4.9 Provision, contingent liabilities and
contingent assets
a) Provisions
Provisions are recognized when the
Company has a present obligation (legal
or constructive) as a result of a past
event, and it is probable that an outflow of
resources embodying economic benefits
will be required to settle the obligation
and a reliable estimate can be made of
the amount of obligation. Provisions are
measured at the best estimate of the
expenditure required to settle the present
obligation, at the balances sheet date.
If the effect of the time value of money
is material, provisions are discounted to
reflect its present value using a current
pre-tax rate that reflects the current market
assessments of the time value of money
and the risks specific to the obligation.
When discounting is used, the increase in
the provision due to the passage of time
is recognized as a finance cost.
b) Contingent Liabilities
A disclosure for a contingent liability is
made when there is a possible obligation
arising from past events, the existence
of which will be confirmed only by the
occurrence or non-occurrence of one or
more uncertain future events not wholly
within the control of the Company or a
present obligation arising as a result of
past event that probably will not require
an outflow of resources or where a
reliable estimate of the obligation cannot
be made.
c) Contingent Assets
Contingent assets are not recognized
in the financial statements. However,
contingent assets are assessed
continually and if it is virtually certain
that an inflow of economic benefits will
arise, the asset and related income are
recognized in the period in which the
change occurs.
4.10 Earnings per share
Basic earnings per equity share is computed
by dividing net profit/ loss attributable to the
equity shareholders of the company by the
weighted average number of equity shares
outstanding during the financial year.
For the purpose of calculating diluted
earnings per share, the net profit or loss for
the year attributable to equity shareholders
and the weighted average number of shares
outstanding during the year are adjusted
for the effects of all dilutive potential equity
shares.
4.11 Leases
The determination of 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 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 or assets, even if that right is not
explicitly specified in an arrangement.
The Company has taken certain assets
on Operating Lease. Operating Lease is a
contract, which conveys the right to Lessee,
to control the use of an identified asset for a
period of time, the lease term, in exchange
for consideration. The Company assesses
whether a contract is, or contains, a lease on
inception.
The lease term is either the non-cancellable
period of the lease and any additional periods
when there is an enforceable option to extend
the lease and it is reasonably certain that the
Company will extend the term, or a lease
period in which it is reasonably certain that the
Company will not exercise a right to terminate.
The lease term is reassessed if there is a
significant change in circumstances.
At commencement, or on the modification, of
a contract that contains a lease component,
the Company allocates the consideration in
the contract to each lease component on the
basis of its relative stand-alone prices.
The Company recognizes a right-of-use
asset and a lease liability at the lease
commencement date. The right-of-use asset
is initially measured at cost, which comprises
the initial amount of the lease liability adjusted
for any lease payments made at or before the
commencement date, plus any initial direct
costs incurred and an estimate of costs to
dismantle and remove the underlying asset or
to restore the underlying asset or the site on
which it is located, less any lease incentives
received.
The right-of-use asset is amortized /
depreciated using straight-line method from the
commencement date to the end of the lease
term. If the lessor transfers ownership of the
underlying asset to the Company by the end
of the lease term or if the Company expects
to exercise a purchase option, the right-of-use
asset will be depreciated over the useful life
of the underlying asset, which is determined
on the same basis as the Company's other
property, plant and equipment. Right-of-use
assets are reduced by impairment losses, if
any, and adjusted for certain re-measurements
of the lease liability.
The lease liability is initially measured at the
present value of the total lease payments
due on the commencement date, discounted
using either the interest rate implicit in the
lease, if readily determinable, or more usually,
an estimate of the Company's incremental
borrowing rate on the inception date for a loan
with similar terms to the lease. The incremental
borrowing rate is estimated by obtaining
interest rates from various external financing
sources.
The lease liability is measured at amortized
cost using the effective interest method. It is
re-measured when there is a change in future
lease payments arising from a change in
an index or rate, if there is a change in the
Company's estimate of the amount expected to
be payable under a residual value guarantee,
if the Company changes its assessment of
whether it will exercise a purchase, extension
or termination option or if there is a revised
in-substance fixed lease payment. When
the lease liability is re-measured in this way,
a corresponding adjustment is made to the
carrying amount of the right-of-use asset, or is
recorded in the statement of profit or loss if the
carrying amount of the right-of-use asset has
been reduced to zero.
In accordance with Ind AS 116, the Company
does not recognize right-of-use assets and
lease liabilities for leases of low-value assets
and short-term leases i.e. leases with a lease
term of 12 months or less and containing no
purchase options. Payments associated with
these leases are recognized as an expense on
a straight-line basis over the lease term.
