1. CORPORATE INFORMATION

MAS Financial Services Limited (the "Company") is a public Company domiciled in India and incorporated under the provisions of the Companies Act, 1956. It is registered as a non deposit taking non-banking finance Company ("NBFC") with Reserve Bank of India ("RBI"). The Company is engaged in the business of providing Micro Enterprise loans ("MEL"), Small and Medium Enterprise loans ("SME"), Two Wheeler loans ("TW"), Commercial Vehicle loans ("CV") and loans to NBFCs - to create the underlying assets of MEL, SME, TW and CV. Its shares are listed on two recognised stock exchanges in India i.e. BSE Limited ("BSE") and the National Stock Exchange of India Limited ("NSE").

The Company's registered office is at 6, Ground Floor, Narayan Chambers, Behind Patang Hotel, Ashram Road, Ahmedabad-380009, Gujarat, India.

2. BASIS OF PREPARATION

2.1 Statement of compliance

The standalone financial statements of the Company have been prepared in accordance with the Indian Accounting Standards (the "Ind AS") prescribed under section 133 of the Companies Act, 2013 (the "Act").

For all periods up to and including the year ended 31 March 2018, the Company had prepared its standalone financial statements in accordance with accounting standards notified under section 133 of the Act, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 (Indian GAAP or previous GAAP). These standalone financial statements for the year ended 31 March 2019 are the Company's first financial statements prepared in accordance with Ind AS.

2.2 Basis of measurement

The standalone financial statements have been prepared on historical cost basis except for following assets and liabilities which have been measured at fair value amount:

i) Loans and investment in equity instruments at fair value through other comprehensive income ("FVOCI") and

ii) Defined benefit plans - plan assets

2.3 Functional and presentation currency

The standalone financial statements are presented in Indian Rupees (?) which is the currency of the primary economic environment in which the Company operates (the "functional currency"). The values are rounded to the nearest lakhs, except when otherwise indicated.

2.4 Use of estimates, judgements and assumptions

The preparation of the standalone financial statements in conformity with Ind AS requires management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) and the reported income and expenses during the year. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised prospectively.

Judgements

In the process of applying the Company's accounting policies, management has made judgements, which have a significant risk of causing material adjustment to the carrying amounts of assets and liabilities within the next financial year.

i) Business model assessment

Classification and measurement of financial assets depends on the results of business model and the solely payments of principal and interest ("SPPI") 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.

Estimates and assumptions

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Company based its assumptions and estimates on parameters available when the standalone financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Company. Such changes are reflected in the assumptions when they occur.

i) Fair value of financial instruments

The fair value of financial instruments is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction in the principal (or most advantageous) market at the measurement date under current market conditions (i.e. an exit price) regardless of whether that price is directly observable or estimated using another valuation technique. When the fair values of financial assets and financial liabilities recorded in the balance sheet cannot be derived from active markets, they are determined using a variety of valuation techniques that include the use of valuation models. The inputs to these models are taken from observable markets where possible, but where this is not feasible, estimation is required in establishing fair values. For further details about determination of fair value refer note 3.9 and note 43.

ii) Effective interest rate ("EIR") method

The Company's EIR methodology, as explained in Note 3.1(A), recognises interest income / expense using a rate of return that represents the best estimate of a constant rate of return over the expected behavioral life of loans given / taken 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 behavior and lifecycle of the instruments, as well as expected changes to interest rates and other fee income/ expense that are integral parts of the instrument.

iii) Impairment of financial asset

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.

The Company's expected credit loss ("ECL") calculations are outputs of complex models with a number of underlying assumptions regarding the choice of variable inputs and their interdependencies. Elements of the ECL models that are considered accounting judgements and estimates include:

a) The Company's criteria for assessing if there has been a significant increase in credit risk and so allowances for financial assets should be measured on a life time expected credit loss ("LTECL") basis.

b) Development of ECL models, including the various formulas and the choice of inputs.

c) Determination of associations between macroeconomic scenarios and economic inputs, such as gross domestic products, lending interest rates and collateral values, and the effect on probability of default ("PD"), exposure at default ("EAD") and loss given default ("LGD").

d) Selection of forward-looking macroeconomic scenarios and their probability weightings, to derive the economic inputs into ECL models.

iv) Provisions and other contingent liabilities

The Company operates in a regulatory and legal environment that, by nature, has a heightened element of litigation risk inherent to its operations. As a result, it is involved in various litigation, arbitration and regulatory investigations and proceedings in the ordinary course of the Company's business.

When the Company can reliably measure the outflow of economic benefits in relation to a specific case and considers such outflows to be probable, the Company records a provision against the case. Where the outflow is considered to be probable, but a reliable estimate cannot be made, a contingent liability is disclosed.

Given the subjectivity and uncertainty of determining the probability and amount of losses, the Company takes into account a number of factors including legal advice, the stage of the matter and historical evidence from similar incidents. Significant judgement is required to conclude on these estimates.

For further details on provisions and other contingencies refer note 3.17.

These estimates and judgements are based on historical experience and other factors, including expectations of future events that may have a financial impact on the Company and that are believed to be reasonable under the circumstances. Management believes that the estimates used in preparation of the standalone financial statements are prudent and reasonable.

2.5 Presentation of the standalone financial statements

The Company presents its balance sheet in order of liquidity. An analysis regarding recovery or settlement within 12 months after the reporting date (current) and more than 12 months after the reporting date (non-current) is presented in Note 41.

Financial assets and financial liability are generally reported gross in the balance sheet. They are only offset and reported net when, in addition to having an unconditional legally enforceable right to offset the recognised amounts without being contingent on a future event, the parties also intend to settle on a net basis in all of the following circumstances:

i) The normal course of business

ii) The event of default

Note: Cash credit / short term loans from banks are secured by hypothecation of movable assets of the Company and goods covered under hypothecation ("HP") agreements / Loan cum HP agreements and relative book debts, receivables, loans and advances and entire portfolio outstanding (except specific portfolio generated from various term loans sanctioned by various banks/financial institutions on an exclusive basis) and equitable mortgage/negative lien by deposit of title deeds on some of the Company's immovable properties, as collateral security. The loans are also guaranteed by Mr. Kamlesh Chimanlal Gandhi, Mr. Mukesh Chimanlal Gandhi and Mrs. Shweta Kamlesh Gandhi.

