1. CORPORATE INFORMATION

Capital First Limited (the ‘Company’ or ‘CFL’) is a public limited company domiciled in India and incorporated on October 18, 2005 under the provisions of the Companies Act, 1956. The Company has received a Certificate of Registration from the Reserve Bank of India (‘RBI’) on April 10, 2006 to commence / carry on the business of Non-Banking Financial Institution (‘NBFC’) without accepting public deposits.

1.1 During the current year, the Board of Directors of the Company at its meeting held on January 13, 2018, has approved a composite scheme of amalgamation, in terms of Sections 230-232 of Companies Act, 2013, of the Company, Capital First Home Finance Limited and Capital First Securities Limited (together the “Amalgamating Companies”) with IDFC Bank Limited (“Amalgamated Company”). The Competition Commission of India has, at its meeting held on March 07, 2018, considered the proposed combination and approved the same under sub-section (1) of Section 31 of the Competition Act, 2002. The National Housing Bank, vide its letter dated February 19, 2018, has intimated their no objection to the aforesaid amalgamation subject to compliance with the applicable provisions of relevant Acts, Rules, Regulations, etc. in the matter. BSE Limited (“BSE”) has, vide its letter dated March 14, 2018, given its prior approval for the aforesaid amalgamation with respect to the Amalgamated Company’s trading membership in the Currency Derivative Segment of BSE. National Stock Exchange of India Limited (“NSE”) has, vide its letter dated March 26, 2018, given its prior approval for the aforesaid amalgamation with respect to the Amalgamated Company’s trading membership in the Currency Derivative Segment of NSE. The said scheme remains subject to the receipt of approval from the Reserve Bank of India and other statutory and regulatory approvals, including the approvals of the relevant stock exchanges, Securities & Exchange Board of India, the National Company Law Tribunal, and the respective shareholders and creditors of the Amalgamating Companies and the Amalgamated Company.

2. BASIS OF PREPARATION OF FINANCIAL STATEMENTS

The financial statements have been prepared to comply in all material respects with the Accounting Standards (‘AS’) notified under section 133 of the Companies Act, 2013 (the ‘Act’) read together with paragraph 7 of the Companies (Accounts) Rules, 2014 and other accounting principles generally accepted in India (IGAAP) and as per the guidelines issued by Reserve Bank of India (‘RBI’) as applicable to a Non-Banking Financial (Non-deposit accepting or holding) Companies (‘NBFC Regulation’). The financial statements have been prepared on an accrual basis and under the historical cost convention. The notified Accounting Standards (AS) are followed by the Company insofar as they are not inconsistent with the NBFC Regulation.

a. Terms / Rights attached to equity shares:

The Company has only one class of equity shares having a par value of Rs.10 per share. Each holder of equity shares is entitled to one vote per share. The dividend, if any is proposed by the Board of Directors and is subject to the approval of the shareholders in the ensuing Annual General Meeting. In the event of liquidation of Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.

Note:

(i) As per Section 45-IC of Reserve Bank of India Act, 1934 every non-banking financial company shall create a reserve fund and transfer therein a sum not less than twenty per cent of its net profit every year as disclosed in the Statement of profit and loss and before any dividend is declared. No appropriation of any sum from the reserve fund shall be made by the non-banking financial company except for the purpose as may be specified by the Reserve Bank of India from time to time and every such appropriation shall be reported to the Reserve Bank of India within twenty-one days from the date of such withdrawal. The said amount has been transferred at the end of the Financial Year.

(ii) The Board of Directors, at its meeting held on May 10, 2017 recommended a dividend of Rs.2.60/- per Equity Share. The dividend had been declared in the Annual General Meeting held on July 4, 2017 and has been paid on and after July 06, 2017.

a. Security details for secured redeemable non-convertible debentures

1 Debentures of Rs.74,000.00 lakhs (Previous Year: Rs.94,000.00 lakhs) are secured by first pari-passu charge on the fixed asset owned by the Company and first exclusive charge on the standard receivables of retail and corporate loan assets and other current assets of the Company.

2 Debentures of Rs.749,320.00 lakhs (Previous Year: 298,220.00 lakhs) are secured by first pari-passu charge on the fixed asset owned by the Company and first pari-passu charge by way of hypothecation, over standard present and future receivables.

3 The total asset cover required thereof has been maintained as per the terms and conditions stated in the respective Debenture Trust Deeds.

c. Security details for secured term loans

1. Term loans of Rs.514,936.50 lakhs (Previous year: Rs.487,939.86 lakhs) is secured by way of first pari passu charge on receivables of retail, wholesale credit and current assets of the Company.

2. Term loans of Rs.118,666.66 lakhs (Previous Year: Rs.111,500.00 lakhs) is secured by way of first exclusive charge on receivables of the Company.