4.12 Statement of Cash flows:
For the purpose of Standalone Statement
of Cash Flows, cash and cash equivalents
comprise cash on hand, cash at banks,
short-term deposits with an original maturity
of three months or less and other short term
investments, that are readily convertible to
known amounts of cash and which are subject
to an insignificant risk of changes in value.
4.13 Impairment of Non-Financial Assets
The Company assesses, at each reporting
date, using external and internal sources,
whether there is an indication that a non¬
financial asset may be impaired and also
whether there is an indication of reversal of
impairment loss recognized in the previous
period/s. If any indication exists, or when annual
impairment testing for an asset is required,
the Company determines the recoverable
amount and impairment loss is recognized
when the carrying value of an asset exceeds
its recoverable amount.
The recoverable amount is determined:
- in the case of an individual asset, at the higher
of the asset's fair value less cost of sell and
value in use; and
- in the case of cash generating unit (a group of
assets that generates identified, independent
cash flows) at the higher of the cash generating
unit's fair value less cost to sell and value in
use.
In assessing value in use, estimated future
cash flows are discounted to their present
value using a pre-tax discount rate that effects
current market assessments of the time
value of money and the risks specific to that
asset. In determining fair value less costs of
disposal, recent market transactions are taken
into account. If no such transactions can be
identified, an appropriate valuation model is
used. These calculations are corroborated by
valuation multiples, quoted share prices for
publicly traded companies or other available
fair value indicators.
An impairment loss for an asset is reversed,
if and only if, the reversal can be related
objectively to an event occurring after the
impairment loss was recognized, the carrying
amount of an asset is increased to its revised
recoverable amount, provided that this
amount does not exceed the carrying amount
that would have been determined (net of any
accumulated amortization or depreciation)
had no impairment loss being recognized for
the asset in prior year/s.
4.14 Fair value measurement
The Company measures its qualifying financial
instruments at fair value on each Balance
Sheet date.
Fair value is the price that would be received
against sale of an asset or paid to transfer
a liability in an orderly transaction between
market participants at the measurement
date. The fair value measurement is based
on the presumption that the transaction to
sell the asset or transfer the liability takes
place in the accessible principal market or
the most advantageous accessible market as
applicable.
The Company uses valuation techniques that
are appropriate in the circumstances and for
which sufficient data is available to measure
fair value, maximizing the use of relevant
observable inputs and minimizing the use of
unobservable inputs.
All assets and liabilities for which fair value
is measured or disclosed in the financial
statements are categorized within the fair
value hierarchy into Level I, Level II and
Level III based on the lowest level input that
is significant to the fair value measurement as
a whole. For detailed information on the fair
value hierarchy, refer note no. 32.14.
For assets and liabilities that are fair valued in
the financial statements on a recurring basis,
the Company determines whether transfers
have occurred between levels in the hierarchy
by re-assessing categorization (based on the
lowest level input that is significant to the fair
value measurement as a whole) at the end of
each reporting period.
For the purpose of fair value disclosures, the
Company has determined classes of assets
and liabilities on the basis of the nature,
characteristics and risks of the asset or liability
and the level of the fair value hierarchy.
17.4 The Company has availed term loans and working capital facilities from various banks, however, slow down of
its lending business and increased level of non-performing / impaired loan portfolio, has impacted its cash flow /
liquidity, and the Company is un-able to service term loans and working capital facilities including interest thereon
to certain banks as detailed in para 17.3 above. As the proposals for restructuring / settlement submitted by the
Company was not accepted by the banks, and as in view of the Company the same was not justifiable considering
the present financial and business compulsions of the Company, it is in talks with the banks for reconsideration of
their decision and has also approached the Hon'ble Delhi High Court for necessary relief in the regard. The matter is
sub-judice. As the Company is reasonably hopeful that its proposals for restructuring / settlement which include the
waiver / reduction of interest will be finally approved / accepted, interest of Rs. 5,018.76 lakhs i.e. Rs. 1,459.32 lakhs
for the current year and Rs. 3,559.44 lakhs for the period upto 31 March, 2023, though accrued on these loans, has
not been provided in these financial statements.
