l) Provision and contingencies
The Company makes a provision when there is a present obligation as a result of a past event, where the outflow of economic resources is probable and a reliable estimate of the amount of the obligation can be made.
A disclosure is made for a contingent liability when there is a:
- possible obligation, the existence of which will be confirmed by the occurrence/non-occurrence of one or more uncertain events, not fully within the control of the Company;
- present obligation, where it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and
- present obligation, where a reliable estimate cannot be made.
When there is a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made.
m) Cash and cash equivalent
Cash and cash equivalents comprise cash at bank and in hand and short-term bank deposits with an original maturity of three months or less.
n) Earnings per share
Basic earnings per share are calculated by dividing the net profit or loss for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year.
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 potential dilutive equity shares.
o) Recent accounting prouncements Standards issued but not yet effective:
In March 2023, the Ministry of Corporate Affairs issued the Companies (Indian Accounting Standards) Amendment Rules, 2023 which amended certain Ind AS as explained below:
1) Ind AS 1 - Presentation of Financial Statements
- the amendment prescribes disclosure of material accounting policies instead of significant accounting policies. The impact of the amendment on the Financial Statements is expected to be insignificant basis the preliminary evaluation"
2) Ind AS 8 - Accounting Policies, Changes in Accounting Estimates and Errors - the
amendment added definition of accounting estimate and clarifies what is accounting estimate and treatment of change in the accounting estimate and accounting policy. There is no impact of the amendment on the Financial Statements basis the preliminary evaluation.
3) Ind AS 12 - Income taxes - the definition of deferred tax asset and deferred tax liability is amended to apply initial recognition exception
on assets and liabilities that does not give rise to equal taxable and deductible temporary differences. There is no impact of the amendment on the Financial Statements basis the preliminary evaluation.
The above amendments are effective from annual periods beginning on or after 151 April, 2023.
p) Impairment of financial instruments
The Company uses 'Expected Credit Loss' (ECL) model, for evaluating impairment of financial assets measured at amortized cost or FVTOCI, except for investments in equity instruments. Company follows a 'three-stage' model for impairment based on changes in credit quality since initial recognition.
Stage 1 (Performing Assets) - includes financial assets that have not had a significant increase in credit risk since initial recognition or that have low credit risk at the reporting date. For these assets, 12-month ECL is recognized and interest income is calculated on the gross carrying amount of the assets (that is, without deduction for credit allowance). 12-month ECL are the portion of ECL that results from default events on a financial instrument that are possible within 12 months after the reporting date, if the credit risk has not significantly increased since initial recognition.
Stage 2 (Underperforming Assets with significant increase in credit risk since initial recognition)
- includes financial instruments that have had a significant increase in credit risk since initial recognition (unless they have low credit risk at the reporting date) but that do not have objective evidence of impairment. For these assets, lifetime ECL are recognized, but interest income is calculated on the gross carrying amount of the assets. Lifetime ECL are the expected credit losses that result from all possible default events over the expected life of the instrument.
Stage 3 (Non-performing or Credit-impaired assets)
- includes financial assets that have objective evidence of impairment at the reporting date. For these assets, lifetime ECL is recognized.
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 provisions of the Indian Companies Act, 2013 ("the Companies Act").
(ii) Share Warrants: it is a document issued by the company under its common seal, stating that its bearer is entitled to the shares or stock specified therein. Share warrants are negotiable instruments. They are transferable by mere delivery without registration of transfer.
(iii) Retained earnings: It represents unallocated/un-distributed profits of the Company. The amount that can be distributed as dividend by the Company as dividends to its equity shareholders is determined based on the separate financial statements of the Company and also considering the requirements of the Companies Act, 2013. Thus amount reported above are not distributable in entirety.
(iv) Reserve fund in terms of section 45-IC(1) of the Reserve Bank of India Act, 1934: Reserve fund is created as per the terms of section 45-IC(1) of the Reserve Bank of India Act, 1934 as a statutory reserve.
(v) ESOP Reserve: ESOP stands for employee stock ownership plan. An ESOP grants company stock to employees, often based on the duration of their employment.
19(C) EMPLOYEE SHARE BASED PAYMENTS
The Company has established employees stock options plan, 2022 (ESOP Scheme-Moongipa Securities Limited Employee Stock Option Scheme-2022) for its employees by passing a resolution through postal ballot e-voting dated November 27, 2022. The employee stock option plan is designed to provide incentives to the employees of the Group to deliver long-term returns and is an equity settled plan. The ESOP Scheme is administered by the Nomination and Remuneration committee. Participation in the plan is at the Nomination and Remuneration committee's discretion and no individual has a contractual right to participate in the plan or to receive any guaranteed benefits. Options granted under ESOP scheme would vest in not less than one year and not more than five years from the date of grant of the options. The Nomination and remuneration committee of the Company has approved multiple grants with related vesting conditions. Vesting of the options would be subject to continuous employment with the Company and hence the options would vest with passage of time. In addition to this, the Nomination and remuneration committee may also specify certain performance parameters subject to which the options would vest. Such options would vest when the performance parameters are met.