The Company has not defaulted in repayment of borrowings and interest.

NOTE 3.1 TERMS / RIGHTS ATTACHED TO PREFERENCE SHARES

Compulsorily Convertible Cumulative Preference Shares (CCCPS)

(a) 2,17,35,545 CCCPS of the face value of Rs. 10 each carry a right from 17 February 2014 to be paid a fixed cumulative preferential dividend at the rate of 0.01% per annum. These CCCPS were automatically and fully convertible into equity shares, at a conversion price to be determined as per the terms of the agreement, upon the expiry of a period of 13 years from the date of final issuance of these CCCPs i.e. from 13 October 2008. Subsequent to execution of the agreement, on 23 March 2017, the Company had revised conversion terms of the original agreement through "Amendment and Termination Agreement to the Shareholders' Agreement dated 29 January 2014" pursuant to which these CCCPS were converted into equity shares at a price determined as per the agreement.

(b) 2,17,35,545 CCCPS of the face value of Rs. 10 each carry a right from 17 February 2014 to be paid a fixed cumulative preferential dividend at the rate of 13.31% per annum. These CCCPS were automatically and fully convertible into equity shares, at a conversion price to be determined as per the terms of the agreement, upon the expiry of a period of 7 years from the effective date i.e. from 17 February 2014. Subsequent to execution of agreement, on 23 March 2017, the Company had revised conversion terms of the original agreement through "Amendment and Termination Agreement to the Shareholders' Agreement dated 29 January 2014" pursuant to which these CCCPS were converted into equity shares at a price determined as per the agreement.

(c) 400 CCCPS of the face value of Rs. 100,000 each carry a right from 13 May 2016 to be paid fixed cumulative preferential dividend at the rate of 9.75% per annum. These CCCPS were automatically and fully convertible into equity shares, at a conversion price of Rs. 1,685 (Rupees one thousand six hundred and eighty five only) per equity share at the end of 10 years, provided however that, the price of these equity shares were subject to the terms and conditions of their issue and the valuation of the Company at the time of conversion of such CCCPS. Under the terms and conditions of issue the Company had right to convert the CCCPS into equity shares during in their tenure from the 5^th till the 10^th year from the issue date. As per the terms and conditions of the issue, the investors had a Put option to convert the CCCPS into equity shares. These shares were converted into equity shares as per above terms.

NOTE 3.2 ISSUE OF SHARE CAPITAL

(a) Pursuant to the private placement offer letter (the "Offer Document") dated 30 March 2017, the Company had allotted 10,34,553 number of equity shares on 19 April 2017 having face value of Rs. 10 per share at a premium of Rs. 328.31 per share under the second tranche of the Offer Document. The Company had raised total of Rs. 13,500.00 lakhs towards private placement offer letter.

(b) Pursuant to the Initial Public Offering (the "IPO"), the Company had allotted 50,92,829 equity shares of Rs. 10 each as fresh issue of equity shares. Out of which, 169,082 equity shares were allotted to eligible employees at premium of Rs. 404.00 per share and balance 49,23,747 equity shares were allotted to public at premium of Rs. 449.00 per share.

(c) Pursuant to the conversion of various compulsorily convertible instruments as mentioned in Note 18.3 below, the Company had issued and allotted 55,78,479 equity shares to the convertible instrument holders. Out of converted equity shares, 49,46,448 equity shares were offered for sale by the convertible instrument holders during the IPO.

NOTE 3.3 CONVERSION OF COMPULSORILY CONVERTIBLE INSTRUMENTS

All the compulsorily convertible instruments were converted into equity shares as per agreements, amended from time to time, in the following manner:

(a) 0.01% Compulsorily Convertible Cumulative Preference Shares were converted into 17,39,865 equity shares having face value of Rs. 10 each at a premium of Rs. 114.93 per equity share on 12 September 2017;

(b) 13.31% Compulsorily Convertible Cumulative Preference Shares were converted into 12,80,723 equity shares having face value of Rs. 10 each at a premium of Rs. 159.71 per equity share on 12 September 2017;

(c) 9.75% Compulsorily Convertible Cumulative Preference Shares were converted into 87,716 equity shares having face value of Rs. 10 each at a premium of Rs. 446 per equity share on 12 September 2017; and

(d) 13% Compulsorily Convertible Debentures were converted into 24,70,175 equity shares having face value of Rs. 10 each at a premium of Rs. 192.33 per equity share on 21 September 2017.

NOTE 3.4 DETAILS OF BONUS SHARES ISSUED DURING THE FIVE YEARS IMMEDIATELY PRECEDING THE BALANCE SHEET DATE:

(a) 60,00,000 equity shares of Rs. 10 each fully paid-up were allotted as bonus shares by capitalisation of Capital Redemption Reserve during the year ended 31 March 2014.

(b) 2,40,00,188 equity shares of Rs. 10 each fully paid-up were allotted as bonus shares by capitalisation of general reserve and balance from the statement of profit and loss during the year ended 31 March 2017.

NOTE 3.5 TERMS / RIGHTS ATTACHED TO EQUITY SHARES

The Company has one class of equity shares having a par value of Rs. 10 per share. Each shareholder is eligible for one vote per share held. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting, except in case of interim dividend. In the event of liquidation of the Company, the equity shareholders will be entitled to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding.

NOTE 4.1 NATURE AND PURPOSE OF RESERVE

1 Reserve u/s. 45-IA of the Reserve Bank of India Act, 1934 (the "RBI Act, 1934")

Reserve u/s. 45-IA of RBI Act, 1934 is created in accordance with section 45 IC(1) of the RBI Act, 1934. As per Section 45 IC(2) of the RBI Act, 1934, no appropriation of any sum from this reserve fund shall be made by the NBFC except for the purpose as may be specified by RBI.

2 Securities premium

Securities premium reserve is used to record the premium on issue of shares. The reserve can be utilised only for limited purposes in accordance with the provisions of section 52 of the Act.

3 Surplus in the statement of profit and loss

Surplus in the statement of profit and loss is the accumulated available profit of the Company carried forward from earlier years. These reserve are free reserves which can be utilised for any purpose as may be required.

