ix. Provisions, contingent assets and contingent
liabilities
Provisions are recognised only when there is a
present obligation, as a result of past events, and
when a reliable estimate of the amount of obligation
can be made at the reporting date. These estimates
are reviewed at each reporting date and adjusted
to reflect the current best estimates. Provisions are
discounted to their present values, where the time
value of money is material.
Contingent liability is disclosed for:
a) Possible obligations which will be confirmed
only by future events not wholly within the
control of the Company or
b) Present obligations arising from past events
where it is not probable that an outflow
of resources will be required to settle the
obligation or a reliable estimate of the amount
of the obligation cannot be made.
x. Leases
Company as a lessee
A contract is, or contains, a lease if the contract
conveys the right to control the use of an identified
asset for a period of time, the lease term, in exchange
for consideration. The Company assesses whether
a contract is, or contains, a lease on inception.
The lease term is either the non-cancellable period
of the lease and any additional periods when there
is an enforceable option to extend the lease and it
is reasonably certain that the Company will extend
the term, or a lease period in which it is reasonably
certain that the Company will not exercise a right
to terminate. The lease term is reassessed if
there is a significant change in circumstances.
The Company recognises a right-of-use asset and
a lease liability at the lease commencement date.
The right-of-use asset is initially measured at cost,
which comprises the initial amount of the lease
liability adjusted for any lease payments made at
or before the commencement date, plus any initial
direct costs incurred.
Right-of-use assets are depreciated from the
commencement date on a straight-line basis over
the shorter of the lease term and useful life of the
underlying asset.
The lease liability is initially measured at the
present value of the total lease payments due on
the commencement date, discounted using either
the interest rate implicit in the lease, if readily
determinable, or more usually, an estimate of the
Company's incremental borrowing rate.
Lease payments included in the measurement of
the lease liability comprise the following:
a) fixed payments, including payments which are
substantively fixed;
b) variable lease payments that depend on a
rate, initially measured using the rate as at the
commencement.
The lease liability is measured at amortised cost
using the effective interest method. It is remeasured
when there is a change in future lease payments
arising from a change in a rate, if the Company
changes its assessment of whether it will exercise
a purchase, extension or termination option or if
there is a revised in-substance fixed lease payment.
When the lease liability is remeasured in this way, a
corresponding adjustment is made to the carrying
amount of the right-of-use asset or is recorded in
profit or loss if the carrying amount of the right-of-
use asset has been reduced to zero.
Short-term leases and leases of low-value assets
As permitted by Ind AS 116, the Company does not
recognise right-of-use assets and lease liabilities
for leases of low-value assets and short-term
leases. Payments associated with these leases are
recognised as an expense on a straight-line basis
over the lease term.
xi. Financial instruments
A Financial instrument is any contract that gives
rise to a financial asset of one entity and a financial
liability or equity instrument of another entity.
Initial recognition and measurement
Financial assets and financial liabilities are
recognised when the Company becomes a party to
the contractual provisions of the financial instrument
and are measured initially at fair value adjusted for
transaction costs. Subsequent measurement of
financial assets and financial liabilities is described
below.
Derivative financial instruments
The Company enters into derivative financial
instruments to manage its exposure to interest
rate and foreign exchange rate risks through cross
currency interest rate swaps.
Derivatives are initially recognised at fair value at the
date the derivative contracts are entered into and
are subsequently remeasured to their fair value at
the end of each reporting period. The resulting gain
or loss is recognised in profit or loss immediately
unless the derivative is designated and effective as a
hedging instrument, in which event the timing of the
recognition in profit or loss depends on the nature
of the hedging relationship and the nature of the
hedged item.
Hedge accounting
The Company designates certain hedging
instruments, which include derivatives in respect of
foreign currency risk, as cash flow hedge.
At the inception of the hedge relationship, the
entity documents the relationship between the
hedging instrument and the hedged item, along
with its risk management objectives and its strategy
for undertaking various hedge transactions.
Furthermore, at the inception of the hedge and
on an ongoing basis, the Company documents
whether the hedging instrument is highly effective in
offsetting changes in fair values or cash flows of the
hedged item attributable to the hedged risk.
