is treated as an extension of the Company, hence the shares held by the Trust are treated as
treasury shares. Treasury shares are recognised at face value and deducted from Equity Share Capital to the tune of Rs. 123.83
lakh. The amount received in excess of the face value is deducted from the Securities Premium Account. Pursuant to the same, the
Company had granted 1,111,929 options on October 10, 2022 during the year ended March, 31 2023. During the year ended March
31, 2025 and March 31, 2024, there has been no secondary market acquisition by the trust.
Nature and purpose of reserves :
(i) Securities premium
Securities premium is used to record the premium on issue of shares. The reserve is utilised in accordance with the provision
of the Companies Act, 2013.
(ii) Employee stock options scheme outstanding
The shares options outstanding is used to recognise the grant date fair value of options issued to employees under stock
option schemes of the Company.
(iii) Statutory reserves u/s 45-IC of the RBI Act, 1934
Statutory reserve fund is required to be created by a Non-Banking Financial Company as per Section 45- IC of the Reserve
Bank of India Act, 1934. The Company is not allowed to use the reserve fund except with authorisation of Reserve Bank of
India.
(iv) Capital reserve
Capital reserve comprises of the amount received on share warrants & which are forfeited by the Company for non-payment
of call money.
(v) Retained earnings - other than Remeasurement of Post Employment Benefit Obligations
Retained earnings represents surplus of accumulated earnings of the Company and which are available for distribution to
shareholders.
(vi) Retained earnings - Remeasurement of Post Employment Benefit Obligations
The Company recognises change on account of remeasurement of the net defined benefit liability (asset) as part of retained
earnings.
(vii) Cash flow hedges reserve
It represents the cumulative gains/(losses) arising on revaluation of the derivative instruments designated as cash flow hedges
through OCI.
(viii) Equity component of compound financial instruments
It represent the residual amount after deducting from the fair value of the instrument as a whole the amount separately
determined for the liability component.
(ix) Money received against share warrants
Money received against share warrant represents 25% of the total consideration received towards warrants which entails the
warrant holders, the option to apply for and be allotted equivalent number of equity shares of the face value of Rs. 10 each
by paying the remaining 75% of the total consideration within 18 months from the date of allotment of the Share Warrants.
f) Nature of CSR activities:
The Company is required to contribute towards corporate social responsibility activities as per CSR Rules under the Compa¬
nies Act, 2013. During the year, the Company has spent Rs. 1.00 lakh against Rs. 6.92 lakh after setting off the total excess
amount of Rs. 6.57 lakhs of previous years. The amount is spent towards poverty alleviation program.
II. Disclosure in relation to Undisclosed Income
There have been no transactions which have not been recorded in the books of accounts, that have been surrendered or dis¬
closed as income during the year ended March 31, 2025 and March 31, 2024 in tax assessments under the Income tax act,
1961. There have been no previously unrecorded income and related assets which were to be properly recorded in the books
of accounts during the year ended March 31, 2025 and March 31, 2024.
III. Details of Crypto currency or Virtual currency
The Company has not traded or invested in crypto currency or virtual currency during the year ended March 31, 2025 and March
31, 2024.
39. Additional Regulatory Information (to the extent applicable and reportable)
I. Title deeds of immovable property not held in the name of the Company as at March 31, 2025:
*The borrowers had mortgaged the immovable properties with the Company to secure the loan facility. Consequent to default
in repayment of secured loan upon classification of the account as Non-Performing Asset (“NPA”), the proceedings under the
provisions of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (“The
SARFAESI Act, 2002”) are initiated, whereby the immovable property mortgaged by the borrower, is taken into possession
of the Company with or without intervention of the Court. The said properties will be sold to the prospective buyer(s) and the
sale proceeds shall be appropriated towards the dues in the respective loan account. Meanwhile, if the borrower/co-borrower
approaches to settle the dues and closes the loan account, the property may be released to them.
II. Details of Benami Property held:
No proceedings have been initiated or are pending against the Company for holding any benami property under the Benami
Transactions (Prohibition) Act, 1988 and rules made thereunder, as at March 31, 2025 and March 31, 2024.
III. Wilful Defaulter:
The Company is not declared wilful defaulter by any bank or financial institution or other lender, in accordance with the guidelines
on wilful defaulters issued by the Reserve Bank of India during the year ended March 31, 2025 and March 31, 2024.