22.1 Nature and purpose of other equity:
i Security Premium
Securities premium is used to record the premium on issue of shares. It can be utilised only for limited purposes in
accordance with the provisions of the Companies Act, 2013
ii Statutory Reserve as per Section 45-IC(1) of RBI 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.
iii Impairment Reserve
Reserve Bank of India (RBI) issued Notification No. DOR (NBFC).CC.PD.No.109/22.10.106/2019-20 dated 13
March, 2020 in respect of 'Implementation of Indian Accounting Standards' by NBFCs. In terms of the said circular,
in case where the impairment allowance under Ind AS 109 is lower than the provisioning required under Income
Recognition, Asset Classification and Provisioning (IRACP) Norms (including standard asset provisioning) issued by
RBI, the Company is required to appropriate the difference from their net profit after tax to “Impairment Reserve”. No
withdrawals are permitted from this reserve without prior permission from the Department of Supervision, RBI. Refer
Note. 32.17 in respect of the disclosure in respect of comparison between impairment allowance and provisioning
under IRACP Norms.
iv Retained Earnings
The profit / loss earned till date, less any transfers/appropriations to any other reserve, dividends or other distribution
paid to shareholders.
v Other Comprehensive Income / (Loss)
The other comprehensive income / (loss) till date, which is available for set off or adjustable only against such
income/loss in future.
The above information regarding dues to Micro, Small and Medium Enterprises has been determined to the extent
such parties have been identified on the basis of information collected with the Company.
32.3 Employee Benefits (Ind AS-19)
(a) Defined Benefit plans:
Gratuity : Payable on separation as per the Payment of Gratuity Act, 1972, as amended @ 15 days pay, for
each completed year of service to eligible employees who render continuous service of 5 years or more. The
Company's liability towards Gratuity is funded / managed by Life Insurance Corporation of India (LIC).
(b) Other Long-Term Benefit:
Compensated Absences : Employees of the Company are entitled to accumulate their earned/privilege leave
up to a maximum of 30 days which can be availed / utilized in coming year/s, while in service. During the
current year the amount of Rs. 0.61 lakhs has been credited (previous year: Rs. 0.49 lakhs has been debited)
in the Statement of Profit and Loss towards reversal of the excess provision based on actuarial valuation.
Notes:
• Transaction values are excluding taxes and duties.
• Related parties as defined under Ind AS 24 'Related Party Disclosures' have been identified based on
representations made by key managerial personnel and information available with the Company. All above
transactions are in the ordinary course of business and on arm's length basis
• Provisions for gratuity, compensated absences and other long-term service benefits are made for the Company
as a whole and the amounts pertaining to the Key Managerial Personnel are not specifically identified and
hence are not included above.
32.6 Leases.
Company's significant leasing arrangements are in respect of the premises (commercial premises, offices etc.) which
contain extension option after the initial contract period, the amounts recognized on account of leases are as under:
32.8 Corporate Social Responsibility (CSR):
The Company has constituted a CSR committee as required under Section 135 of the Companies Act, 2013, together
with relevant rules as prescribed in Companies (Corporate Social Responsibility Policy) Rules, 2014 ('CSR rules').
The CSR Committee had approved the CSR Policy and also identified the broad areas of CSR activities which it
propose to carry out viz. Child Education and Women Empowerment. The Company has made serious deliberations
and chosen the CSR programs which would be undertaken on a long term and continuous basis. Such programs will
benefit communities where the Company operates or likely to operate and create goodwill for the Company. As the
Company has incurred average net losses during the last three years, no amount is required to be spent on account
of CSR during the year ended 31st March, 2024 / 31st March, 2023.
32.9 Going Concern:
Accumulated losses of the earlier years and the substantial losses during the current year which are mainly due to non
carrying out the lending activities and substantial reduction in the recoveries from the borrowers / customers, have
resulted in erosion of substantial net worth and significant financial crunch being faced by the Company, and there are
defaults in the repayments of its borrowings, delays in payments of other liabilities/commitments including employees
and statutory dues etc. Also, Company's Net Owned Fund and Leverage Ratio are not in compliance of the Master
Direction - Reserve Bank of India (Non-Banking Financial Company - Scale Based Regulation) Directions, 2023
as amended from time to time issued vide notification no. RBI/DoR/2023-24/106 DoR.FIN.REC.No.45/03.10.119 /
2023-24 dated October 19, 2023, as updated / amended from time to time (“RBI Master Directions”). These events
/ conditions indicate the existence of uncertainty on the Company's ability to continue as a going concern. However,
the financial statements have been prepared on a going concern basis on the strength of continued support from
the promoters and considering the ongoing discussions / efforts for One Time Settlements (OTS) of borrowings and
Company's ability to generate adequate resources for the foreseeable future.
32.10 Disclosures as required under Master Direction-Reserve Bank of India (Non-Banking Financial Company - Scale
Based Regulation) Directions, 2023 as amended from time to time and other applicable directions/circulars are
enclosed vide Annexure - I.