The above information regarding Micro, Small and Medium enterprises has been determined to the extent such parties have been identified on the basis of information available with the Company.
Micro, Small and Medium Enterprises Development
The Ministry of Micro, Small and Medium Enterprises has issued an Office Memorandum dated 26 August 2008 which recommends that the Micro and Small Enterprises should mention in their correspondence with its customers the Entrepreneurs Memorandum Number as allocated after filing of the Memorandum. Based on the information available with the management, as at 31 March 2024, no dues were outstanding to Micro and Small enterprises as defined under the MSMED Act. Further, the Company has not received any claim for interest from any supplier under the said Act till 31st March 2024.
31 SEGMENT REPORTING
The Company is engaged in the business of financing which as per the Indian Accounting Standard 108- Segment Reporting, is considered to constitute a single reportable primary segment which has similar risks and rewards for the purpose of the aforesaid standard. The Company operates in a single geographical segment, i.e. domestic and hence there are no reportable secondary segments.
32 OPERATING LEASES
The Company's significant leasing arrangements are in respect of operating leases taken for office premises. These are operating leases with irrevocable lease period not exceeding ten years in respect of any arrangement. Future minimum lease rentals payable as per lease agreements are as follows:
Credit risk is the risk of financial loss if a customer or counterparty fails to meet an obligation under a contract. Lending activities account for most of the Company's credit risk. Other sources of credit risk also exist in loans and transaction settlements. Credit risk is measured as the amount that could be lost if a customer or counterparty fails to make repayments. The maximum exposure to credit risk in the case of all the financial instruments is restricted to their respective carrying amount. Credit Risk is monitored through stringent credit appraisal, counter party limits and internal risk ranges of the borrowers. Exposure to credit risk is managed through regular analysis of the ability of all the customers and counterparties to meet interest and capital repayment obligations and by changing lending limits where appropriate. Company primarily offers loans secured by immovable property. In order to mitigate credit risk, the company also seeks collateral appropriate to the product segment. Other means of mitigating credit risk that the company uses are guarantees. The most common types of collateral the company receives, measured by collateral value, are mortgages on financial assets in the form of real estate.The company carries a Standard Assets Provision at 0.40 % on loans and advances.
37 FINANCIAL RISK MANAGEMENT
The company is exposed to various risk in relation to financial instruments. The company is exposed to market risk, credit risk and liquidity risk. The company risk activities are governed by appropriated policies and procedures and that financial risk are identified, measured and managed in accordance with the companies policies and risk objectives, which are summarized below:-
a) Market Risk
Market risk is the risk that the fair value of future cash flows of a financial instruments will fluctuate because of changes in market prices. Market risk comprises Interest rate risk and foreign currency risk. The company does not have any foreign currency risk since the company does not have any foreign currency exposure as on reporting date. The company does not have any interest rate risk as neither its borrowings nor its advances are at floating interest rate as on reporting date.
ii) Credit Quality Analysis
An impairment analysis is performed at each reporting date based on the facts and circumstances existing on that date to identify expected losses on account of time value of money and credit risk. The credit quality of Loans and advances measured at amortized cost is primarily assessed by the Days Past Due (DPD) status.
Inputs, assumptions and techniques used for estimating impairment
In assessing the impairment of financial assets under the expected credit loss model, the Company defines default when a loan obligation is overdue for more than 90 days.
Assessment of significant increase in credit risk
When determining whether the risk of default has increased significantly since initial recognition, the Company considers the DPD status of the loans. Credit risk is deemed to have increased significantly when an asset is more than 30 days past due (DPD)
Calculation of expected credit losses
ECL provisioning has been computed taking guidance from the RBI's IRB approach.
The Company has followed simplified approach of ECL provisioning on loan and advances.
Applicable provisions for NBFCs covered under Ind AS:
RBI vide circular no. RBI/2019-20/170 DOR (NBFC).CC.PD.No.109/22.10.106/2019-20 dated March 13, 2020, provides that NBFCs which are required to comply with Indian Accounting Standards (Ind AS) shall, as hitherto, continue to be guided by the guidelines duly approved by their board and as per the ICAI guidelines for recognition of the impairments.
The following table sets out information about the credit quality of financial assets measured at amortized cost.
