1 Corporate Information

LKP Finance Limited, incorporated in the State of Maharashtra is a Non-Banking Financial Company (NBFC) registered with the Reserve Bank and is listed on Bombay Stock exchange (BSE) of India. The Company is engaged in the business of finance and trading in shares and securities, derivatives etc.

e) Employee Stock Option Scheme

(i) Employee Stock Option Scheme 2010

The Company had instituted an Employee Stock Option Plan (“ESOP 2010 or “the Scheme”) as approved by Board of Directors and Shareholders of the Company. Under the scheme, 3,90,000 Stock Options were granted at a pricing of 5% discount on the average closing price of the Company;s shares on BSE during the last 15 days preceeding the date of grant of options to the employees of the Company and of its subsidiaries. The options vested would be exercisable at any time within a period of five years from the date of vesting and the equity shares arising on exercise of options shall not be subject to any lock in. The said Scheme is administered by the Nomination and Remuneration Committee of the Board. There are no option outstanding as at 31 March 2019.

During the year ended 31 March 2019, the Company did not grant any stock option. Out of the options granted 132,600 stock options had been excercised.

(ii) Employee Stock Option Scheme 2010

The Company had instituted a new Employee Stock Option Plan (“ESOP 2010 or “the Scheme”) as approved by Board of Directors and Shareholders of the Company. Under the scheme, 447,000 Stock Options were granted at a price of Rs 80/- per option to the employees of the Company and of its subsidiaries. The options vested would be exercisable at any time within a period of five years from the date of vesting and the equity shares arising on exercise of options shall not be subject to any lock in. The said Scheme is administered by the Nomination and Remuneration Committee of the Board. There are no option outstanding as at 31 March 2019.

During the year ended 31 March 2019, the Company did not grant any stock option. Out of the options granted 14,500 stock options had been excercised.

c) There are no bonus shares issued, shares issued for consideration other than cash or shares bought back during 5 years preceeding 31 March 2019.

d) 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 Company declares and pays dividend in Indian Rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholder in the ensuring Annual General Meeting.

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 would be in proportion to the number of equity shares held by the shareholders.

(iii) Employee Stock Option Scheme 2014

The Company has instituted an Employee Stock Option Plan (“ESOP 2014” or “the Scheme”) as approved by Board of Directors and Shareholders of the Company, for issuance of 775,000 Stock Options Convertible in equivalent number of equity shares of Rs.10 each to the employees of the Company and of its subsidiaries. Out of 610,000, 610,000 options were granted and vested during 31 March 2015 at a price of Rs 80/per option. The options vested would be exercisable at any time within a period of three years from the date of vesting and the equity shares arising on exercise of options shall not be subject to any lock in. The said Scheme is administered by the Nomination and Remuneration Committee of the Board. There are no option outstanding as at 31 March 2019

(a) Cash Credit/ Overdraft from Bank of India of Rs Nil (Rs 71,629,349) are secured against pledge of approved debt securities rated ‘A’ and above with 15% margin, fixed deposit with the bank and personal guarantee of the Promoter. The loan is repayable on demand and carries interest of 12% p.a. (one year MCLR BSS CRP)

(b) Cash Credit from Federal Bank Limited of Rs Nil (Rs 123,294,076 ) are secured against pledge of bonds in CGSL account with Federal bank Limited. The loan is repayable on demand and carries interest of 10.95% (one year MCLR)

(c) Overdraft from Federal Bank Limited of Rs Nil (Rs 3,894,821) are secured against pledge of fixed deposit with banks. The loan is repayable on demand. It carries interest 7.25% - 7.80% at monthly rests

(d) Intercorporate borrowings of Rs 359,665,031 (Rs 359,665,031) is considered interest free and repayable on demand in the absence of term sheet and confirmation.

2. Contingent Liabilities and Litigations

(a) Contingent Liabilities

(i) Against a penalty order for Rs 18,000,000/- received from the Enforcement Directorate in respect of a matter which arose in 1996 pertaining to the erstwhile money changing division of the Company , the Company has preferred an appeal in the Honorable Madras High Court. The Company has provided a bank guarantee to cover the demand. The matter is pending. The Management is of the opinion that a cash outflow is unlikely and therefore no provision is considered necessary .

(b) Litigations

(i) A winding up petition filed by the Company against a borrower has been admitted by the Honourable High court of Mumbai. The recovery if any will be accounted for when the money is received from official Liquidator.

(ii) The Company has filed an arbitration case Rs. 2,510,744/against borrowers for which it has received a favourable award from the arbitrators. The opposing parties have filed an appeal in the Honourable High court of Mumbai for which the matter is pending.

3. As per Accounting Standard 15 “Employee Benefits”, the disclosures of Employee benefits as defined in the Accounting Standard are given below:

The Employees’ Gratuity Fund Scheme managed by LIC of India is a defined benefit plan. The present value of obligation is based on actuarial valuation using the projected unit credit method. The obligation for leave benefits (non-funded) is also recognized using the projected unit credit method.

Disclosure of Gratuity (funded) in terms of AS 15 is as under:

4. Corporate Social Responsibility (CSR)

As per Section 135 of the Companies Act, 2013, a CSR Committee has been formed by the Company. The Company is required to spend Rs.3,032,013/- against which Rs 3,500,000/- has been spent on activities specified in Schedule VII of the Companies Act, 2013.

Notes

i) Amounts recognized as an expense and included in Note 18 "Employee benefits expense" are Gratuity written back Rs. 268,990 (Rs 1,135,052)

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

iii) “Contribution to provident and other funds” is recognized as an expense in Note 18 "Employee benefits expense" of the Statement of Profit and Loss.

5. Other Commitments

a) During the year, the Company has entered into an memorandum of understanding to purchase 2,900 Equity shares based on the valuation to be determined by the valuer after due diligence. The Company has given advance of Rs 78,650,000 towards purchase of 786,500 preference shares of Rs 100 each which would also be transferred after the agreement for sale has been entered.

b) Uncalled amount on investments is Rs Nil (Rs 43,250,000/-)

c) Minimum Alternate Tax (MAT) paid in accordance with tax laws, which give rise to future economic benefits in the form of adjustment of future tax liability, is recognised as an asset only when, based on convincing evidence, it is probable that the future taxable benefits associated with it will flow to the Company and the assets can be measured reliably. The Company has unrecognized MAT credit entitlement as on 31 March 2019 of Rs 198,049,929/

6. Other payables includes amount payable to Small Scale Industrial Undertakings and Micro, Small and Medium Enterprises. Under the Micro, Small and Medium Enterprises Development Act, 2006 (MSMEDA),which came into force from 2 October, 2006, certain disclosures are required to be made relating to Micro, Small and Medium enterprises. On the basis of the information and records available with the management, the following disclosures are made for the amounts due to the Micro, Small and Medium enterprises, which have registered with the competent authorities.

7. a) Provision for current tax has been made as per the provisions of the Income Tax Act, 1961.

b) In accordance with AS - 22 on “Accounting for Taxes on Income” issued by the ICAI, deferred tax assets and liability is recognized for all timing differences, in accordance with the said standard. However, deferred tax asset has not been created on tax losses of Rs 426,921,610/-. in absence of convincing evidence to generate sufficient future taxable profits in foreseeable future.

8. Segment reporting

The Company has only one business, i.e. engaged in investment and financing activities and hence “Segment Reporting” as defined in Accounting Standard 17 is not applicable.

9. Previous year’s figures have been regrouped / reclassified wherever necessary to correspond with the current year’s classifications / disclosures. Figures in brackets pertain to previous year.