IV. Details pertaining to transactions with the companies struck off under section 248 of the Companies Act, 2013 or
section 560 of the Companies Act, 1956 is as follows:
The Company does not have any transactions with the struck off companies during the year ended March 31, 2025 and March
31, 2024.
VI. Analytical Ratios
(a) Capital to risk-weighted assets ratio (CRAR) - Refer Note No. 59 (a)
(b) Tier I CRAR - Refer Note No. 59 (a)
(c) Tier II CRAR - Refer Note No. 59 (a)
(d) Liquidity Coverage Ratio - Refer Note no. 50(b). Liquidity Risk.
VN.Disclosure under rule 11(e) of the Companies (Audit and Auditors) Rules, 2014:
(a) - The Company has not advanced or loaned or invested funds (either borrowed funds or share premium or any other sources
or kind of funds) to any other person(s) or entity(ies), including foreign entities (intermediaries) with the understanding
(whether recorded in writing or otherwise) that the Intermediary shall
- 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 to or on behalf of ultimate beneficiaries.
(b) - The company has not received any fund from any person(s) or entity(ies), including foreign entities (funding party) with the
understanding (whether recorded in writing or otherwise) that the company shall
- 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 to or on behalf of ultimate beneficiaries.
40. Earnings per share
Basic and diluted earnings per share [EPS] computed in accordance with the Ind AS 33 ‘Earnings per share' :
Basic EPS is calculated by dividing the net profit for the year attributable to equity holders by the weighted average number of equity
shares outstanding during the year.
Diluted EPS is calculated by dividing the profit attributable to equity holders (after adjusting the profit impact of dilutive potential
equity shares, if any) by the aggregate of weighted average number of equity shares outstanding during the year and the weighted
average number of equity shares that would be issued on conversion of all the dilutive potential equity shares into equity shares.
The sensitivity analysis have been determined based on reasonably possible changes of the respective assumptions occurring at
the end of the reporting period, while holding all other assumptions constant.
The sensitivity analysis presented above may not be representative of the actual change in the Defined Benefit Obligation as it is
unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.
Furthermore, in presenting the above sensitivity analysis, the present value of the Defined Benefit Obligation has been calculated
using the projected unit credit method at the end of the reporting period, which is the same method as applied in calculating the
Defined Benefit Obligation as recognised in the balance sheet.
There was no change in the methods and assumptions used in preparing the sensitivity analysis from prior years.
c. Compensated absences
(i) The principal assumptions used for the purposes of the actuarial valuations towards Privilege Leave liability were as
follows :
46. Disclosure relating to employee stock option scheme
The Company has two employee stock option schemes viz. CSL Employee Stock Option Scheme 2017 (“ESOS 2017”) and UGRO
Capital Employee Stock Option Scheme 2022 (“ESOS 2022”).
The ESOS 2017 was approved by the Board of Directors on August 13, 2018 and by the shareholders through postal ballot on May
7, 2018. Further, the shareholders of the Company at the Extraordinary General Meeting held on September 18, 2018 approved
ratification of the number of Options under the ESOS 2017.
The ESOS 2022 was approved by the Board of Directors on July 22, 2022 and by the shareholders through postal ballot on
September 4, 2022.
During the year, the Company had issued 120,000 (previous year 691,980) options representing equal numbers of equity shares of
Rs. 10 each.
50. Financial risk management
The Company has exposure to the following risks from financial instruments:
a. Credit Risk
b. Liquidity Risk
c. Market Risk
d. Operational Risk
The Company is exposed to a variety of risks such as credit risk, liquidity risk, market risk, operational risk etc. The Company has
therefore, invested in talent, processes and emerging technologies for building advanced risk and underwriting capabilities. The
Board of Directors has constituted a Risk Management Committee to address these risks. The Risk Management Committee's
mandate includes periodic review of the risk management policy, risk management planning, implementation and monitoring of
the risk management plan and mitigation of key risks. The risk owners are accountable to the Risk Committee for identification,
assessment, aggregation, reporting and monitoring of risks. The board of directors are responsible for providing overall risk
oversight, approving risk appetite, risk management policies and frameworks and providing adequate oversight for the decisions.