Policy for Write off
The gross carrying amount of a financial asset is written off (either partially or in full) to the extent that there is no reasonable expectation of recovering the asset in its entirety or a portion thereof. This is generally 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 and when there is no reasonable expectation of recovery from the collaterals held. However, financial assets that are written-off could still be subject to enforcement activities in order to comply with the Company's procedures for recovery of amounts due.
iv) Collateral and other credit enhancements
Company would generally have its credit exposures backed by securities, either primary or collateral. Lending Policy of the Company prescribes Asset cover norms and collateral guidelines for its various product offering. The amount and type of collateral required depends on an assessment of the credit risk of the counterparty and product offered. Company grants loans against collateral of immovable property (Land, under construction projects, Ready property) including commercial and residential properties.
As collateral is a source of mitigating credit risk, assessment of the condition of the securities and their value is undertaken on a regular basis. There were no significant changes in the collateral policy of the company during the Financial Year 2023-2024.
Liquidity risk is the risk that the Company will encounter difficulties in meeting the obligations associated with its financial liabilities that are selected by delivering cash or other financial assets. The Company's approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company's reputation. The Company has in place an Asset-Liability Management Committee (ALCO) which functions as the operational unit for managing the Balance Sheet within the performance and risk parameters laid down by the Board and Risk Committee of the Board. ALCO reviews Asset Liability strategy and Balance Sheet management in relation to asset and liability profile. ALCO ensures that the objectives of liquidity management are met by monitoring the gaps in the various time buckets, deciding on the source and mix of liabilities, setting the maturity profile of the incremental assets and liabilities etc
Key principles adopted in the Company's approach to managing liquidity risk include:
a) Monitoring the Company's liquidity position on a regular basis, using a combination of contractual and behavioral modelling of balance sheet and cash flow information
b) Maintaining a high quality liquid asset portfolio or maintaining undrawn bank lines
c) Operating a prudent funding strategy which ensures appropriate diversification and limits maturity concentrations
The Company's principal sources of liquidity are cash and cash equivalents, undrawn cash credit & overdraft facilities from Banks, liquid asset portfolio like Mutual funds and the cash flow that is generated from operation.
The following are the remaining contractual maturities of financial liabilities at the reporting date. The amounts are gross and undiscounted, and include interest accrued till the reporting date.
45 DISCLOSURE PERTAINING TO RBI MASTER DIRECTION - RBL/DOR/2021-22/86 DOR STR.REC51/21.04.048/2021-22 RESERVE BANK OF INDIA (TRANSFER OF LOAN EXPOSURES) DIRECTIONS, 2021 DATED SEPTEMBER 24, 2021
(a) The Company has not transferred through assignment in respect of loans not in default during financial year ended March 31, 2024.
(b) The Company has not acquired any loans (not in default) through assignment during the financial year ended March 31, 2024.
(c) The Company has neither acquired nor transferred any stressed loans during the year ended March 31,2024.
46 PURSUANT TO RBI CIRCULAR ON PRUDENTIAL NORMS ON INCOME RECOGNITION, ASSET CLASSIFICATION AND PROVISIONING PERTAINING TO ADVANCES
Clarification dated November 12, 2021, the Company has taken necessary steps in accordance with the provision of the aforesaid circular. Further, on February 15, 2022, RBI has allowed a deferment of Para 10 of the aforesaid circular till September 30, 2022, pertaining to upgrade of non-performing account.
47 MORATORIUM IN ACCORDANCE WITH THE RESERVE BANK OF INDIA (RBI) GUIDELINES
Not Applicable
48 MANAGERIAL REMUNERATION
During the year, Company has not paid the managerial remuneration to the directors which exceeds the limit prescribed under section 197 and rules thereunder read with Schedule V of the Act.
49 RELATIONSHIP AND TRANSACTIONS WITH STRUCK OFF COMPANIES
The Company does not have any transactions with struck-off companies.
50 UNDISCLOSED INCOME
The Company does not have any transaction which is not recorded in the books of accounts but has been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961 (such as, search or survey or any other relevant provisions of the Income Tax Act, 1961).
iii) The Company has not received any funds (which are material either individually or in the aggregate) from any person or entity, including foreign entity ("Funding Parties"), 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 Funding Party ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
(iv) The Company has not been declared as wilful defaulter by any bank or financial institutions or other lender.
55 PRIOR PERIOD COMPARATIVES
Previous years figures have been regrouped and reclassified where necessary to confirm to current year's presentation.
As per our report of even date
For AKGVG & Associates For and on behalf of the Board of Directors of
Chartered Accountants SG Finserve Limited (formerly Moongipa Securities Limited)
Firm Registration No.018598N
Sd/- Sd/- Sd/- Sd/- Sd/-
Mohan Nayak Rahul Gupta Rohan Gupta Sahil Sikka Ritu Nagpal
Partner Director Director Chief Financial Officer Company Secretary
Membership No.029858 DIN- 07151792 DIN- 08598622 ICSI Membership
No. A38318
Date: 28/05/2024
Place: New Delhi
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