32.11 Capital
The Company maintains an actively managed capital base to cover risks inherent in the business which includes
issued equity capital and other reserves attributable to equity holders of the Company. As an NBFC, the RBI requires
the Company to maintain a minimum capital to risk weighted assets ratio (“CRAR”) consisting of Tier 1 and Tier 2
capital of 15% of the aggregate risk weighted assets. Further, the total of the Tier 2 capital cannot exceed 100% of
the Tier 1 capital at any point of time. The capital management process of the Company ensures to maintain a healthy
CRAR at all the times.
Capital Management
The primary objectives of the Company's capital management policy is to maintain appropriate levels of capital
to support its business strategy taking into account the regulatory, economic and commercial environment. The
Company aims to maintain a strong capital base to support the risks inherent to its business and growth strategies.
The Company endeavors to maintain a higher capital base than the mandated regulatory capital at all times.
Planning
The Company's assessment of capital requirement is aligned to its planned growth which forms part of an annual
operating plan which is approved by the ALCO and also a long-range strategy. These growth plans are aligned to
assessment of risks- which include credit, liquidity and interest rate.
The Company monitors its capital to risk-weighted assets ratio (CRAR) on a yearly basis through its Assets Liability
Management Committee (ALCO).
The Company endeavors to maintain its CRAR higher than the mandated regulatory norm. Accordingly, increase in
capital is planned well in advance to ensure adequate funding for its growth.
The Company is also the provider of equity capital to its wholly owned subsidiary and associates and also provides
them with non-equity capital where necessary. These investments are funded by the Company through its equity
share capital and other equity which inter alia includes securities premium and retained earnings.
Regulatory capital
32.13 Fair Values
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 (i.e., an exit
price), regardless of whether that price is directly observable or estimated using a valuation technique.
In order to show how fair values have been derived, financial instruments are classified based on a hierarchy of
valuation techniques.
This note describes the fair value measurement of both financial and non-financial instruments.
Valuation framework
The Company has an internal fair value assessment team which assesses the fair values for assets qualifying for fair
valuation.
The Company's valuation framework includes:
• Benchmarking prices against observable market prices or other independent sources;
• Development and validation of fair valuation models using model logic, inputs, outputs and adjustments.
These valuation models are subject to a process of due diligence and validation before they become operational and
are continuously calibrated. These models are subject to approvals by various functions of the Company. Finance
function is responsible for establishing procedures, governing valuation and ensuring fair values are in compliance
with Indian accounting standards.
Valuation methodologies adopted
The fair value of the financial assets and liabilities is included at the amount at which the instrument could be
exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The following
methods and assumptions were used to estimate the fair values:
a. Fair values of strategic investments in equity instruments designated under FVOCI have been measured
under level 3.
b. Fair value of loans held under a business model that is achieved by both collecting contractual cash flows and
partially selling the loans through partial assignment to willing buyers and which contain contractual terms that
give rise on specified dates to cash flows that are solely payments of principal and interest are measured at
FVOCI. The fair value of these loans has been determined under level 3.
c. The Company has disclosed financial instruments such as cash and cash equivalents, other bank balances,
other financial assets and liabilities at carrying value because their carrying amounts are a reasonable
approximation of the fair values due to their short-term nature.
32.14 Fair Values Hierarchy
The Company uses the following hierarchy for determining and disclosing the fair value of financial instruments by
valuation technique:
Level 1: Valuation based on quoted market price: financial instruments with quoted prices for identical instruments in
active markets that the Company can access at the measurement date.
Level 2: Valuation based on using observable inputs: financial instruments with quoted prices for similar instruments
in active markets or quoted prices for identical or similar instruments in inactive markets and financial instruments
valued using models where all significant inputs are observable.
Level 3: Valuation technique with significant unobservable inputs: - financial instruments valued using valuation
techniques where one or more significant inputs are unobservable.
Disclosures of fair value measurement hierarchy for financial instruments are given below:
Credit risk
Credit risk is the risk of financial loss arising out of a customer or counterparty failing to meet their repayment
obligations to the Company. It has a diversified lending model and focuses on broad categories viz: business,
mortgages, and commercial lending. The Company assesses the credit quality of all financial instruments that are
subject to credit risk.
Classification of financial assets under various stages
The Company classifies its financial assets in three stages having the following characteristics:
Stage1: unimpaired and without significant increase in credit risk since initial recognition on which a 12-month
allowance for ECL is recognised;
Stage 2: a significant increase in credit risk since initial recognition on which a lifetime ECL is recognised;
Stage 3: objective evidence of impairment, and are therefore considered to be in default or otherwise credit impaired
on which a lifetime ECL is recognised.