Risk Management team is engaged in defining a framework, overseeing enterprise wide risks and building a portfolio within
the risk appetite of the Company. The effective management of credit risk requires the establishment of appropriate credit risk
policies and processes. The Company has comprehensive and well-defined credit policies across various businesses, products
and segments, which encompass credit approval process for all businesses along with guidelines for mitigating the risks
associated with them. Credit underwriting is driven by a deep understanding of the selected segments, which forms proprietary
risk models and approaches. The Company believes in positive sector/sub-sector selection to source its business. The same
is done primarily through analytics and survey. Further, the Company has also developed sophisticated sector/sub-sector
scorecards, both statistical and expert. The proposals are appraised based on the understanding of these sector/sub-sectors.
A fine balance of sector knowledge, data analytics, touch and feel and digital process is used for underwriting the proposals.
Given the dynamic nature of the market, the credit policies are regularly reviewed and amended.
Management of Credit Risk
Write-off policy:
Financial assets are written-off either partially or in their entirety only when the Company has stopped pursuing the recovery.
Any subsequent recoveries are credited to impairment on financial instruments in the Statement of profit and loss. The write¬
off decisions are taken by the management which would be based on suitable justification notes presented by the responsible
business / collections team.
Credit quality analysis:
The Company's policies for computation of expected credit loss (ECL) are set out below:
(I) ECL on Loans and advances
ECL is computed for loans portfolio of the Company:
Loan portfolio:
UGRO Capital Ltd is primarily engaged into SME lending and has segmented its lending portfolio based on the homogenous
nature of the group of borrowers.
Definition of default:
A default shall be considered to have occurred when any of the following criteria is met:
a) An account shall be tagged as NPA once the day end process is completed for the 91st day past due.
b) If one facility of a borrower is NPA, all the facilities of that borrower are to be treated as NPA.
Significant increase in credit risk (SICR) criteria:
(a) External credit rating going below investment grade rating.
(b) Significant changes in the expected performance and behaviour of the borrower, including changes in the payment
status of borrowers.
(c) Other qualitative parameters :
- existing or forecast adverse changes in business, financial or economic conditions that are expected to cause a
significant change in the borrower's ability to meet its debt obligations.
- an actual or expected significant adverse change in the regulatory, economic, or technological environment of the
sector that results in a significant change in the sector's ability to meet its debt obligations.
(d) Any other qualitative parameter.
A case which has scores above cut-off norms as set by the Company from time to time and current status is Stage 1 is termed
as low credit risk.
Forward looking factors:
Forward looking factors are considered while determining the significant increase in credit risk.
Staging criteria:
Following staging criteria is used for loans:
(i) Stage 1: 0-30 DPD;
(ii) Stage 2: 31-90 DPD and
(iii) Stage 3: > 90 DPD
Any deviation to the above classification, except as per the RBI Circular RBI/2021-2022/125 DOR.STR.REC.68/21.04.048/2021-
22 on Prudential norms on Income Recognition, Asset Classification and Provisioning pertaining to Advances - Clarification
dated November 12, 2021 shall be approved by the audit committee of the board (ACB).
Probability of default (PD%)
PDs are determined using internally developed model, which is a dynamic evaluation based on repayment history, corporate
ratings, specific market estimates as applicable to the respective portfolio segments from time to time.
Loss given default (LGD%)
Loss given default (LGD) is defined as the expected/estimated amount or percentage of exposure that may not be recovered
when a loan defaults.
LGD computation for secured loans is based on an internal model which factors post default recovery rates and collateral
value; for unsecured loans, LGD is taken as a standard estimate in line with the Foundational-Internal Rating Based (F-IRB)
approach. LGD for stage 1 & 2 assets, thus determined, is subject to a minimum floor of 20%. For Stage 3 loans, the Company
determines ECL requirement based on cash flows expected over the future time period.
Exposure at default (EAD)
Exposure at default represents the outstanding balance at the reporting date taking into account expected drawdowns on
committed facilities, including repayments of principal and interest, and accrued interest from missed payments.
(II) ECL on fixed deposits, investments, trade and other receivables
With respect to the fixed deposits and investments held by the Company, ECL provisioning has been computed taking guidance
from the RBI's IRB approach.
The Company has followed simplified approach of ECL provisioning on its trade and other receivables.