Cash flow hedges
The effective portion of changes in the fair value of
derivatives that are designated and qualify as cash
flow hedges is recognised in other comprehensive
income and accumulated under the heading of
cash flow hedge reserve. The gain or loss relating to
the ineffective portion is recognised immediately in
“Statement of profit and loss”.
Amounts previously recognised in other
comprehensive income and accumulated in equity
relating to (effective portion as described above)
are reclassified to profit or loss in the periods when
the hedged item affects profit or loss, in the same
line as the recognised hedged item. However,
when the hedged forecast transaction results in the
recognition of a non-financial asset or a non-financial
liability, such gains and losses are transferred from
equity (but not as a reclassification adjustment) and
included in the initial measurement of the cost of the
non-financial asset or non-financial liability.
Hedge accounting is discontinued when the
hedging instrument expires or is sold, terminated,
or exercised, or when it no longer qualifies for hedge
accounting. Any gain or loss recognised in other
comprehensive income and accumulated in equity
at that time remains in equity and is recognised
when the forecast transaction is ultimately
recognised in profit or loss. When a forecast
transaction is no longer expected to occur, the gain
or loss accumulated in other equity is recognised
immediately in statement of profit and loss.
Non-derivative financial assetsSubsequent measurementi. Financial assets carried at amortised cost
- a financial asset is measured at the amortised
cost if both the following conditions are met:
a) The asset is held within a business model
whose objective is to hold assets for
collecting contractual cash flows, and
b) Contractual terms of the asset give rise
on specified dates to cash flows that
are solely payments of principal and
interest (SPPI) on the principal amount
outstanding.
After initial measurement, such financial assets
are subsequently measured at amortised
cost using the effective interest rate (EIR)
method. Amortised cost is calculated by
taking into account any discount or premium
on acquisition and fees or costs that are an
integral part of the EIR. The EIR amortisation is
included in interest income in the Statement of
Profit and Loss.
ii. Financial assets carried at fair value
through other comprehensive income - a
financial asset is measured at fair value, with
changes in fair value being carried to other
comprehensive income, if both the following
conditions are met:
a) the financial asset is held within a business
model whose objective is achieved by
both collecting contractual cash flows
and selling financial assets, and
b) Contractual terms of the asset give rise
on specified dates to cash flows that
are solely payments of principal and
interest (SPPI) on the principal amount
outstanding.
De-recognition of financial assets
Financial assets (or where applicable, a part of
financial asset or part of a group of similar financial
assets) are derecognised (i.e. removed from the
Company's balance sheet) when the contractual
rights to receive the cash flows from the financial
asset have expired, or when the financial asset
and substantially all the risks and rewards are
transferred. Further, if the Company has not retained
control, it shall also derecognise the financial asset
and recognise separately as assets or liabilities any
rights and obligations created or retained in the
transfer.
Non-derivative financial liabilitiesOther financial liabilities - Subsequent
measurement
Subsequent to initial recognition, all non-derivative
financial liabilities, except compulsorily convertible
preference shares, are measured at amortised cost
using the effective interest method.
De-recognition of financial liabilities
A financial liability is de-recognised when the
obligation under the liability is discharged or
cancelled or expired. When an existing financial
liability is replaced by another from the same lender
on substantially different terms, or the terms of an
existing liability are substantially modified, such
an exchange or modification is treated as the
de-recognition of the original liability and the
recognition of a new liability. The difference in the
respective carrying amounts is recognised in the
Statement of Profit and Loss.
First loss default guarantee
First loss default guarantee contracts are contracts
that require the Company to make specified
payments to reimburse the bank and financial
institution for a loss it incurs because a specified
debtor fails to make payments when due, in
accordance with the terms of a debt instrument.
Such financial guarantees are given to banks and
financial institutions, for whom the Company acts
as ‘Business Correspondent' or avails any facilities
like Term Loans, Securitisation transactions etc.