Unless identified at an earlier stage, all financial assets are deemed to have suffered a significant increase in credit
risk when they are 90 days past due (DPD) and are accordingly transferred from stage 1 to stage 2. For stage 1 an
ECL allowance is calculated based on a 12-month Point in Time (PIT) probability weighted probability of default (PD).
For stage 2 and 3 assets a life time ECL is calculated based on a lifetime PD.
The Company has calculated ECL using three main components: a probability of default (PD), a loss given default
(LGD) and the exposure at default (EAD) along with an adjustment considering forward macro-economic conditions
[for a detailed note for methodology of computation of ECL please refer to significant accounting policies note no
4.3(i) to the financial statements].
Financial instruments other than loans were subjected to simplified ECL approach under Ind AS 109 'Financial
Instruments' and accordingly were not subject to sensitivity of future economic conditions.
The table below summarises the approach adopted by the Company for various components of ECL viz. PD, EAD
and LGD across product lines using empirical data where relevant
32.20 The Ministry of Corporate Affairs (MCA) has issued a notification Companies (Accounts) Amendment Rules, 2021,
which is effective from 1st April, 2023, states that every Company which uses accounting software for maintaining
its books of account shall use only the accounting software where there is a feature of recording audit trail of each
and every transaction, and further creating an edit log of each change made to books of account along with the
date when such changes were made and ensuring that the audit trail cannot be disabled. The Company has used
accounting software for maintaining its books of account which has feature of recording audit trail (edit log) facility
and the same has operated throughout the year for all relevant transactions recorded in the software, except in
certain components where the audit trail were not recorded / operating due to system limitations. Further, it was not
tempered at any time during the year.
32.21 During the previous year ended 31 March, 2023, Company had written off loans having gross amount (including
interest accrued thereon) of Rs. 5,080.47 lakhs and also reversed impairment loss allowance of Rs. 4,026.86 lakhs
held on these loans, as in view of the management, there was very low probability of recovery of these loans, however,
the litigation / recovery process are continued in the normal course. The reversal of impairment loss allowance on
these loans after their write off had also resulted in reversal of deferred tax assets of Rs. 1,013.48 lakhs during the
previous year. Further, during the year, an impairment loss allowance of Rs. 811.01 lakhs had been booked on the
investment and loan given to the Subsidiary Company, based on the latest assessment of its recoverability.
32.22 In absence of virtual uncertainty regarding availability of the sufficient taxable income in future, the deferred tax
assets has not been recognised on accumulated brought forwarded and current tax losses, however, has created
Deferred tax assets (net) of Rs. 322.57 lakhs during the current year mainly on impairment on loan and investment
in Subsidiary (as detailed in note 32.21 above) and had reversed the Deferred tax assets (net) of Rs. 863.52 lakhs
during the previous year, i.e. net of reversal of deferred tax assets of Rs. 1,013.48 lakhs on impairment loss on the
loans (as detailed in note 32.21 above) and creation of deferred tax liabilities of Rs. 149.96 lakhs on other temporary
differences.
32.23 Wilful Defaulter:
The Company has not been declared wilful defaulter by any bank or financial institution or other lender company, as
such the declaration as wilful defaulter is not applicable.
32.24 Relationship with Struck off Companies
The Company has the transactions with the company struck off under Section 248 of Companies Act, 2013 or Section
560 of Companies Act, 1956, as under:
32.26 The company did not have any transaction which had not been recorded in the books of accounts, which had been
surrendered or disclosed as income during the year in the tax assessments under the Income TaxAct, 1961.
32.27 The Company has not traded or invested in crupto currency or virtual currency during the year.
32.28 The company has not advanced or loaned or invested any funds (either from borrowed funds or share premium or
any other sources or kind of funds) to or in any other person or entity, including foreign entity (“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 provided any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
32.29 The Company has not received any funds 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 provided any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
32.30 Previous year's figures have been reclassified / regrouped wherever necessary to conform to current year
classification.
As per our report of even date
For S. P. Chopra & Co. For and on behalf of the Board of Directors of
Chartered Accountants Intec Capital Limited
Firm Registration No. 000346N
(Gautam Bhutani) (Sanjeev Goel) (S. K. Goel)
Partner Managing Director Director
Membership No.: 524485 DIN: 00028702 DIN: 00963735
Place: New Delhi (Vinod Kumar) (Radhika Garg)
Date: 21 June, 2024 Chief Financial Officer Company Secretary
M. No. ACS - 36587
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