Note 1: The overall provision for portfolio loans determined as per the above mentioned provisioning policy is subject to the provision prescribed in the NBFC Master Directions, 2016 for Non-Banking Financial Company - Micro Finance Institutions (NBFC-MFIs). These Directions require the total provision for portfolio loans to be higher of (a) 1% of the outstanding loan portfolio or (b) 50% of the aggregate loan installments which are overdue for more than 90 days and less than 180 days and 100% of the aggregate loan installments which are overdue for 180 days or more.

Such additional provision created in order to comply provisioning policy as applicable to NBFC-MFI is classified and disclosed in the Balance Sheet along with the contingent provision for standard assets

ii. Loans and advances other than portfolio loans are provided for at the higher of management estimates and provision required as per the NBFC Master Directions, 2016.

iii. Provision on securitized / managed portfolio is made as per the Company's provisioning policy for portfolio loans mentioned in (i) above net of losses, if any and subject to the maximum guarantee given in respect of these arrangements.

iv. All overdue loans including loans where the tenure of the loan is completed and in the opinion of the management any amount is not recoverable, are fully provided for / written off. t. Grants

Grants and subsidies from the government are recognized when there is reasonable assurance that (i) the company will comply with the conditions attached to them, and (ii) the grant/subsidy will be received.

When the grant or subsidy relates to revenue, it is recognized as income on a systematic basis in the statement of profit and loss over the periods necessary to match them with the related costs, which they are intended to compensate. Such grants are either be shown separately under 'other income' or deducted in reporting the related expense. Where the grant relates to an asset, it is recognized as deferred income and released to income in equal amounts over the expected useful life of the related asset.

Where the company receives non-monetary grants, the asset is accounted for on the basis of its acquisition cost. In case a non-monetary asset is given free of cost, it is recognized at a nominal value.

Government grants of the nature of promoters' contribution are credited to capital reserve and treated as a part of the shareholders' funds

(b) Terms/ rights attached to equity shares

The Company has only one class of equity shares having par value of '10 per share. Each holder of equity shares is entitled to one vote per share. Any dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting. Dividend declared and paid would be in Indian rupees.

In the event of liquidation of the 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.

(c) Aggregate number of shares issued For consideration other than cash during the period of five years immediately preceding the reporting date:

The Company has issued 4,605,383 shares (March 31, 2017: 3,298,526) during the period of five years immediately preceding the reporting date on exercise of options granted under stock option plans wherein part consideration was received in the form of services rendered to the Company.

2. Segment information

The Company operates in a single business segment i.e. financing, which has similar risks and returns for the purpose of Accounting standard 17 on 'Segment Reporting' specified under section 133 of the Companies Act 2013, read with rule 7 of the Companies (Accounts) Rules, 2014 and Companies (Accounting Standards) Amendment Rules, 2016. The Company 3

3. Related parties

a. Names of the related parties with whom transactions have been entered

Key Management Personnel Mr. M. R. Rao, Managing Director and Chief Executive

Officer

Mr. S. Dilli Raj, President (Resigned w.e.f October 28,

2016)

Mr. K.V. Rao, Chief Operating Officer (Resigned w.e.f January 31, 2018)

Mr. Ashish Damani, Chief Financial Officer Mr. Rajendra Patil, Company Secretary

Note: As the provisions for gratuity, leave benefits and stock option expenditure are made for the Company as a whole, the amounts pertaining to the Key Management Personnel are not specifically identified and included above.

4. Stock option scheme

The Company has provided various share-based payment schemes to its Directors and Employees. The plans in operation are Plan II (Other Independent Directors) and Plan III (Employees). The alphabet a, b,

c, etc. represents different grants made under these plans. During the year ended March 31, 2018, the following series were in operation:

The expected life of the stock option is based on historical data and current expectations and is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility for the one year period ended on the date of grant is indicative of future trends, which also may not necessarily be the actual outcome.

Effect of the share-based payment plans on the statement of profit and loss and on the financial position:

5 Retirement benefits

The Company has a defined benefit gratuity plan. Every employee who has completed five years or more of service is eligible for gratuity on cessation of employment and it is computed at 15 days salary (last drawn salary) for each completed year of service subject to limit of Rs.2,000,000 as per The Payment of Gratuity Act, 1972 as amended from time to time. The scheme is funded with an insurance Company in the form of a qualifying insurance policy.

The following tables summaries the components of net benefit expense recognized in the statement of profit and loss and the funded status and amounts recognized in the Balance Sheet for the gratuity plan.

*Professional fees for the year ended March 31, 2017 includes Rs.13,826,493 towards consultancy services in connection with the Qualified Institutional Placement adjusted to securities premium account as per section 52 of the Companies Act, 2013. The expenditure in foreign currency does not include commission payable to three foreign directors (Previous year: Rs. 10,800,000) as the amount payable to individual directors shall be determined by the Board of Directors, in accordance with the shareholder resolution passed at 12th Annual General Meeting held on September 23, 2015. However, the total amount payable to all directors has been charged to the statement of profit and loss.

6. Leases (operating lease)

Office Premises:

Head office, registered office and branch office premises are obtained on operating lease. The branch office premises are generally rented on cancellable term ranging from twelve months to thirty six months with or without escalation clause, however none of the branch lease agreement carries non-cancellable lease periods. The registered office premise has been obtained on a lease term of thirty six months with an escalation clause of five percent after every twelve months. The rent agreement for head office premise has been renewed on a lease term of nine years with an escalation clause of five percent after every twelve months. There are no restrictions imposed by lease arrangements. There are no subleases. Lease payments during the year are charged to statement of profit and loss.