Financial guarantee contracts are initially recognised
at fair value and subsequently measured at the
higher of:
(i) the amount of loss allowance determined
under expected credit loss principles; and
(ii) the amount initially recognised less cumulative
amortisation, where appropriate.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and
the net amount is reported in the balance sheet if
there is a currently enforceable legal right to offset
the recognised amounts and there is an intention to
settle on a net basis, to realise the assets and settle
the liabilities simultaneously.
xii. Determination of fair value
The Company measures financial instruments, such
as, investments at fair value at each balance sheet
date. Fair value is the price that would be received
to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at
the measurement date. The fair value measurement
is based on the presumption that the transaction
to sell the asset or transfer the liability takes place
either:
a) I n the principal market for the asset or liability,
or
b) I n the absence of a principal market, in the
most advantageous market for the asset or
liability
The principal or the most advantageous market
must be accessible by the Company.
The fair value of an asset or a liability is measured
using the assumptions that market participants
would use when pricing the asset or liability, if market
participants act in their economic best interest.
A fair value measurement of a non-financial asset
considers a market participant's ability to generate
economic benefits by using the asset in its highest
and best use or by selling it to another market
participant that would use the asset in its highest
and best use.
The Company uses valuation techniques that are
appropriate in the circumstances and for which
enough data are available to measure fair value,
maximising the use of relevant observable inputs
and minimizing the use of unobservable inputs.
The financial instruments are classified based on a
hierarchy of valuation techniques, as summarised
below:
Level 1 financial instruments - Those where the
inputs used in the valuation are unadjusted quoted
prices from active markets for identical assets or
liabilities that the Company has access to at the
measurement date.
Level 2 financial instruments - Those where the
inputs that are used for valuation and are significant,
are derived from directly or indirectly observable
market data available over the entire period of the
instrument's life. Such inputs include quoted prices
for similar assets or liabilities in active markets,
quoted prices for identical instruments in inactive
markets and observable inputs other than quoted
prices such as interest rates and yield curves,
implied volatilities, and credit spreads. In addition,
adjustments may be required for the condition
or location of the asset or the extent to which it
relates to items that are comparable to the valued
instrument. However, if such adjustments are based
on unobservable inputs which are significant to the
entire measurement, the Company will classify the
instruments as Level 3.
Level 3 financial instruments - Those that include
one or more unobservable input that is significant
to the measurement as whole. Difference between
transaction price and fair value at initial recognition
The best evidence of the fair value of a financial
instrument at initial recognition is the transaction
price (i.e. the fair value of the consideration given
or received) unless the fair value of that instrument
is evidenced by comparison with other observable
current market transactions in the same instrument
(i.e. without modification or repackaging) or based
on a valuation technique whose variables include
only data from observable markets. When such
evidence exists, the Company recognises the
difference between the transaction price and the fair
value in profit or loss on initial recognition (i.e. on day
one).
When the transaction price of the instrument differs
from the fair value at origination and the fair value
is based on a valuation technique using only inputs
observable in market transactions, the Company
recognises the difference between the transaction
price and fair value in net gain on fair value changes.
In those cases where fair value is based on models
for which some of the inputs are not observable, the
difference between the transaction price and the fair
value is deferred and is only recognised in profit or
loss when the inputs become observable, or when
the instrument is derecognised.
The Company recognises transfers between levels
of the fair value hierarchy at the end of the reporting
period during which the change has occurred. No
such instances of transfers between levels of the fair
value hierarchy were recorded during the reporting
period.
xiii. Cash and cash equivalents
Cash and cash equivalent in the balance sheet
comprise cash at banks and on hand and short-
term deposits with an original maturity of three
months or less, which are subject to an insignificant
risk of changes in value.
xiv. Earnings per share
The Company reports basic and diluted earnings
per share in accordance with Ind AS 33 on Earnings
per share. Basic earnings per share is calculated
by dividing the net profit or loss for the period
attributable to equity shareholders (after deducting
attributable taxes) by the weighted average number
of equity shares outstanding during the period.
The weighted average number of equity shares
outstanding during the period is adjusted for events
including a bonus issue.
