k. IND AS - 37 Provisions Contingent liabilities and contingent assets :-
The Company creates a provision when there is present obligation as a result of a past event that probably requires an outflow
of resources and a reliable estimate can be made of the amount of the obligation.
A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably
will not, require an outflow of resources. The Company also discloses present obligations for which a reliable estimate cannot
be made. When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is
remote, no provision or disclosure is made.
l. IND AS - 108 Operating Segments
The Company is engaged in the business segment of Financing, whose operating results are regularly reviewed by the entity's
chief operating decision maker to make decisions about resources to be allocated and to assess its performance, and for which
discrete financial information is available. Further other business segments do not exceed the quantitative thresholds as
defined by the Ind AS 108 on “Operating Segment”. Hence, there are no separate reportable segments, as required by the Ind
AS 108 on “Operating Segment”.
m. Cash and Cash Equivalents
Cash and cash equivalents comprise of cash at banks and on hand and short-term deposits with an original maturity of three
months or less, which are subject to an insignificant risk of changes in value. For the purpose of the statement of cash flows,
cash and cash equivalents consist of cash and short- term deposits, as defined above, net of outstanding bank overdrafts if any,
as they are considered an integral part of the Company's cash management.
n. Significant accounting judgements, estimates and assumptions
The preparation of financial statements in conformity with the Ind AS requires the management to make judgments, estimates
and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the accompanying disclosure
and the disclosure of contingent liabilities, at the end of the reporting period. Estimates and underlying assumptions are
reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised
if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and
future periods. Although these estimates are based on the management's best knowledge of current events and actions,
uncertainty about these assumptions and estimates could result in the outcomes requiring a material adjustment to the
carrying amounts of assets or liabilities in future periods.
In particular, information about significant areas of estimation, uncertainty and critical judgments in applying accounting
policies that have the most significant effect on the amounts recognized in the financial statements is included in the following
notes:
i) Business Model Assessment
Classification and measurement of financial assets depends on the results of the SPPI and the business model test. The
Company determines the business model at a level that reflects how groups of financial assets are managed together to
achieve a particular business objective. This assessment includes judgement reflecting all relevant evidence including how
the performance of the assets is evaluated and their performance measured, the risks that affect the performance of the
assets and how these are managed and how the managers of the assets are compensated. The Company monitors financial
assets measured at amortised cost or fair value through other comprehensive income that are derecognised prior to their
maturity to understand the reason for their disposal and whether the reasons are consistent with the objective of the
business for which the asset was held. Monitoring is part of the Company's continuous assessment of whether the business
model for which the remaining financial assets are held continues to be appropriate and if it is not appropriate whether
there has been a change in business model and so a prospective change to the classification of those assets.
ii) Effective Interest Rate (EIR) Method
The Company's EIR methodology, recognises interest income using a rate of return that represents the best estimate of a
constant rate of return over the expected behavioural life of loans given and recognises the effect of potentially different
interest rates at various stages and other characteristics of the product life cycle (including prepayments and penalty
interest and charges).
This estimation, by nature, requires an element of judgement regarding the expected behaviour and life-cycle of the
instruments, probable fluctuations in collateral value as well as expected changes to India's base rate and other fee
income/expense that are integral parts of the instrument.
iii) Impairment of loans portfolio
The measurement of impairment losses across all categories of financial assets requires judgement, in particular, the
estimation of the amount and timing of future cash flows and collateral values when determining impairment losses and
the assessment of a significant increase in credit risk. These estimates are driven by a number of factors, changes in which
can result in different levels of allowances.
It has been the Company's policy to regularly review its models in the context of actual loss experience and adjust when
necessary.
iv) Defined employee benefit assets and liabilities
The cost of the defined benefit gratuity plan and the present value of the gratuity obligation are determined using
actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments
in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to the
complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes
in these assumptions. All assumptions are reviewed at each reporting date.
v) Fair Value Measurement
When the fair values of financial assets and financial liabilities recorded in the balance sheet cannot be measured based on
quoted prices in active markets, their fair value is measured using various valuation techniques. The inputs to these
models are taken from observable markets where possible, but where this is not feasible, a degree of judgment is required
in establishing fair values. Judgments include considerations of inputs such as liquidity risk, credit risk and volatility.
Changes in assumptions about these factors could affect the reported fair value of financial instruments.
For B. B. Gusani & Associates [FRN: 0140875W]
Chartered Accountants Karnavati Finance Limited
Bhargav Gusani
Proprietor Akanksha Rai Kush R Morzaria Raman P Morzaria Jay R Morzaria
[M. No. 120710] Company Secretary Chief Financial Officer Whole Time Director Managing Director
UDIN: 25120710BMHTRW9288 PAN: BFZPR9132P PAN: BAJPM1377E DIN: 00203310 DIN: 02338864
Date : May 29, 2025 Date: May 29, 2025 Date : May 29, 2025 Date : May 29, 2025 Date : May 29, 2025
Place: Jamnagar Place: Mumbai Place: Mumbai Place: Mumbai Place: Mumbai
| 