Interest rate range from 8.60% p.a to 11.00% p.a as at March 31, 2018

These debentures have a ‘Call Option’ which may be exercised by the Company only after the instrument has run for a period of ten years from the date of allotment. Further, call option shall be exercised by the Company only with the prior approval of Reserve Bank of India (RBI) and as per RBI guidelines. It also have a coupon rate step-up option of 100 bps, which shall be exercised only once during the whole life of the instrument, in conjunction with the Call Option, after the lapse of 10 years from the date of allotment of issue. The coupon rate will be higher by 100 bps for subsequent years if Call Option is not exercised by the Company. The claim of the investors shall be pari passu among themselves and with other subordinated indebtedness of the Company, superior to the claims of investors in equity shares and subordinate to the claims of all other unsecured creditors and depositors of the Company, as regards repayment of principal and interest by the Issuer.

f. Details of unsecured term loans from others:

The Company had raised Rs.3,642.00 Lakhs at the rate of 8.50% (Previous Year Rs.3,455.00 lakhs at the rate of 8.50%) by way of Term Loan from Others, which is repayable on March 31, 2019 (Previous Year March 31, 2019) i.e. 2 year from the date of its disbursement. By mutual consent, same can also be repaid prior to its scheduled repayment date without the levy of any prepayment penalty or charges.

Disclosure under Micro, Small and Medium Enterprises Development Act, 2006

Based on and to the extent of the information received by the company from the suppliers during the year regarding their status under the Micro,Small and Medium Enterprises Development Act, 2006 (MSMED Act) and relied upon by the auditors, there are no amounts due to MSME as at March 31, 2018.

*Book value of Non-convertible debentures is taken as market value since market quotes are not available in the absence of trades.

**In earlier years, the Board of Directors decided to discontinue broking business carried on through its subsidiary Capital First Securities Limited (CFSL). At the time of discontinuance of broking business of CFSL, the Company was carrying impairtment provision of Rs.5,841.73 lakhs. Thereafter CFSL started other business activity which has resulted in consistent income and profitability.The management believes that the provision for diminution needs to be reversed to the extent of CFSL’s net worth. Accordingly Rs.2,936.75 lakhs has been reversed. However, this has no impact on the consolidated financial statements of the Company.

Note (ii)

In earlier years, the Board of Directors decided to discontinue broking business carried on through its subsidiary Capital First Securities Limited (CFSL). At the time of discontinuance of broking business of CFSL, the Company was carrying impairtment provision of Rs.5,841.73 lakhs. Thereafter CFSL started other business activity which has resulted in consistent income and profitability.The management believes that the provision for diminution needs to be reversed to the extent of CFSL’s net worth. Accordingly Rs.2,936.75 lakhs has been reversed. However, this has no impact on the consolidated financial statements of the Company.

3. Post-Employment Benefit Plans

Every employee who has completed five years or more of service gets a gratuity on departure at 15 days salary (last drawn) for each completed year of service. Gratuity expense has been included in ‘Contribution to provident fund and other funds’ under Personnel expenses.

The following table summaries the components of net benefit expense recognized in the statement of profit and loss and amounts recognized in the balance sheet for the respective plans.

The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.

Since the Company has not funded its gratuity liability there are no returns on the planned assets and hence the details related to changes in fair value of assets have not been given.

ESOS 2007

No further options were granted during the year under this scheme. Options under this scheme will vest after the expiry of 3 years from the date of grant. All the options are exercisable within 5 years from the date of vesting or 10 years from the date of grant, whichever is later.

ESOS 2008

No further options were granted during the year under this scheme. All the options are exercisable within 5 years from the date of vesting or 10 years from the date of grant, whichever is later.

ESOS 2009

No further options were granted during the year under this scheme. All the options in respect of earlier grant are exercisable within 5 years from the date of vesting or 10 years from the date of grant, whichever is later.

ESOS 2011

No further options were granted during the year under this scheme. All the options are exercisable within 5 years from the date of vesting or 10 years from the date of grant, whichever is later.

ESOS 2012

No further options were granted during the year under this scheme. All the options are exercisable within 5 years from the date of vesting or 10 years from the date of grant, whichever is later.

ESOS 2014

No further options were granted during the year under this scheme. All the options are exercisable on completion of 5 years from the effective grant date (i.e April 2, 2014) but prior to expiry of 10 years from the effective grant date.

ESOS 2016

No further options were granted during the year under this scheme. The options will vest in graded proportion of 20% each year after expiry of 1,2,3,4 and 5 years respectively. All the options are exercisable on completion of 5 years from the date of grant or 6 months from the date of vesting whichever is later.