4 FVOCI equity investments

The Company has elected to recognise changes in the fair value of investments in equity securities (other than investment in subsidiary) in other comprehensive income. These changes are accumulated within the FVOCI equity investments reserve within equity.

5 FVOCI - loans and advances

The Company has elected to recognise changes in the fair value of loans and advances in other comprehensive income. These changes are accumulated within the FVOCI - loans and advances reserve within equity.

6 Remeasurement of the defined benefit liabilities

Remeasurement of the net defined benefit liabilities comprise actuarial gain or loss, return on plan assets excluding interest and the effect of asset ceiling, if any.

Notes:

i) Guarantees are given by the Company to various banks and NHB on behalf of the subsidiary company for the loan taken and accordingly, the same has been shown as contingent liability.

ii) During the previous year, the Company has given bank guarantee to NSE amounting to Rs. 160.04 lakhs as a security deposits in connection with its IPO and accordingly, the same has been shown as contingent liability.

iii) There are numerous interpretative issues relating to the Supreme Court ("SC") judgement dated 28 February 2019, relating to components / allowances paid that need to be taken into account while computing an employer's contribution of provident fund ("PF") under the Employees' Provident Funds and Miscellaneous Provisions Act,1952. The Company is in process of evaluating the method of computation of its PF contribution prospectively and would record any further effect in its financial statements, on receiving additional clarity on the subject.

NOTE 5. The Company has incurred expenditure of Rs. 2,399.91 lakhs during the year ended 31 March 2018 and Rs. 2,766.99 lakhs (net of recovery from selling shareholders Rs. 832.50 lakhs) as at 31 March 2018 respectively towards private placement of equity shares, IPO and offer for sale ("OFS"). The Company has adjusted the expenses incurred to the securities premium account.

NOTE 6 LEASING ARRANGEMENTS

(a) Operating lease commitments - as lessee

The Company has entered into leave and license agreements for taking office premises along with furniture and fixtures as applicable and godown premises on rental basis ranging from 11 to 60 months. It has recognised lease payments amounting to Rs. 177.35 lakhs and Rs. 166.75 lakhs for the year ended 31 March 2019 and 2018 respectively in the statement of profit and loss. The Company has given refundable, interest free security deposits under certain agreements. Certain agreements contain provision for renewal and further there are no sub-leases. The future minimum lease payments under non-cancellable operating leases are as follows:

(b) Operating lease commitments - as lessor

The Company has let out portions of office premises along with furniture and fixtures and other amenities on operating lease to its subsidiary MAS Rural Housing & Mortgage Finance Limited. It has recognised lease rental income amounting to Rs. 13.35 Lakhs and Rs. 12.00 Lakhs for the year ended 31 March 2019 and 2018 respectively in the statement of profit and loss.

NOTE 7 SEGMENT REPORTING:

Operating segment are components of the Company whose operating results are regularly reviewed by the Chief Operating Decision Maker ("CODM") to make decisions about resources to be allocated to the segment and assess its performance and for which discrete financial information is available.

The Company is engaged primarily on the business of "Financing" only, taking into account the risks and returns, the organization structure and the internal reporting systems. All the operations of the Company are in India. All non-current assets of the Company are located in India. Accordingly, there are no separate reportable segments as per Ind AS 108 - "Operating segments".

NOTE 8 Under the Micro, Small and Medium Enterprises Development Act, 2006 ("MSMED Act") which came into force from October 2, 2006, certain disclosures are required to be made relating to micro, small and medium enterprises. There have been no reported cases of delays in payments to micro and small enterprises or of interest payments due to delays in such payments. The disclosure as required by section 22 of MSMED Act has been given below:

NOTE 9. During the previous year, pursuant to initial public offering ("IPO") and offer for sale, the Company had issued 1,00,39,277 equity shares out of which:

(i) 50,92,829 equity shares of Rs. 10 each were allotted as fresh issue of equity shares. Out of which, 1,69,082 equity shares were allotted to eligible employees of the Company and its subsidiary at premium of Rs. 404.00 per share and balance 49,23,747 equity shares were allotted to public at premium of Rs. 449.00 per share.

(ii) 49,46,448 equity shares of Rs. 10 each were offered for sale by the existing shareholders at premium of Rs. 449.00 per share.

NOTE 10.1 DERIVATIVES

The Company has not entered into any derivative transactions and hence the disclosure required has not been made.

NOTE 10.2 DETAILS OF FINANCIAL ASSETS SOLD TO SECURITISATION / RECONSTRUCTION COMPANY FOR ASSET RECONSTRUCTION

The Company has not sold financial assets to securitisation / reconstruction Company for asset reconstruction during the year (previous year Nil)

NOTE 10.3 DETAILS OF NON-PERFORMING FINANCIAL ASSETS PURCHASED / SOLD.

The Company has not purchased or sold non-performing financial assets during the year (previous year Nil).

NOTE 10.4 DETAILS OF FINANCING OF PARENT COMPANY PRODUCTS

Not applicable

NOTE 10.5 DETAILS OF SINGLE BORROWER LIMIT ("SGL") / GROUP BORROWER LIMIT ("GBL") EXCEEDED BY THE NBFC

i) Loans and advances, excluding advance funding but including off-balance sheet exposures to any single party in excess of 15 per cent of owned fund of the NBFC:

Nil

ii) Loans and advances to (excluding advance funding but including debentures/bonds and off-balance sheet exposures) and investment in the shares of single party in excess of 25 per cent of the owned fund of the NBFC:

Nil

NOTE 10.6 UNSECURED ADVANCES

a) Refer Note no. 7(B)(ii) to the financial statements.

b) The Company has not granted any advances against intangible securities (31 March 2018: Nil).

NOTE 10.7 REGISTRATION NUMBER OBTAINED FROM RBI:

B. 01. 00241

NOTE 10.8 DISCLOSURE OF PENALTIES IMPOSED BY RBI AND OTHER REGULATORS

During the financial year ended 31 March 2019, no penalties have been imposed by RBI and other regulators (31 March 2018: Nil).

NOTE 10.9 REMUNERATION OF DIRECTORS

Refer Note no. 34 to the financial statements.