For the purpose of calculating diluted earnings per
share, the net profit or loss for the period attributable
to equity shareholders and the weighted average
number of shares outstanding during the period are
adjusted for the effects of all dilutive potential equity
shares including the impact of employee stock
options and shares held through the ESOP trust,
where applicable to satisfy the exercise of the share
options by the employees. Dilutive potential equity
shares are deemed converted as of the beginning of
the period, unless they have been issued at a later
date. In computing the dilutive earnings per share,
only potential equity shares that are dilutive and that
either reduces the earnings per share or increases
loss per share are included.
xv. Foreign currencyFunctional and presentation currency
Items included in the financial statement of the
Company are measured using the currency of the
primary economic environment in which the entity
operates (‘the functional currency').
Transactions and balances
Foreign currency transactions are translated into
the functional currency, by applying the exchange
rates on the foreign currency amounts at the date
of the transaction. Foreign currency monetary
items outstanding at the balance sheet date are
converted to functional currency using the closing
rate. Non-monetary items denominated in a foreign
currency which are carried at historical cost are
reported using the exchange rate at the date of the
transaction.
Exchange differences arising on monetary items on
settlement, or restatement as at reporting date, at
rates different from those at which they were initially
recorded, are recognised in the Statement of Profit
and Loss in the year in which they arise.
xvi. Significant management judgement in applying
accounting policies and estimation uncertainty
The preparation of the Company's financial
statements requires management to make
judgements, estimates and assumptions that affect
the reported amounts of revenues, expenses,
assets and liabilities, and the related disclosures.
Actual results may differ from these estimates.
Significant management judgements
Recognition of deferred tax assets - The extent
to which deferred tax assets can be recognised is
based on an assessment of the probability of the
future taxable income against which the deferred
tax assets can be utilised.
Business model assessment - 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 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.
Effective Interest Rate (EIR) method - The
Company's EIR methodology, recognises interest
income/expense using a rate of return that
represents the best estimate of a constant rate of
return over the expected behavioural 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 behaviour
and life-cycle of the instruments, as well expected
changes to India's base rate and other fee income/
expense that are integral parts of the instrument.
Evaluation of indicators for impairment of
assets - The evaluation of applicability of indicators
of impairment of assets requires assessment of
several external and internal factors which could
result in deterioration of recoverable amount of the
assets.
Classification of leases - The Company enters
into leasing arrangements for various assets.
The classification of the leasing arrangement as
a finance lease or operating lease is based on an
assessment of several factors, including, but not
limited to, transfer of ownership of leased asset
at end of lease term, lessee's option to purchase
and estimated certainty of exercise of such option,
proportion of lease term to the asset's economic
life, proportion of present value of minimum lease
payments to fair value of leased asset and extent of
specialised nature of the leased asset.
Expected credit loss (‘ECL’) - The measurement
of expected credit loss allowance for financial assets
requires use of complex models and significant
assumptions about future economic conditions
and credit behaviour (e.g. likelihood of customers
defaulting and resulting losses). The Company
makes significant judgements with regard to the
following while assessing expected credit loss:
a) Determining criteria for significant increase in
credit risk;
b) Establishing the number and relative weightings
of forward-looking scenarios for each type of
product/market and the associated ECL; and
c) Establishing groups of similar financial assets
for the purposes of measuring ECL.
Provisions - At each balance sheet date basis the
management judgment, changes in facts and legal
aspects, the Company assesses the requirement
of provisions against the outstanding contingent
liabilities. However, the actual future outcome may
be different from this judgement.
Significant estimates
Useful lives of depreciable/amortisable assets
- Management reviews its estimate of the useful lives
of depreciable/amortisable assets at each reporting
date, based on the expected utility of the assets.
Uncertainties in these estimates relate to technical
and economic obsolescence that may change the
utility of assets.
Defined benefit obligation (DBO) - Management's
estimate of the DBO is based on a number of
underlying assumptions such as standard rates of
inflation, mortality, discount rate and anticipation
of future salary increases. Variation in these
assumptions may significantly impact the DBO
amount and the annual defined benefit expenses.