Vehicles:

The Company has taken certain vehicles on cancellable operating lease. Total lease expense under cancellable operating lease during the year was Rs.34,301,259 (Previous year: Rs.27,686,441).

7. The Company had given interest free collateral free loan to an employee benefit trust under the Employee Stock Purchase Scheme to provide financial assistance to its employees to purchase equity shares of the Company under such scheme. The loan was repayable by the trust under a back to back arrangement by the trust with the employees of the Company. The loan was fully repaid during the year ended March 31, 2018 and the year-end balance for the total loan granted is Rs. Nil (March 31, 2017: Rs.21,362,356 ).

8. In the financial years 2013-14, 2015-16 and 2016-17, the Company has received five demand orders from service tax authorities against the show-cause notices received in earlier years. The orders pertain to applicability of service tax on various items like income from asset assignment transactions, administration charges collected by the Company on distribution of insurance products to its borrowers, reimbursement of certain expenses from an insurance company, etc. The amount of service tax demanded in two orders received in 2013-14 aggregated to Rs.460,522,457 (plus penalty and interest, as applicable). The Company had filed appeals and stay petition against these demand orders with The Customs, Excise and Service Tax Appellate Tribunal ('CESTAT') and received a stay order in respect of one of the two orders amounting to Rs.118,091,538 (plus penalty and interest, as applicable).

In the financial year 2015-16, the Company received a stay order from CESTAT for the demand raised in the previous year for Rs.342,493,571 (plus penalty and interest, as applicable) against pre-deposit of Rs.30,000,000. Further, the Company has received three orders on similar matters aggregating Rs.276,831,601 (plus penalty and interest, as applicable). The Company has filed an appeal before the CESTAT against these orders.

Based on the merits of the cases, the Company and its tax advisors believe that its position is likely to be upheld in the appellate process for the above matters. Accordingly, no provision has been made for the amounts mentioned above as at March 31, 2018.

9. The Company has provided for minimum alternate tax ('MAT') liability of Rs.789,174,013 for the year ended March 31, 2018 and recognized a corresponding MAT credit entitlement as an asset on the balance sheet.

10. The Company has certain litigations pending with income tax authorities, service tax authorities and other litigations which have arisen in the ordinary course of business. The Company

has reviewed all such pending litigations having an impact on the financial position, and has adequately provided for where provisions are required and disclosed the contingent liabilities where applicable, in its financial statements. Refer note 36 for further details.

11. Dues to micro, small and medium enterprises

There are no amounts that need to be disclosed in accordance with the Micro Small and Medium Enterprise Development Act, 2006 (the 'MSMED') pertaining to micro or small enterprises.

For the year ended March 31, 2018, no supplier has intimated the Company about its status as micro or small enterprises or its registration with the appropriate authority under MSMED.

12. There are no transactions in Specified Bank Notes (SBN) during the year ended March 31, 2018.

Notes:

1. Represent collections in Specified Bank Notes made by the Company on behalf of a bank against loan obligations of the bank, pursuant to a Business Correspondent arrangement, of Rs.13.22 crores from November 9, 2016 to November 11, 2016 and Rs.0.03 crores on November 14, 2016. Such collections were remitted to the corresponding bank in the ordinary course of business.

2. In addition to the permitted receipts mentioned in the table above, Rs.95.59 crores was received by the Company in Specified Bank Notes from its loan borrowers from November 9, 2016 to November 11, 2016 and Rs.0.01 crores on November 14, 2016. These amounts were collected against the borrowers' regular loan obligations which had fallen due in the ordinary course of business and were deposited into bank accounts of the Company.

Such collections were made pending the outcome of the Company's representation to the Reserve Bank of India (RBI) on November 9, 2016 and November 11, 2016 seeking permission for collecting loan repayments from its borrowers in specified bank notes in view of the difficulties and operational challenges faced by NBFC-MFIs owing to the profile of their borrowers. In absence of any response from the RBI, the Company discontinued further collections in SBNs with effect from November 11, 2016 except Rs.0.01 crores received on November 14, 2016.

b. Amounts received by the Company from November 9, 2016 to November 14, 2016 represents collection towards existing loan obligations of around 28.6 lakh borrowers across 1,220 branches. The maximum amount so collected against the scheduled loan installment from any single borrower is Rs.1,635 (average of Rs.575 per borrower against the scheduled loan installment). Such collections have been made in the ordinary course of business from borrowers, in respect of whom the Company has obtained/maintained adequate record of their KYC documents (comprising identification and address proof) as prescribed by RBI and validated by independent credit bureau. The information mentioned in this note has been certified by the management of the Company and relied upon by the auditors.

k. Unsecured Advances - Refer note 14. l. Registration obtained From other financial sector regulators:

The Company is registered with following other financial sector regulators (Financial regulators as described by Ministry of Finance):

i. Ministry of Corporate Affairs

ii. Ministry of Finance (Financial Intelligence Unit)

m. Disclosure of penalties imposed by RBI and other regulators:

No Penalties were imposed by RBI and other regulators during current and previous year

13. Previous year's figures have been regrouped where necessary to conform to this year's classification.