Applicable provisions for NBFCs covered under Ind AS:
The Company has prepared the financial statements in accordance with Ind AS and complied with the regulatory guidance
specified by the Master Direction - Reserve Bank of India (Non-Banking Financial Company - Scale Based Regulation)
Directions, 2023 issued by the Reserve Bank of India (RBI) vide their Notification No. RBI/DoR/2023-24/106 DoR.FIN.REC.
No.45/03.10.119/2023-24 dated October 19, 2023, as amended.
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. The Treasury team actively manages asset and liability positions in accordance with
the overall guidelines laid down by the regulator in the Asset liability management framework. The Company continues to maintain
a positive ALM.
The Company's ALCO monitors asset liability mismatches to ensure that there are no imbalances or excessive concentrations
on either side of the Balance Sheet. The Company continuously monitors liquidity in the market and as a part of its ALCO
strategy.
(vi) Institutional set-up for liquidity risk management :
We have an asset liability management committee (ALCO) that is formed in accordance with the Directions issued by the Reserve
Bank of India. Our Asset Liability Committee takes into account interest rate forecasts and spreads, the internal cost of funds,
operating results, projected funding needs, projected loan disbursements, liquidity position, loan loss reserves to outstanding loans,
funding strategies. This committee reviews the fund position, asset liability maturity profile, variance between forecast and actuals
of the concluded quarter, analysis of sensitivity of interest rates variation in various buckets, what if scenario analysis, etc. As far
as structural liquidity position is concerned, the Company maintained a positive cumulative mismatch across all the time buckets.
The Company has disclosed the below information as required by the Master Direction - Reserve Bank of India (Non¬
Banking Financial Company - Scale Based Regulation) Directions, 2023 issued by the Reserve Bank of India (“RBI”)
vide their Notification No. RBI/DoR/2023-24/106 DoR.FIN.REC.No.45/03.10.119/2023-24 dated October 19, 2023 (the
“Notification”), as amended, that enables the market participants to make an informed judgment about the soundness of
its liquidity risk management framework and liquidity position.
Liquidity Coverage Ratio (LCR)
C. Market Risk :
Market risk is the risk that the fair value of the future cash flows of financial instruments will fluctuate due to changes in market
variables such as interest rates.
The Company primarily deploys funds in bank deposits and liquid debt securities as a part of its liquidity management
approach. The Company regularly reviews its average borrowing/ lending cost including proportion of fixed and floating rate
borrowings/ loans so as to manage the impact of changes in interest rates.
Exposure to price risk:
The Company's exposure to price risk arises from investments held by the Company and is classified in the Balance Sheet
through fair value through statement of Profit and Loss.
Interest rate risk:
Interest rate risk is the risk where changes in market interest rates might adversely affect the Company's financial conditions.
The interest rate risk can be viewed from the two perspectives as mentioned below:
a. Earnings perspective - change in net interest income (NII) or net interest margin (NIM) due to change in interest rates.
b. Economic value perspective - change in market value of the company due to change in the company's assets, liabilities
and off-balance sheet positions due to variation in interest rates.
The board has established limits on the interest rate gaps for stipulated periods. The management monitors these gaps on a
regular basis to ensure that the positions are maintained within the established limits.
* The Principal outstanding amount as on March 31, 2025 and as on March 31, 2024 respectively is considered above.
** Impact on Statement of Profit and Loss up to 1 year, holding all other variables constant.
Foreign Currency Risk
Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. Foreign
currency risk for the Company arises mainly on account of the foreign currency borrowings. The Company manages this foreign
currency risk by entering into cross-currency interest rate swaps/ full currency swaps and forward contracts. When a derivative is
entered into for the purpose of being as hedge, the company negotiates the terms of those derivatives to match with the terms of the
hedge exposure. The Company's policy is to fully hedge its foreign currency borrowings at the time of drawdown and remain so till
repayment.