Fair value measurements - Management
applies valuation techniques to determine the fair
value of financial instruments (where active market
quotes are not available). This involves developing
estimates and assumptions consistent with how
market participants would price the instrument.
xvii. Implementation of Indian Accounting
Standards by RBI
The RBI issued Circular DOR (NBFC).CC.PD.
No.109/22.10.106/2019-20 dt. March 13, 2020,
which require Non-Banking Financial Companies
(NBFCs) covered by Rule 4 of the Companies (Indian
Accounting Standards) Rules, 2015 to comply with
the respective circular while preparing the financial
statements from financial year 2019-20 onwards.
xviii. Recent Accounting Pronouncements
Ministry of Corporate Affairs (‘MCA’) notifies new
standard or amendments to the existing standards
under Companies (Indian Accounting Standards)
Rules as issued from time to time. During the
2025-26, MCA notified amendments to:
Ind AS 21 - The Effects of Changes in Foreign
Exchange Rates, applicable w.e.f. April 01, 2025.
The Company has reviewed the amendment and
based on its evaluation has determined that it
does not have any significant impact in its financial
statements.
I nd AS 7, Statement of Cash Flows and Ind AS
107, Financial Instruments: Disclosures, applicable
w.e.f. April 01,2025 - the amendment in Ind AS 7
requires to inform users of financial statements of
the existence of supplier finance arrangements and
explain the nature of the arrangements, the carrying
amount of liabilities and the range of payment
due dates. Ind AS 107 has been amended to add
supplier finance arrangements as a factor that may
cause concentration of liquidity risk. The Company
has reviewed the amendment and based on its
evaluation has determined that it does not have any
impact in its financial statements.
Ind AS 12, International Tax Reform - Pillar
Two Model Rules applicable immediately - The
amendments provide a temporary mandatory
relief from deferred tax accounting for top-up tax
and disclose that they have applied the relief. This
relief is immediate and applies retrospectively. The
Company has reviewed the amendment and based
on its evaluation has determined that it does not have
any significant impact in its financial statements.
(i) There are no repatriation restrictions with respect to cash and cash equivalents as at the end of the reporting year and
prior years.
(ii) Short-term deposits are made for varying periods of between seven days and three months, depending on the immediate
cash requirements of the Company, and to earn interest at the respective short-term deposit rates.
(iii) Short term deposits includes fixed deposits amounting to ' 20.65 million pertaining to the ESOP Trust consolidated
with the Company. These deposits are free from any lien or restriction and are considered part of the Company's normal
treasury balances.
(iv) The Company has not taken bank overdraft, therefore the cash and cash equivalents for statement of cash flows is same
as for cash and cash equivalents.
(i) There are no repatriation restrictions with respect to bank balances other than cash and cash equivalents as at the end of the
reporting year and prior years.
(ii) The Company earns a fixed rate of interest on these term deposits.
(iii) Term deposits amounting to ' 3,768.75 million (March 31,2025: ' 3,961.24 million ) are held as pledged against borrowings,Credit
enhancement in securitisation transactions (cash collateral towards PTC transactions) and other commitments.
(iv) Balance with banks in current account represents restricted bank balance of ' Nil (March 31,2025: ' 277.62 million) with
a bank, in which proceeds from IPO have been received. The balance in this account after meeting IPO expenses had been
allocated and paid to the Company and the Selling Shareholders proportionately during the year.
The Company has not granted any loans or advances in the nature of loans, to promoters, Directors, KMPs and related parties
(as defined under the Companies Act, 2013), either severally or jointly with any other person, that are either repayable on
demand or without specifying any terms or period of repayment during the year. Trade receivables are non-interest bearing
and short term in nature, hence does not involve any significant interest risk.
(i) All loans given to employees are without any security of assets or guarantee.
(ii) Refer note 42 for loans pledged as security.
(iii) Refer note 45 for expected credit loss related disclosures on loan assets.
(iv) The Company has not granted any loans or advances in the nature of loans, to promoters, Directors, KMPs and
related parties (as defined under the Companies Act, 2013), either severally or jointly with any other person, that are
either repayable on demand or without specifying any terms or period of repayment during the year.