NOTE 10.10 MANAGEMENT

The annual report has a detailed chapter on Management Discussion and Analysis.

NOTE 10.11 NET PROFIT OF LOSS FOR THE PERIOD, PRIOR PERIOD ITEMS AND CHANGE IN ACCOUNTING POLICIES

There are no such material items which require disclosures in the notes to account in terms of the relevant Ind AS.

NOTE 10.12 REVENUE RECOGNITION

Refer note no. 3.1 to the financial statements.

NOTE 10.13 IND AS 110 - CONSOLIDATED FINANCIAL STATEMENTS (CFS)

All the subsidiaries of the Company have been consolidated as per Ind AS 110. Refer consolidated financial statements (CFS).

NOTE 10.14 CONCENTRATION OF DEPOSITS (FOR DEPOSIT TAKING NBFCS)

Not Applicable

NOTE 10.15 OVERSEAS ASSETS (FOR THOSE WITH JOINT VENTURES AND SUBSIDIARIES ABROAD)

Nil

NOTE 10.16 OFF-BALANCE SHEET SPVs SPONSORED (WHICH ARE REQUIRED TO BE CONSOLIDATED AS PER ACCOUNTING NORMS)

Nil

NOTE 11. Q2QEB3 Information as required in terms of Paragraph 13 of the RBI Master Direction DNBR. PD. 008/03.10.119/2016-17 dated September 01, 2016 "Master Direction - Non-Banking Financial Company - Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016 are mentioned as below:

Notes:

1. As defined in point xix of paragraph 3 of Chapter - 2 of these Directions.

2. Provisioning norms are applicable as prescribed in the Systemically Important Non-Banking Financial (Non-Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2016.

3. All Ind AS issued by MCA are applicable including for valuation of investments and other assets as also assets acquired in satisfaction of debt. However, market value in respect of quoted investments and break up / fair value / NAV in respect of unquoted investments shall be disclosed irrespective of whether they are classified as long term or current in (5) above.

NOTE 12 The Board of Directors recommended dividend of Rs. 3.60 per equity share of face value of Rs. 10 each, which is subject to approval by shareholders of the Company.

NOTE 13. OFFSETTING

Following table represents the recognised financial assets that are offset, or subject to enforceable master netting arrangements and other similar arrangements but not offset, as at 31 March 2019, 31 March 2018 and 1 April 2017. The column 'net amount' shows the impact of the Company's balance sheet if all the set-off rights were exercised.

Note:

1. Rs. 1,668.26 lakhs (31 March 2018: Rs. 1,496.32 lakhs, 1 April 2017: Rs. 815.84 lakhs) represents advances received against loan agreements.

2. Rs. 50,878.81 lakhs (31 March 2018: Rs. 43,849.76 lakhs, 1 April 2017: Rs. 36,108.96 lakhs) represents security deposits received from borrowers.

3. Rs. 197.55 lakhs (31 March 2018: Rs. 289.54 lakhs, 1 April 2017: Rs. 312.45 lakhs) represents deposits given as security against borrowings.

NOTE 14. EMPLOYEE BENEFIT PLAN

Disclosure in respect of employee benefits under Ind AS 19 - Employee Benefit are as under:

(a) Defined contribution plan

The Company's contribution to provident fund and employee state insurance scheme are considered as defined contribution plans. The Company's contribution to provident fund aggregating Rs. 86.69 lakhs (31 March 2018: ' 78.06 lakhs) has been recognised in the statement of profit and loss under the head employee benefits expense.

(b) Defined benefit plan:

Gratuity

Financial assets not measured at fair value

The Company operates a defined benefit plan (the "gratuity plan'') covering eligible employees. The gratuity plan is governed by the Payment of Gratuity Act, 1972. Under the act, employee who has completed five years of service is entitled to specific benefit. The level of benefits provided depends on the member's length of service and salary at retirement age/ resignation date.

The defined benefit plans expose the Company to risks such as actuarial risk, investment risk, liquidity risk, market risk, legislative risk. These are discussed as follows:

Actuarial risk: It is the risk that benefits will cost more than expected. This can arise due to one of the following reasons:

Adverse salary growth experience: Salary hikes that are higher than the assumed salary escalation will result into an increase in obligation at a rate that is higher than expected.

Variability in mortality rates: If actual mortality rates are higher than assumed mortality rate assumption than the gratuity benefits will be paid earlier than expected. Since there is no condition of vesting on the death benefit, the acceleration of cash flow will lead to an actuarial loss or gain depending on the relative values of the assumed salary growth and discount rate.

Variability in withdrawal rates: If actual withdrawal rates are higher than assumed withdrawal rate assumption than the gratuity benefits will be paid earlier than expected. The impact of this will depend on whether the benefits are vested as at the resignation date.

Investment risk: For funded plans that rely on insurers for managing the assets, the value of assets certified by the insurer may not be the fair value of instruments backing the liability. In such cases, the present value of the assets is independent of the future discount rate. This can result in wide fluctuations in the net liability or the funded status if there are significant changes in the discount rate during the inter-valuation period.

Liquidity risk: Employees with high salaries and long durations or those higher in hierarchy, accumulate significant level of benefits. If some of such employees resign / retire from the Company, there can be strain on the cash flows.

Market risk: Market risk is a collective term for risks that are related to the changes and fluctuations of the financial markets. One actuarial assumption that has a material effect is the discount rate. The discount rate reflects the time value of money. An increase in discount rate leads to decrease in defined benefit obligation of the plan benefits and vice versa. This assumption depends on the yields on the government bonds and hence the valuation of liability is exposed to fluctuations in the yields as at the valuation date.