The Company holds the derivative financial instruments such as full currency swaps to mitigate the risk of changes in exchange rate
in foreign currency and floating interest rate. The counterparty for these contracts is generally a bank. These derivative financial
instruments are valued based on the quoted prices for similar assets and liabilities in active markets or inputs that are directly or
indirectly observable in the market place.
d. Operational Risk
Operational risk is the risk of loss arising from systems failure, human error, fraud or external events. When controls fail to operate
effectively, operational risks can cause damage to reputation, have legal or regulatory implications, or may lead to financial loss. The
Company cannot expect to eliminate all operational risks, but it endeavours to manage these risks through a control framework and
by monitoring and responding to potential risks. Controls include maker-checker controls, effective segregation of duties, access,
authorisation and reconciliation procedures, staff education and assessment processes, such as the use of internal audit.
Capital Management:
The Company's capital management objective is primarily to safeguard the business continuity. The Company's capital raising
policy is aligned to the macro-economic situations and incidental risk factors. The Company's cashflows are regularly monitored in
sync with the annual operating plans and the long-term and other strategic investment plans. The operational funding requirements
are met through debt and operating cash flows generated. The company believes that this approach would create shareholder value
in the long run. Also, the company has adopted a conservative approach for ALM management with primacy to adequate liquidity.
At present, a large portion of the company's resource base is equity. Therefore, the company enjoys a low gearing.
The Company maintains its capital structure in line with the economic conditions and the risk characteristics of its activities and the
board reviews the capital position on a regular basis.
d. Unrecognised deductible temporary differences, unused tax losses and unused tax credits :
There are no deductible temporary differences, unused tax losses and unused tax credits for which deferred tax assets have not
been recognised.
53. Fair value of financial instruments :
Fair value 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, regardless of whether that price is directly
observable or estimated using a valuation technique.
Ind AS 107, 'Financial Instruments - Disclosure' requires classification of the valuation method of financial instruments measured
at fair value in the Balance sheet using a three-level fair-value-hierarchy (which reflects the significance of inputs used in the
measurements). The hierarchy gives the highest priority to un-adjusted quoted prices in active markets for identical assets or
liabilities (Level 1 measurements) and lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair-
value-hierarchy under Ind AS 107 are described below:
Level 1: Level 1 hierarchy includes financial instruments measured using quoted prices.
Level 2: The fair value of financial instruments that are not traded in an active market is determined using valuation techniques
There were no transfers between Level 1 and Level 2 during the year.
Valuation methodologies of financial instruments not measured at fair value :
Short-term financial assets and liabilities :
For financial assets and financial liabilities that are of short-term nature, the carrying amount itself is considered as its fair value.
Such instruments include: other financial assets and other financial liabilities.
Cash and cash equivalents and Bank balances other than cash and cash equivalents:
The carrying amount itself is considered as its fair value. Impairment loss allowance is not part of above disclosure.
Loans and advances to customers:
The fair values of loans and receivables are calculated using a portfolio-based approach, grouping loans as far as
possible into homogenous groups based on similar characteristics. The fair value is then extrapolated to the portfolio using
discounted cash flow models that incorporate interest rate estimates considering all significant characteristics of the loans.
For loans having contractual residual maturity less than one year, the carrying value has been considered as fair value.
Impairment loss allowance and adjustments related to effective interest rate are not part of above disclosure.
Debt securities and Borrowings:
The fair values of these instruments are estimated by determining the price of the instrument taking into consideration the origination
date, maturity date, coupon rate, actual or approximation of frequency of interest payments and incorporating the actual or estimated/
proxy yields of identical or similar instruments through the discounting factor. For instruments, having contractual residual maturity
less than one year, the carrying value has been considered as fair value.
b. Assignment and Colending
The Company has sold some loans (measured at amortised cost) by way of direct bilateral assignment and co-lending, as a source
of finance.
As per the terms of these deals, since substantial risk and rewards related to these assets were transferred to the buyer, the assets
have been de-recognised from the Company's balance sheet.
The table below summarises the carrying amount of the derecognised financial assets measured at amortised cost and the gain/
(loss) on derecognition, per type of asset.
2. Exchange traded interest rate (IR) derivatives
The Company has not entered into any exchange traded derivative.
3. Disclosures on risk exposure and derivatives
Qualitative Disclosures
I. The Company undertakes the derivative transactions to prudently hedge the risk in context of a particular borrowing or diversify
sources of borrowing and to maintain fixed and floating borrowing mix. The Company does not indulge into any derivative trading
transaction. The Company reviews the proposed transaction and outlines any consideration associated with the transaction,
including identification of the benefits and potential risks (worst case scenario) ; an independent analysis of potential savings
from the proposed transaction. The Company evaluates all the risks inherent in the transaction viz. , counter party risk , market
risk, operational risk, basis risk etc.