(v) Refer Note 55 (xxx) for Loans where fraud has been committed and reported for the year.
(vi) The Company has securitised certain term loans and managed servicing of such loan accounts. The carrying
value of these assets have not been de-recognised in the books. Refer Note 49 for securitised term loans not
derecognised in their entirety.
(vii) Secured Loans granted by the Company are secured or partly secured by one or a combination of equitable
mortgage of property, Hypothecation of assets including Gold.
(viii) The above loan excludes microfinance loans assigned to a third party on direct assignment in accordance with
RBI Guidelines which qualify for derecognisation as per Ind AS 109. The amounts given are of minimum retention
retained in the books.
(i) The Company has a Board approved policy for entering into derivative transactions. Derivative transactions comprise of
currency and interest rate swaps. The Company undertakes such transactions for hedging of foreign currency borrowings.
The Asset Liability Management Committee periodically monitors and reviews the risk involved.
(ii) The Company raises foreign currency borrowings under its External Commercial Borrowing (“ECB”) programme, which is
governed by applicable RBI guidelines, including the requirement to hedge a minimum of 70% of ECB exposure (principal and
coupon) for borrowings with an average maturity of less than five years. As a prudent risk management practice, the Company
has fully hedged its ECB exposure for the entire tenure of the borrowings.
(iii) I n managing its ECB exposure, the Company evaluates factors such as foreign exchange rates, borrowing tenure, and fully
hedged borrowing costs, and enters into derivative contracts, including over-the-counter hedge instruments, to mitigate
currency risk. Accordingly, the Company does not have any material foreign currency fluctuation risk relating to its ECB
borrowings. Refer Note 45C.4 for details of hedging activities and derivatives.
(i) Borrowings under securitisation arrangements represents securities issued by the special purpose vehicles (‘SPVs') to
the investors pursuant to the securitisation arrangement. Since such arrangements do not fulfil the derecognition criteria
under Ind AS 109, the Company has recognised the associated liabilities with corresponding loans. Refer Note 49 for
securitised term loans not derecognised in their entirety.
(ii) Borrowings under securitisation arrangements are shown at net outstanding amount (Net of investment in Pass Through
Certificates) of the proceeds received by the Company from the Trust.
(iii) The Company holds derivative instrument i.e. Interest rate cross currency swap to mitigate the risk of change in interest
rates and exchange rates on foreign currency exposure. The tenure of ECBs and derivative Instruments are same and
hence are treated as perfectly hedged.
Treasury shares
Treasury shares represents Company's own equity shares held by MML Employee Welfare Trust for implementing Employee
Stock Option Plan of the Company. The Company treats ESOP trust as its extension and the Treasury shares are presented
as a deduction from total equity.
(i) Rights, preferences and restrictions attached to equity shares:
The Company has equity shares having a par value of ' 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
in any financial year is subject to the approval of the shareholders in the ensuing annual general meeting, except interim
dividend. 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.
*For detailed movement of reserves refer statement of changes in equity for the year ended March 31,2026 and year ended
March 31,2025.
Nature and purpose of reserves
Securities premium reserve
Securities premium reserve is used to record the premium on issue of shares. The reserve can be utilised only for limited
purposes such as issuance of bonus shares in accordance with the provisions of the Companies Act, 2013.
Reserve fund u/s 45-IC of RBI Act 1934
The Company creates a reserve fund in accordance with the provisions of section 45-IC of the Reserve Bank of India Act,
1934 and transfers therein an amount equal to/more than twenty per cent of its net profit of the year, before declaration of
dividend. Accordingly, during the period ended March 31,2026, the Company has transferred an amount of ' 340.53 million
(March 31,2025: Nil).
Employee stock options outstanding
The account is used to recognise the grant date value of options issued to employees under Employee stock option plan and
adjusted as and when such options are exercised or otherwise expire.
Loan assets through other comprehensive income
The Company recognises changes in the fair value of loan assets held with business objective of collect and sell in other
comprehensive income. These changes are accumulated within the FVOCI debt investments reserve within equity. The
Company transfers amounts from this reserve to the statement of profit and loss when the loan assets are sold. Any impairment
loss on such loans are reclassified immediately to the statement of profit and loss.