Legislative risk: Legislative risk is the risk of increase in the plan liabilities or reduction in the plan assets due to change in the legislation/ regulation. The government may amend the Payment of Gratuity Act, 1972, thus requiring the companies to pay higher benefits to the employees. This will directly affect the present value of the defined benefit obligation and the same will have to be recognized immediately in the year when any such amendment is effective.

viii. Sensitivity analysis

Significant actuarial assumptions for the determination of the defined benefit obligation are discount rate, expected salary increase and withdrawal rates. The sensitivity analysis below have been determined based on reasonably possible changes of the assumptions occurring at the end of the reporting period, while holding all other assumptions constant. The results of sensitivity analysis is given below:

ix. Asset liability matching strategies

The Company contributes to the insurance fund based on estimated liability of next financial year end. The projected liability statements is obtained from the actuarial valuer.

x. Effect of plan on the Company's future cash flows

a) Funding arrangements and funding policy

The Company has purchased an insurance policy to provide for payment of gratuity to the employees. Every year, the insurance company carries out a funding valuation based on the latest employee data provided by the Company. Any deficit in the assets arising as a result of such valuation is funded by the Company.

The future accrual is not considered in arriving at the above cash-flows.

The expected contribution for the next year is Rs. 41.52 lakhs.

(C) Other long term employee benefits

The liability for compensated absences as at the year ended 31 March 2019 is Rs. 15.84 lakhs and as at year ended 31 March 2018 is ' 75.57 lakhs.

B. Measurement of fair values

i) Valuation techniques and significant unobservable inputs

The carrying amounts of financial assets and liabilities which are at amortised cost are considered to be the same as their fair values as there is no material differences in the carrying values presented.

ii) Financial instruments - fair value

The fair value of financial instruments as referred to in note (A) above have been classified into three categories depending on the inputs used in the valuation technique. The hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and lowest priority to unobservable inputs (Level 3 measurement).

The categories used are as follows:

Level 1: Level 1 hierarchy includes financial instruments measured using quoted prices;

Level 2: The fair value of financial instruments that are not traded in active market is determined using valuation technique which maximizes the use of observable market data and rely as little as possible on entity specific estimates. If all significant inputs required to fair value on instrument are observable, the instrument is included in level 2; and

Level 3: If one or more of significant input is not based on observable market data, the instrument is included in level 3.

iii) Transfers between levels I and II

There has been no transfer in between level I and level II.

iv) Valuation techniques Loans

The Company has computed fair value of the loans and advances through OCI considering its business model. These have been fair valued using the base of the interest rate of loan disbursed in the last seven days of the year end which is an unobservable input and therefore these has been considered to be fair valued using level 3 inputs.

Investment in equity instruments

The majority equity instruments held by the Company are actively traded on stock exchanges with readily available active prices on a regular basis. Such instruments are classified as level 1. Equity investments in unquoted instruments are fair valued using the price earnings ratio approach and accordingly classified as fair valued using level 2.

Security deposits

The Company has fair valued the security deposit using normal market rate of interest as on relevant date using cash flow method approach.

C. Capital

The Company maintains an actively managed capital base to cover risks inherent in the business and is meeting the capital adequacy requirements of the local banking supervisor, RBI. The adequacy of the Company's capital is monitored using, among other measures, the regulations issued by RBI.

The Company has complied in full with all its externally imposed capital requirements over the reported period. Equity share capital and other equity are considered for the purpose of Company's capital management.

C.1 Capital management

The primary objectives of the Company's capital management policy are to ensure that the Company complies with externally imposed capital requirements and maintains strong credit ratings and healthy capital ratios in order to support its business and to maximise shareholder value.

The Company manages its capital structure and makes adjustments to it according to changes in economic conditions and the risk characteristics of its activities. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividend payment to shareholders, return capital to shareholders or issue capital securities. No changes have been made to the objectives, policies and processes from the previous years. However, they are under constant review by the Board.

NOTE 15 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Company's principal financial liabilities comprise borrowings and trade payables. The main purpose of these financial liabilities is to finance the Company's operations and to support its operations. The Company's financial assets include loan and advances, cash and cash equivalents that derive directly from its operations.

The Company is exposed to credit risk, liquidity risk and market risk. The Company's board of directors has an overall responsibility for the establishment and oversight of the Company's risk management framework. The board of directors has established the risk management committee, which is responsible for developing and monitoring the Company's risk management policies. The committee reports regularly to the board of directors on its activities.

The Company's risk management policies are established to identify and analyse the risks faced by the Company, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company's activities.

The Company's risk management committee oversees how management monitors compliance with the Company's risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Company.

1) Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counter-party to financial instrument fails to meet its contractual obligations and arises principally from the Company's receivables from customers and loans.

The carrying amounts of financial assets represent the maximum credit risk exposure.

Loans and advances

The Company's exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, management also considers the factors that may influence the credit risk of its customer base, including the default risk associated with the industry.

The risk management committee has established a credit policy under which each new customer is analysed individually for creditworthiness before the Company's standard payment and delivery terms and conditions are offered. The Company's review includes external ratings, if they are available, financial statements, credit agency information, industry information etc.

An impairment analysis is performed at each reporting date based on the facts and circumstances existing on that date to identify expected losses on account of time value of money and credit risk. For the purposes of this analysis, the loan receivables are categorised into groups based on days past due. Each group is then assessed for impairment using the ECL model as per the provisions of Ind AS 109 - financial instruments.

Staging:

As per the provision of Ind AS 109 general approach all financial instruments are allocated to stage 1 on initial recognition. However, if a significant increase in credit risk is identified at the reporting date compared with the initial recognition, then an instrument is transferred to stage 2. If there is objective evidence of impairment, then the asset is credit impaired and transferred to stage 3.

The Company considers a financial instrument defaulted and therefore Stage 3 (credit-impaired) for ECL calculations in all cases when the borrower becomes 90 days past due on its contractual payments.

For financial assets in stage 1, the impairment calculated based on defaults that are possible in next twelve months, whereas for financial instrument in stage 2 and stage 3 the ECL calculation considers default event for the lifespan of the instrument.

As per Ind AS 109, Company assesses whether there is a significant increase in credit risk at the reporting date from the initial recognition. Company has staged the assets based on the Day past dues criteria and other market factors which significantly impacts the portfolio.

Grouping:

As per Ind AS 109, Company is required to group the portfolio based on the shared risk characteristics. Company has assessed the risk and its impact on the various portfolios and has divided the portfolio into following groups:

a. TW loan

b. SME loans

c. SRTO loan

d. MSME loan

e. Retail asset channel loans

ECL:

ECL on financial assets is an unbiased probability weighted amount based out of possible outcomes after considering risk of credit loss even if probability is low. ECL is calculated based on the following components:

a. Marginal probability of default ("MPD")

b. Loss given default ("LGD")

c. Exposure at default ("EAD")

d. Discount factor ("D")

Marginal probability of default:

PD is defined as the probability of whether borrowers will default on their obligations in the future. Historical PD is derived from NBFC internal data calibrated with forward looking macroeconomic factors.

