1 Company information
LKP Securities Limited (“the Company') is domiciled and incorporated in India and its shares are publicly traded on the Bombay Stock Exchange(BSE) in India. The Company's registered office is located at 203, Embassy centre, Nariman point, Mumbai 400021, Maharashtra, India. The Company is engaged as a stock and securities broker and providing other financial service with nationwide network across assets classes equities, debt, structured products, Portfolio Management services and Third party distribution.
The seperate financial statement (hereinafter referred to as “Financial Statements”) of the Company for the year ended 31 March 2019 were authorised for issue by the Board of Directors at the meeting held on 2 May 2019.
Trade payables and other payables are non-interest bearing and are normally settled as per payment terms mentioned in the contract. In the opinion of the management, the balances of Payables are stated at book value and are payable.
For transactions relating to related party payables refer note 39.
* Secured against hypothecation of vehicles. The aforesaid borrowing carry interest rates @ 9.50% and are repayable in monthly installments by October 2019.
** Interest free, repayable on demand
Loans from Banks
Loan of Rs 494.39 Lakhs from Bank of India secured by first pari passu charge on book debts both present and future. The facility carries interest @ 12.40% presently (8.30 MCLR 0.30% BSS 3.80% CRP)
Loan of Rs 1,596.65 Lakhs from Yes Bank is secured by first pari passu charge on on all current assets of the company and personal guarantee of Promoters. The facility carries interest @11.95 % presently (1 year MCLR 300 bps)
Loan of Rs 431.04 Lakhs from South Indian Bank is secured against fixed deposit of the company. The loan carries interest rates which ranges from @ 7.75 % to 8.60% ( FD Rate 1 %)
Loans from Financial Institutions
Loan from Financial Institution IL&FS is secured by shares in pool account. The Loan carries interest @ 10.25%. The loan is repaid during the year.
b) Terms/rights attached to equity shares
The Company has only one class of equity shares having a par value of Rs.2 per share. Each holder of equity shares is entitled to one vote per share. The Company declares and pays dividend in Indian rupees. The final dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing 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 will be in proportion to the number of equity shares held by the shareholders.
c) Aggregate number of bonus shares issued, shares issued for consideration other than cash and shares bought back during the period of five years immediately preceding the reporting date: NIL
e) Employees Stock Option Scheme (ESOP)
The Company had instituted an Employee Stock Option Plan (“ESOP 2017 or “the Scheme”) as approved by Board of Directors and Shareholders of the Company. Under the scheme, 37,00,000 Stock Options were granted at a price of Rs. 7/- per option to the employees of the Company. As per the scheme, 33%, 33% and 34% of the total grant shall be vested at the end of every year from the original grant date. The options vested would be exercisable at any time within a period of one 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.
During the year ended 31 March 2019, the Company did not grant any stock option. Out of the options granted 7,13,440 stock options had been exercised. There are 25,96,200 Options outstanding as at 31 March 2019.
The applicable tax rate is the standard effective corporate income tax rate in India. The tax rate is 27.82% for the year ended 31 March 2019.
Deferred tax assets and liabilities are offset where the Company has a legally enforceable right to do so. For analysis of the deferred tax balances (after offset) for financial reporting purposes refer note 9.
The Company does not have any temporary differences in respect of unutilized tax losses as at 31 March 2019.
2. Operating Leases
The Company has taken offices under leave and license agreements under cancellable/non-cancellable lease agreements that are renewable on periodic basis at the option of both the lessor and the lessee.
- The initial tenure of the lease is generally ranging from 12 months to 84 months.
3. (i) Contingent Liabilities
# The amount represents the best possible estimates arrived at on the basis of available information. The Company has engaged reputed advocates to protect its interests and has been advised that it has strong legal positions against such disputes.'
(ii) Litigation
The Company has filed various cases for recovery of dues and suits are pending in various courts. The company has engaged advocates to protect the interest of the company and expects favourable decision.
(iii) Capital Commitments
Estimated amount of contracts remaining to be executed on capital account not provided for (net of advances) is Rs. 8 lakhs (2018 : 16.06 lakhs )
4. Segment Information’s
Disclosure under Indian Accounting Standard 108 - ‘Operating Segments' is not given as, in the opinion of the management, the entire business activity falls under one segment, viz. ,primarily engaged as stock and securities broker and providing the financial services. The Company conducts its business only in one Geographical Segment, viz., India.
5. Micro, small and medium enterprises
Trade payables and other payables include amount payable to Micro, Small and Medium Enterprises. Under the Micro, Small and Medium Enterprises Development Act, 2006, (MSMEDA) which came into force from 02 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, who have registered with the competent authorities.
6. Financial Instruments
i) Financial risk management objective and policies
The Company's principal financial liabilities, comprise loans and borrowings, trade and other payables. The main purpose of these financial liabilities is to finance the Company's operations. The Company's principal financial assets include investments, loans, trade receivables, other receivables, and cash and cash equivalents that derive directly from its operations.
The Company is exposed to market risk, credit risk and liquidity risk. The Company's management oversees the management of these risks.
a) Market risk:
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: interest rate risk, foreign currency risk and other price risk such as equity price risk. Financial instruments affected by market risk include loans and borrowings, deposits, other financial instruments.