Retained earnings
All the profits or losses made by the Company are transferred to retained earnings from statement of profit and loss.
General reserve
Represents the profits or losses made by the employee welfare trust on account of issue or sale of treasury stock.
Effective portion of Cashflow hedge
The amount refers to changes in the fair value of derivative financial Contracts which are designated as effective Cash flow
Hedge.
(iii) Section 198(4)(a) allows usual working charges to be deducted while computing the net profits for the purpose
of section 198. The usual working charges can be interpreted as the expenditure incurred by the Company in
the ordinary course of the business. Being an NBFC, the Company provides loans to various customers with
or without collaterals. Given the fact that the Company is into the lending business, any credit losses incurred
by the Company could be construed and ‘usual working charges' i.e. credit losses are integral part of the
lending business and should not be considered as capital in nature. Accordingly, Expected Credit Loss (ECL)
provision has been treated as an allowable expenditure for the purpose of calculation of profits under section
198 of the Companies Act, 2013 for Corporate Social Responsibility.
(a) Gratuity is payable to the employees on death or resignation or on retirement at the attainment of superannuation
age.
(b) These assumptions were developed by management with the assistance of independent actuarial appraisers.
Discount factors are determined close to each year-end by reference to government bonds and that have terms
to maturity approximating to the terms of the related obligation. Other assumptions are based on management's
historical experience.
(c) The discount rate is based on the prevailing market yield of Government of India bonds as at the balance sheet date
for the estimated terms of obligations.
(a) Encashment of compensated absence is payable to the employees on death or resignation or on retirement at
the attainment of superannuation age, and it is not applicable on termination and unserved notice period of an
employee.
(b) These assumptions were developed by management with the assistance of independent actuarial appraisers.
Discount factors are determined close to each year-end by reference to government bonds and that have terms
to maturity approximating to the terms of the related obligation. Other assumptions are based on management's
historical experience.
(c) The discount rate is based on the prevailing market yield of Government of India bonds as at the balance sheet date
for the estimated terms of obligations.
(d) The estimates of future salary increases considered takes into account the inflation, seniority, promotion and other
relevant factors.
The above sensitivity analysis is based on a change an assumption while holding all other assumptions constant. In
practice, this is unlikely to occur and changes in some of the assumptions may be correlated. When calculating the
sensitivity of the defined benefit obligation to significant actuarial assumptions the same method (present value of the
defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been
applied which was applied while calculating the defined benefit obligation liability recognised in the balance sheet.
The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to previous
year.
B Fair values hierarchy
The fair value of financial instruments as referred to in note ‘A above has 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 measurements].
The categories used are as follows:
Level 1: Quoted prices (unadjusted) for identical instruments in an active market;
Level 2: Directly (i.e. as prices) or indirectly (i.e. derived from prices) observable market inputs, other than Level 1 inputs;
and
Level 3: Inputs which are not based on observable market data (unobservable inputs).
B.1 Valuation framework
Loan assets carried at fair value through other comprehensive income are categorised in Level 3 of the fair value hierarchy.
The Company's fair value methodology and the governance over its models includes a number of controls and other
procedures to ensure the quality and adequacy of the fair valuation. In order to arrive at the fair value of the above
instruments, the Company obtains independent valuations. The valuation techniques and specific considerations for
level 3 inputs are explained in detail below. The objective of the valuation techniques is to arrive at a fair value that reflects
the price that would be received to sell the asset or paid to transfer the liability in the market at any given measurement
date.
The fair valuation of the financial instruments and its ongoing measurement for financial reporting purposes is ultimately
the responsibility of the finance team which reports to the Chief Financial Officer. The team ensures that final reported fair
value figures are in compliance with Ind AS and will propose adjustments wherever required. When relying on third-party
sources, the team is also responsible for understanding the valuation methodologies and sources of inputs and verifying
their suitability for Ind AS reporting requirements.
B.3 Valuation techniquesB.3A Loan assets carried at fair value through other comprehensive income
Loan receivables are measured at fair value through other comprehensive income (“FVOCI”) as the Company's business
model is to hold financial assets to collect contractual cash flows and also to sell financial assets.