For computation of probability of default ("PD"), Vasicek Single Factor Model was used to forecast the PD term structure over lifetime of loans. As per Vasicek model, given long term PD and current macroeconomic conditions, conditional PD corresponding to current macroeconomic condition is estimated. Company has worked out on PD based on the last five years historical data.

Marginal probability:

The PDs derived from the Vasicek model, are the cumulative PDs, stating that the borrower can default in any of the given years, however to compute the loss for any given year, these cumulative PDs have to be converted to marginal PDs. Marginal PDs is probability that the obligor will default in a given year, conditional on it having survived till the end of the previous year.

Conditional marginal probability:

As per Ind AS 109, expected loss has to be calculated as an unbiased and probability-weighted amount for multiple scenarios.

The probability of default was calculated for 3 scenarios: upside (11%), downside (21%) and base (68%). This weightage has been decided on best practices and expert judgement. Marginal conditional probability was calculated for all 3 possible scenarios and one conditional PD was arrived as conditional weighted probability.

LGD:

LGD is an estimate of the loss from a transaction given that a default occurs. Under Ind AS 109, lifetime LGD's are defined as a collection of LGD's estimates applicable to different future periods.

Various approaches are available to compute the LGD. Company has considered workout LGD approach. The following steps are performed to calculate the LGD:

1) Analysis of historical credit impaired accounts at cohort level.

2) The computation consists of five components, which are:

a) Outstanding balance (POS)

b) Recovery amount (discounted yearly) by initial contractual rate.

c) Expected recovery amount (for incomplete recoveries), discounted to reporting date using initial contractual rate.

d) Collateral (security) amount

The formula for the computation is as below:

% Recovery rate = (discounted recovery amount security amount discounted estimated recovery) / (total POS)

% LGD = 1 - recovery rate

EAD:

As per Ind AS 109, EAD is estimation of the extent to which the financial entity may be exposed to counterparty in the event of default and at the time of counterparty's default. Company has modelled EAD based on the contractual and behavioral cash flows till the lifetime of the loans considering the expected prepayments.

Company has considered expected cash flows for all the loans at DPD bucket level for each of the segments, which was used for computation of ECL. Moreover, the EAD comprised of principal component, accrued interest and also the future interest for the outstanding exposure. So discounting was done for computation of expected credit loss.

Discounting:

As per Ind AS 109, ECL is computed by estimating the timing of the expected credit shortfalls associated with the defaults and discounting them using effective interest rate.

ECL computation:

Conditional ECL at DPD pool level was computed with the following method:

Conditional ECL for year (yt) = EAD (yt) * conditional PD (yt) * LGD (yt) * discount factor (yt)

The loss rates are based on actual credit loss experience over past years. These loss rates are then adjusted appropriately to reflect differences between current and historical economic conditions and the Company's view of economic conditions over the expected lives of the loan receivables. Movement in provision of expected credit loss has been provided in below note.

Cash and cash equivalent and Bank deposits

Credit risk on cash and cash equivalent and bank deposits is limited as the Company generally invests in term deposits with banks which are rated AA- to AA , based on CRISIL ratings.

2) Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting its obligations associated with its financial liabilities. The Company's approach in managing liquidity is to ensure that it will have sufficient funds to meet its liabilities when due.

The Company is monitoring its liquidity risk by estimating the future inflows and outflows during the start of the year and planned accordingly the funding requirement. The Company manages its liquidity by unutilised cash credit facility, term loans and direct assignment.

The composition of the Company's liability mix ensures healthy asset liability maturity pattern and well diverse resource mix.

Capital adequacy ratio of the Company, as on 31 March 2019 is 29.13% against regulatory norms of 15%. Tier I capital is 27.40% as against requirement of 10%. Tier II capital is 1.73% which may increase from time to time depending on the requirement and also as a source of structural liquidity to strengthen asset liability maturity pattern.

The total cash credit limit available to the Company is Rs. 183,500.00 lakhs spread across 20 banks. The utilization level is maintained in such a way that ensures sufficient liquidity on hand.

Majority of the Company's portfolio is MSME loans which qualifies as Priority Sector Lending. Over the years, the Company has maintained around 35% to 40% of assets under management as off book through direct assignment transactions. It is with door to door maturity and without recourse to the Company. This further strengthens the liability management.

3) 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 includes interest rate risk and foreign currency risk. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.

3.1) Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company's exposure to the risk of changes in market interest rates relates primarily to the Company's investment in bank deposits and variable interest rate borrowings and lending. Whenever there is a change in borrowing interest rate for the Company, necessary change is reflected in the lending interest rates over the timeline in order to mitigate the risk of change in interest rates of borrowings.

3.2) Foreign currency risk

The Company does not have any instrument denominated or traded in foreign currency. Hence, such risk does not affect the Company.

NOTE 16. There have been no events after the reporting date that require disclosure in these financial statements.

NOTE 17. EXPLANATION TO TRANSITION TO IND AS

As stated in Note 2, these are the Company's first financial statements prepared in accordance with Ind AS. For the year ended 31 March 2018, the Company had prepared its financial statements in accordance with Companies (Accounting Standards) Rules, 2006, notified under Section 133 of the Act and other relevant provisions of the Act ("Previous GAAP").

The accounting policies set out in Note 3 have been applied in preparing these financial statements for the year ended 31 March 2019 including the comparative information for the year ended 31 March 2018 and the opening Ind AS balance sheet on the date of transition i.e. 1 April 2017.

In preparing the Ind AS balance sheet as at 1 April 2017 and in presenting the comparative information for the year ended 31 March 2018, the Company has adjusted amounts reported previously in the financial statements prepared in accordance with Previous GAAP. This note explains the principal adjustments made by the Company in restating its financial statements prepared in accordance with Previous GAAP and how the transition from Previous GAAP to Ind AS has affected the Company's financial position, financial performance and cash flows.