ESOS 2017

The Nomination and Remuneration Committee of the Board of Directors through Circular Resolution dated July 13, 2017 has granted options in respect of 910,000 equity shares at an exercise price of Rs.709.75 to eligible employees, Circular Resolution dated September 14, 2017 has granted options in respect of 950,000 equity shares at an exercise price of Rs.799.85 to eligible employees, Circular Resolution dated December 6, 2017, has granted options in respect of 10,000 equity shares at an exercise price of Rs.695.55 to eligible employees. The options will vest in graded proportion of 20% each year after expiry of 1,2,3,4 and 5 years for stock options granted on July 13, 2017, December 6, 2017 and for stock options granted on September 14, 2017, Options will vest completely after one year from the date of grant. All the options are exercisable within a period of 5 years from the date of grant or 6 months from the date of vesting of respective options, whichever is later.

ESOS 2017-CMD

The Nomination and Remuneration Committee of the Board of Directors at its meeting held on December 18, 2017, has granted options in respect of 15,00,000 equity shares to Chairman and Managing Director at an exercise price of Rs.799.85. All the options granted under this scheme (viz.100% of Options) shall vest after five years from Effective Date of Grant and shall be capable of being Exercised within a period of 1 (One) years from the Date of Vesting of Options.

The fair value of the stock options granted during the year have been calculated using Black Scholes Options Pricing Model and the significant assumptions made in this regard are as follows:

4. Segment Reporting

Since the Company has only one reportable business segment “loans given” as primary segment and it operates in a single geographical segment within India, no disclosure is required to be given as per Accounting Standard - 17 ‘Segmental Reporting’ as notified under Section 133 of the Companies Act, 2013 (‘the Act’) read together with paragraph 7 of the Companies (Accounts) Rules, 2014.

Geographical Segments:

The Company operates solely in one Geographic segment namely “Within India” and hence no separate information for Geographic segment wise disclosure is required.

5. Operating Leases

The Company’s significant leasing arrangements are in respect of operating leases are for premises (residential and office) which are renewable on mutual consent at agreed terms. Certain agreements provide for cancellation by either party or certain agreements contains clause for escalation and renewal of agreements. The non-cancellable operating lease agreements are ranging for a period 36 to 60 months. There are no sub leases.

6. Pursuant to circular no RBI/2017-18/129- DBR.No.BP.BC.100/21.04.048/2017-18 dated February 7, 2018 issued by the Reserve Bank of India (RBI) which permits regulated entities to defer the down grade of an account of micro, small and medium enterprise under the Micro,Small and Medium Enterprises (MSED) Act, 2006, that was standard as on January 31, 2018, the Company has not opted for 180 days relaxation entended by RBI for recognition of loan as Non-Performing Assets (‘NPA’).

7. The Company’s pending litigations comprise of claims against the Company primarily by the customers and proceedings pending with Tax authorities. The Company has reviewed all its pending litigations and proceedings and has adequately provided for where provisions are required and disclosed the contingent liabilities where applicable, in its financial statements. The Company does not expect the outcome of these proceedings to have a material adverse effect on its financial results at March 31, 2018. Refer note 30 for details on contingent liabilities.

8. The Company has a process whereby periodically all long term contracts (including derivative contracts) are assessed for material foreseeable losses. At the year end, the Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses.

9. The Board of Directors have recommended dividend of Rs.2.80 per share (28%) on each equity share having face value of ‘10/each. The proposed equity dividend and dividend distribution tax thereon are not accounted as liabilities in fiscal 2017-18 in accordance with revised AS-4 “Contingencies and events occuring after balance sheet date”.

10 During previous year, the Board of Directors vide Circular Resolution dated December 14, 2016 had allotted 4,780,000 equity shares of the Company of Rs.10/- each, at the premium of ‘702.70 per equity shares on preferential basis amounting to Rs.34,067.06 lakhs. The aforesaid allotment was subject to lock-in requirements as per the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009, as amended from time to time, with regard to said Preferential Issue.

11. Additional information as per guidelines issued by the Reserve Bank of India is respect of Non-Banking Financial (Non-deposit accepting or holding) Systemically Important (NBFC-ND-SI) is given in Annexure 2.

12. The disclosures regarding details of specified bank notes (SBN) held and transacted during 8 November 2016 to 30 December 2016 has not been made since the requirement does not pertain to financial year ended 31 March 2018. Corresponding amounts as appearing in the audited Standalone financial statements for the year ended 31 March 2017 have been disclosed:

In the ordinary course of business, Company’s collection agencies had collected cash and customers had directly deposited cash amounting to Rs.3,802.61 lakhs as part of the loan repayments in the collection bank account of the Company during the period from November 9, 2016 to December 30, 2016. The denomination wise details of such cash had been confirmed by the Company’s bankers.

13. Previous year’s amounts have been audited by predecessor auditors.

14. Figures for previous year have been regrouped/ rearranged wherever necessary, to conform to current year’s classification.