1) Interest rate risk:
Interest rate risk can be either fair value interest rate risk or cash flow interest rate risk. Fair value interest rate risk is the risk of changes in fair value of fixed interest bearing investments because of fluctuations in the interest rates. Cash flow interest rate risk is the risk that future cash flows of floating interest bearing investments will vary because of fluctuations in interest rates.
The Company's exposure to the risk of changes in market interest rates relates primarily to the Company's short-term loan from banks. Redeemable preference shares carries fixed coupon rate and hence is not considered for calculation of interest rate sensitivity of the company.
2) Foreign currency risk:
The Company does not have any foreign currency risk. Hence no sensitivity analysis is required
3) Credit Risk:
Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company's receivables from customers, deposits and loans given, investments and balances at bank.
The Company measures the expected credit loss of trade receivables based on historical trend, industry practices and the business environment in which the entity operates. Expected Credit Loss is based on actual credit loss experienced and past trends based on the historical data.
Credit risk on cash and cash equivalents is limited as the Company generally invest in deposits with banks and financial institutions with high credit ratings assigned by credit rating agencies. Investments primarily include investment in equity shares and bonds.
b) Liquidity Risk:
Liquidity risk refers to the risk that the Company cannot meet its financial obligations. The Company's principal source of liquidity are cash and cash equivalents and the cash flow i.e. generated from operations. The Company consistently generated strong cash flows from operations which together with the available cash and cash equivalents and current investment provides adequate liquidity in short terms as well in the long term.
ii) Capital Management
For the purpose of Company's capital management, capital includes issued capital and other equity reserves. The primary objective of the Company's Capital Management is to maximize shareholder value. The company manages its capital structure and makes adjustments in the light of changes in economic environment and the requirements of the financial covenants.
The company monitors capital using gearing ratio, which is Net debt divided by total capital.
The management assessed that cash and cash equivalents and bank balances, trade receivables, other financial assets, certain investments, trade payables and other current liabilities approximate their fair value largely due to the short-term maturities of these instruments. Difference between carrying amount and fair value of bank deposits, other financial assets, other financial liabilities and borrowings subsequently measured at amortised cost is not significant in each of the year presented.
7. Fair Value Hierarchy :
- Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
- Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. prices) or indirectly (i.e. derived from prices).
- Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
If the inputs used to measure the fair value of an asset or a liability fall into different levels of a fair value hierarchy, then the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.
The Following table provides the fair value measurement hierarchy of the Company's assets and liabilities.
Quantitative disclosures of fair value measurement hierarchy for assets and liabilities as at 31 March 2019
Investments measured at fair value are tabulated above. All other financial assets and liabilities at amortised cost are in Level 3 of fair value hierarchy and have been considered at carrying amount .
The fair values of the financial assets and financial liabilities included in the level 3 categories above have been determined in accordance with generally accepted pricing models like networth criteria.
8. Gratuity and other post employment benefit plans
The disclosures of employee benefits as defined in the Ind AS 19 ’’Employee Benefits” are given below:
a. Leave encashment is a non-funded defined benefit scheme. The obligation for leave encashment is recognized in the same manner as gratuity.
b. Details of post retirement gratuity plan are as follows:
Notes:
(a) The current service cost recognized as an expense is included in the Note 27 ‘Employee benefits expense' as gratuity. The remeasurement of the net defined benefit liability is included in other comprehensive income.
(b) The estimate of future salary increases considered in the actuarial valuation takes into account the rate of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.
9. Disclosures as required by Ind AS 115
The Companies (Indian Accounting Standards) Amendment Rules, 2018 issued by the Ministry of Corporate Affairs (MCA) notified Ind AS 115 “Revenue from Contracts with Customers. The Company has adopted Ind AS 115 w.e.f. 1 April 2018 using the full retrospective approach. Impact on the financial statements upon adoption of Ind AS 115 is not material.
10 . There are no unclaimed dividend for a period of more than seven years. Further, there are no amounts due and outstanding to be credited to Investor's Education and Protection Fund as on 31 March 2019
11. The Company, has no long-term contracts including derivative contracts having material foreseeable losses as at 31 March 2019.
12. Securities received from Clients as collateral for margin are held by the Company in its own name in fiduciary capacity.
13. As per section 135 of the Companies Act, 2013, amount required to be spent by the company during the year ended March 31, 2019 is Rs. 7.94 lakhs, computed at 2% of its average net profit for the immediately preceding three financial years, on Corporate Social Responsibility (CSR). The Company incurred an amount of 8.50 lakhs during the year ended 31 March, 2019 towards CSR expenditure for purposes other than construction / acquisition of any asset.
* Loan is repayable on demand and carries interest @ 13% (13%) and balance does not include interest
b) There are no investments made other than disclosed in Note 6.
c) There are no corporate guarantee given on behalf of others
d) There are no securities provided during the year.
14. Prior Year Comparatives
Previous year's figures have been regrouped / reclassified/rearranged wherever necessary to correspond with the current year's classifications / disclosures. Figures in brackets pertain to previous year
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