Optional exemptions availed and mandatory exceptions

In preparing these financial statements, the Company has applied the below mentioned optional exemptions and mandatory exceptions.

A. Optional exemptions availed

1. Property plant and equipment and intangible assets

As per Ind AS 101 an entity may elect to:

(i) measure an item of property, plant and equipment at the date of transition at its fair value and use that fair value as its deemed cost at that date

(ii) use a Previous GAAP revaluation of an item of property, plant and equipment at or before the date of transition as deemed cost at the date of the revaluation, provided the revaluation was, at the date of the revaluation, broadly comparable to:

- fair value;

- or cost or depreciated cost under Ind AS adjusted to reflect, for example, changes in a general or specific price index.

The elections under (i) and (ii) above are also available for intangible assets that meets the recognition criteria in Ind AS 38, Intangible Assets, (including reliable measurement of original cost); and criteria in Ind AS 38 for revaluation (including the existence of an active market).

(iii) use carrying values of property, plant and equipment, intangible assets and investment properties as on the date of transition to Ind AS (which are measured in accordance with Previous GAAP) if there has been no change in its functional currency on the date of transition.

As permitted by Ind AS 101, the Company has elected to continue with the carrying values under Previous GAAP for all the items of property, plant and equipment. The same election has been made in respect of intangible assets also.

2. Investments in subsidiaries

Ind-AS 101 allows a first-time adopter to use a deemed cost when measuring an investment in a subsidiary in the separate opening statement of financial position. This deemed cost can be determined using either fair value at the date of transition to Ind-AS or a Previous GAAP carrying amount at that date. A first-time adopter is able to choose whether to use the deemed cost exemption on an investment-by-investment basis for its subsidiary.

Accordingly, the Company has elected to avail the exemption and use the Previous GAAP carrying value as deemed cost.

3. Designation of previously recognised financial instruments

Ind AS 101 permits an entity to designate particular equity investments (other than equity investments in subsidiaries, associates and joint arrangements) as at FVOCI based on facts and circumstances at the date of transition to Ind AS (rather than at initial recognition).

The Company has opted to avail this exemption to designate equity investments (other than investment in subsidiary) as FVOCI on the date of transition.

B. Mandatory exceptions

1. Accounting estimates

As per Ind AS 101, an entity's estimates in accordance with Ind AS at the date of transition to Ind AS at the end of the comparative period presented in the entity's first Ind AS financial statements, as the case may be, should be consistent with estimates made for the same date in accordance with the Previous GAAP unless there is objective evidence that those estimates were in error. However, the estimates should be adjusted to reflect any differences in accounting policies.

As per Ind AS 101, where application of Ind AS requires an entity to make certain estimates that were not required under Previous GAAP those estimates should be made to reflect conditions that existed at the date of transition (for preparing opening Ind AS balance sheet) or at the end of the comparative period (for presenting comparative information as per Ind AS).

The Company's estimates under Ind AS are consistent with the above requirement. Key estimates considered in preparation of the financial statements that were not required under the Previous GAAP are listed below:

- Fair valuation of financial instruments carried at FVOCI.

- Impairment of financial assets based on the expected credit loss model.

- Determination of the discounted value for financial instruments carried at amortised cost.

- EIR on borrowings.

- Expected life of portfolio.

- Classification of equity and liability.

2. Derecognition of financial assets and liabilities

As per Ind AS 101, an entity should apply the derecognition requirements in Ind AS 109 - Financial Instruments, prospectively for transactions occurring on or after the date of transition to Ind AS. However, an entity may apply the derecognition requirements retrospectively from a date chosen by it if the information needed to apply Ind AS 109 to financial assets and financial liabilities derecognised as a result of past transactions was obtained at the time of initially accounting for those transactions.

The Company has elected to apply the de-recognition criteria for financial assets/liabilities prospectively. Hence, it has not recognised any financial assets/financial liabilities previously derecognised.

3. Classification and measurement of financial assets

Ind AS 101 requires an entity to assess classification of financial assets on the basis of facts and circumstances existing as on the date of transition. Further, the standard permits measurement of financial assets accounted at amortised cost based on facts and circumstances existing at the date of transition if retrospective application is impracticable.

Accordingly, the company has determined the classification of financial assets based on facts and circumstances that exist on the date of transition.

4. Impairment of financial assets

The Company being NBFC company is required to assess the impairment of financial assets based upon the new model i.e. ECL instead of rule based guidance (RBI Prudential Norms) as prevailed under Previous GAAP

Accordingly, the Company has applied the impairment requirement of Ind-AS 109 on all financial assets recognised as per Ind-AS 109 retrospectively except:

1. The Company has sought to approximate the credit risk on initial recognition by considering all reasonable and supportable information that is available without undue cost or effort.

2. The Company has determined whether the financial asset is having low credit risk, as specified in Ind-AS 109, and whether there is a significant increase in credit risk since initial recognition of financial assets by applying rebuttable presumption of 30 days past due.

3. If the Company is unable to determine whether there is a significant increase in credit risk since initial recognition of a financial asset, without involving undue cost or effort, the Company shall recognise a loss amount equal to life time expected losses at each reporting date till the financial asset is derecognised.

Accordingly, the Company has developed ECL model for testing of impairment of loans and advances.

* Ind AS 101 requires reconciliations of its equity reported in accordance with previous GAAP to its equity in accordance with Ind AS and a reconciliation to its total comprehensive income in accordance with Ind AS for the latest period in the entity's most recent annual financial statements. The Company has chosen to provide reconciliation of amount reported in accordance with previous GAAP to amount reported under Ind AS for each line item of balance sheet and statement of profit and loss as an additional disclosure.

# The previous GAAP figures have been reclassified to conform to Ind AS presentation requirements for the purpose of this note.