II. Credit risk is controlled by restricting the counter parties that the Company deals with, to those who either have banking
relationship with the Company or are internationally renowned or can provide sufficient information. Market/ price risk arising
from the fluctuation of interest rates and foreign exchange rates or from other factors shall be closely monitored and controlled.
Normally transaction entered for hedging, will run over the life of the underlying instrument, irrespective of profit or loss.
Liquidity risk is controlled by restricting counter parties to those who have adequate facility, sufficient information and sizable
trading capacity and capability to enter into transactions in any market around the world.
During the year ended March 31, 2025 the penalty was levied due to a delay in the submission of record date intimations to the stock
exchanges. This delay was procedural in nature and did not have any material impact on the Company. Additionally, another penalty
relating to the appointment/continuation of Non-Executive Directors above the age of seventy-five was paid by the Company under
protest, while maintaining that the necessary approvals and compliance measures were duly undertaken.
During the year ended March 31, 2024 the penalties were levied prima facie for instances of delayed submissions of intimations with
stock exchanges about certain routine matters like CP redemption, record date intimation etc. which does not have material impact
on the Company.
3. Related party transactions:
Details of all material transactions with related parties has been given in note 43 of the financial statements.
j. Corporate Governance (refer Corporate Governance section in the annual report)
k. Breach of covenant
During the year ended March 31, 2025, there was no breach of covenant except as below-
1) The covenant of CRAR of 20% stipulated under the transaction documents of public Issuance of NCD (ISIN- INE583D07315)
having principal outstanding of Rs. 49.28 Crores and due for the payment on 28th September'2025 against the actual CRAR
of 19.41% as of March'2025.
2) The covenant for the ceiling limit of Repossessed Stock (SOD) of Rs.200.00 Crores stipulated under the transaction documents
of Term Loan of Rs. 50.00 Crores availed from Kotak Mahindra Investments Ltd. having outstanding balance of Rs.27.78 crores
as on 31st March 2025 and repayable by monthly installments till January'2026 as against the actual amount of Repossessed
Stock (SOD) of Rs.244.00 Crores.
There is no material impact on the cost or liquidity of the Company.
l. Divergence in asset classification and provisioning
As per Annex VII of the Master Direction - Reserve Bank of India (Non-Banking Financial Company - Scale Based Regulation)
Directions, 2023 issued by RBI, divergence is required to be reported if either or both of the below conditions are satisfied:
(i) The additional provisioning requirements assessed by the RBI exceeds 5 percent of the reported profits before tax and
impairment loss on financial instruments for the reference period
(ii) The additional Gross NPAs identified by the RBI exceeds 5 percent of the reported Gross NPAs for the reference period.
Since the above conditions are not satisfied, no divergence in asset classification and provisioning is required to be reported.
69 During the year ended March 31, 2025, the Company's Board of Directors and shareholders through their approval
dated May 02, 2024 and June 01, 2024 respectively, had approved the acquisition of Datasigns Technologies
Private Limited (“DTPL”), a prominent Embedded Finance Fintech platform, for an enterprise value of Rs.
4,500 lakh through a combination of equity and cash consideration. Necessary approvals from the regulators
are under consideration till date. Post this acquisition, DTPL will become a subsidiary of the Company.
70. Previous year figures have been regrouped wherever necessary to conform to/ with the current year classification/
disclosure.
The accompanying notes are an integral part of the financial statements.
For Sharp & Tannan Associates For and on behalf of the Board of Directors of
Chartered Accountants UGRO CAPITAL LIMITED
Firm's Registration Number : 109983W
Sd/- Sd/- Sd/-
Tirtharaj Khot Shachindra Nath Hemant Bhargava
Partner Vice Chairman & Independent Director and
Managing Director Chairman - Audit Committee
Membership Number : (F) 037457 DIN : 00510618 DIN : 01922717
Sd/- Sd/-
Kishore Kumar Lodha Satish Kumar Chelladurai
Chief Financial Officer Company Secretary
Place : Mumbai Place : Mumbai Place : Mumbai
Date : April 26, 2025 Date : April 26, 2025 Date : April 26, 2025
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