Notes to the reconciliations

1) FVOCI of financial assets

a) Investments

Under Previous GAAP the Company accounted for long term investments in unquoted and quoted equity shares as investment measured at cost less provision for other than temporary diminution in the value of investments. Under Ind AS, financial assets representing investment in equity shares of entities other than subsidiaries have to be fair valued. At the date of transition to Ind AS, difference between the instruments fair value and Previous GAAP carrying amount has been recognised as a separate component of equity, in the FVOCI reserve, net of related deferred taxes. Accordingly, an amount of ' 0.77 lakh has been recognised in OCI for the year ended 31 March 2018. Further an amount of Rs. 8.02 lakhs has been recognised as increase in investments as on 1 April 2017.

b) Loans and advances

The Company has business model of sale the loan portfolio through assignment or hold the loan portfolio and therefore, the Company recognizes its loan portfolio through FVOCI as per IND AS 109. While under Previous GAAP, loans and advances were carried at their carrying amount. Accordingly, at the date of transition to Ind AS, difference between the fair value of loan and Previous GAAP carrying amount has been recognised as a separate component of loans and advances, in the FVOCI reserve, net of related deferred taxes. An amount of Rs. 1,651.09 lakhs has been adjusted in retained earning as on 1 April 2017. Further, Rs. 2,471.74 lakhs has been recognised in FVOCI during the year ended 31 March 2018.

2) Actuarial gain and loss

Under Ind AS, all actuarial gains and losses are recognised in other comprehensive income. Under Previous GAAP, the Company recognised actuarial gains and losses in the statement of profit or loss. However, this has no major impact on the total comprehensive income and total equity as on 1 April 2017 or as on 31 March 2018.

3) Loss allowance

Under Previous GAAP the Company has created provision for impairment of loans to customer as per the guidelines specified by RBI. Under Ind AS, the Company has recognised impairment loss on loans based on the expected credit loss model as required by Ind AS 109. Consequently, the Company impaired its loans and advances by Rs. 365.47 lakhs on 1 April 2017 which has been eliminated against retained earnings. Further, a reversal of Rs. 182.60 lakhs has been recognised in the statement of profit and loss for the year ended on 31 March 2018.

4) EIR

a) Under Previous GAAP, transaction cost charged to customers were recognised upfront while under Ind AS, such costs are included in the initial recognition amount of financial asset and recognised as interest income using effective interest method. Consequently, loan to customer on the date of transition as on 1 April 2017 have decreased by Rs. 994.07 Lakhs which has been eliminated against retained earnings. The impact of Rs. 115.85 Lakhs for the year ended on 31 March 2018 has been recognised in the statement of profit and loss.

b) Under Previous GAAP transaction cost incurred on borrowings were amortized over the tenure of the loan on straight-line basis while under Ind AS, such cost are included in the initial recognition amount of financial assets and recognised as interest income using effective interest method. Consequently, borrowings on the date of transition date have increased by Rs. 21.96 Lakhs and interest expenses for the year ended 31 March 2018 has decreased by Rs. 18.36 Lakhs.

5) Corporate financial guarantees

The Company has given various corporate guarantees to banks on behalf of its subsidiary. Under Previous GAAP, guarantees were disclosed in the financial statements as part of notes to accounts. Under Ind AS, these guarantees are initially measured at fair value and recognised as investment in subsidiary and corresponding financial liability. It has resulted into increase of income by Rs. 189.32 Lakhs on the date of transition which has been recognised in the retained earnings and an amount of Rs. 26.19 Lakhs for the year ended 31 March 2018 has been recognised in the statement of profit and loss.

6) Interest reversal on stage 3 financial assets

Under Previous GAAP, the Company did not accrue interest on stage 3 assets. Under Ind AS, the Company has recognized interest on stage 3 assets resulting into an income of Rs. 275.92 Lakhs on the date of transition which has been recognised in retained earnings. The impact of ' 6.36 Lakhs for the year ended 31 March 2018 has been adjusted in the statement of profit and loss.

7) Security deposits initially recognised at amortised cost

Under Previous GAAP, the Company accounted for refundable security deposits liability taken from customers at carrying cost. Under Ind AS, these deposits have been accounted at amortised cost determined using the appropriate market rate.

8) Assignment of loan portfolio

The Company derecognizes the loan portfolio assigned to assignees. Under Previous GAAP, interest income spread on the loan portfolio assigned (net of minimum retention ratio) was recognized as and when it was accrued, i.e., over the life of the loan given. Under Ind AS, such interest income is recognized upfront i.e., at the time of assignment transaction.

This has resulted in increase in equity as on 1 April 2017 by Rs. 3,819.85 Lakhs and as on 31 March 2018 by Rs. 1,889.94 Lakhs.

9) Compulsorily convertible preference shares

Under Previous GAAP, compulsorily convertible preference shares ("CCPS") were disclosed at their carrying amount and classified as equity. Under Ind AS, these instruments are classified as financial liability and measured at amortised cost as per Ind AS 32. Accordingly, on the date of transition, a total impact of Rs. 13,091.50 Lakhs on account of CCPS has been adjusted against retained earnings. For the year ended 31 March 2018, an impact of Rs. 1,194.92 Lakhs and a positive impact of Rs. 14,286.42 Lakhs has been recognised in the statement of profit and loss and retained earnings respectively.

Under Previous GAAP, dividend / interest in respect of shares / debt were recorded in retained earning and the statement of profit and loss respectively. Under Ind AS, since these convertible instruments are classified as financial liability, the dividend and corresponding dividend distribution tax amounting to Rs. 36.47 Lakhs arising on account of these instruments has been adjusted against the statement of profit and loss for the year ended 31 March 2018.

10) Other comprehensive income

Under Previous GAAP, the Company did not present OCI separately. Hence, it has reconciled Previous GAAP profit and loss to profit and loss as per Ind AS. Further, Previous GAAP profit and loss is reconciled to total comprehensive income as per Ind AS.

11) Deferred tax

Previous GAAP requires deferred tax accounting using the profit and loss approach, which focuses on differences between taxable profits and accounting profits for the period. Ind AS 12 requires entities to account for deferred taxes using the balance sheet approach, which focuses on temporary differences between the carrying amount of an asset or liability in the balance sheet and its tax base. The application of Ind AS 12 approach has resulted in recognition of deferred tax on new temporary differences arising on account of transitional differences adjustments which were not required under Previous GAAP

In addition, the various transitional adjustments lead to temporary differences. According to the accounting policies, the Company has to account for such differences. Deferred tax adjustments are recognised in correlation to the underlying transaction either in retained earnings or a separate component of equity.