The fair valuation of loan receivables is carried out separately for monthly and weekly repayment portfolios using an
income approach based discounted cash flow valuation methodology. Individual loan accounts are valued separately
and aggregated to determine the fair value of the respective portfolios.
The valuation is performed using the following approaches:
(a) Market Yield Approach; and
(b) Internal/Own Cost of Funds Approach.
Based on management's assessment of the valuation methodologies applied and the recommendation from valuer, the
Internal/Own Cost of Funds Approach has been considered appropriate for determining fair value for financial reporting
purposes.
The fair value of loan receivables is determined by discounting the aggregate expected future cash flows using risk-
adjusted discount rates over the residual tenor of the portfolio. The discounting factors are applied considering the timing
and frequency of expected collections.
The following assumptions are applied in estimation of future cash flows:
- contractual principal and interest cash flows are considered based on the agreed repayment schedule with
borrowers;
- arrear instalments relating to loans with DPD between 1-30 days are considered in the 6th month;
- arrear instalments relating to loans with DPD between 31-90 days are considered in the 12th month; and
- for loans classified as Stage 3/DPD greater than 90 days, the outstanding principal after applying Loss Given
Default (“LGD”) assumptions is considered in the 12th month.
The significant inputs used in the determination of fair value include:
(i) expected future cash flows comprising contractual principal and interest receivables;
(ii) risk-adjusted discount rates derived using:
- market yield/internal cost of funds;
- borrower credit spreads based on Probability of Default (“PD”) and LGD assumptions; and
- servicing cost of financial assets based on OPEX to GLP ratio;
(iii) Probability of Default (“PD”);
(iv) Loss Given Default (“LGD”); and
(v) Servicing cost assumptions.
The fair valuation is classified under Level 3 of the fair value hierarchy due to the use of significant unobservable inputs
including PD, LGD, servicing cost assumptions and risk-adjusted discount rates.
The risk-adjusted discount rates applied for valuation as at March 31,2026 were as follows:
Loan portfolio Discount rate (%)
Monthly portfolio 17.81 %
Weekly portfolio 17.71%
B.3BInvestment in Security Receipts carried at fair value through other comprehensive income
For investment in Security Receipts, the Company has considered the Net Asset Value declared by the Trust.
B.3C Investment in equity instruments carried at fair value through other comprehensive income
For investment in equity instruments, the Company has assessed the fair value on the basis of using a market comparable
book value multiple.
B.3D Investment in government securities carried at fair value through other comprehensive income
For investment in government securities, the Company has assessed the fair value on the basis of the closing price
published by FBIL and are classified as level 1.
B.4 Fair value of instruments measured at amortised cost
The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged
in a current transaction between willing parties, other than in a forced or liquidation sale.
(i) The management assessed that fair values of the following financial instruments to be approximate their respective
carrying amounts, largely due to the short-term maturities of these instruments - Cash and cash equivalents, Bank
balances other than cash and cash equivalents, Trade receivables and Other receivables, Trade payables and Other
payables, Other financial assets and liabilities.
(ii) Majority of the Company's borrowings are at a variable rate interest and hence their carrying values represent best
estimate of their fair value as these are subject to changes in underlying interest rate indices.
(iii) The management assessed that fair values arrived by using the prevailing interest rates at the end of the reporting
periods to be approximate their respective carrying amounts in case of the following financial instruments-Loans,
Lease liabilities and Debt securities.
45. FINANCIAL RISK MANAGEMENT
Introduction and risk profile
The Company has operations in India. The Company's activities expose it to market risk, liquidity risk and credit risk. The
Company's board of directors has overall responsibility for the establishment and oversight of the Company risk management
framework. This note explains the sources of risk which the entity is exposed to and how the entity manages the risk and the
related impact in the financial statements.
A Credit risk
Credit risk is the risk that a counterparty fails to discharge its obligation to the Company. The Company's exposure to credit
risk is influenced mainly by cash and cash equivalents, other bank balances, other receivables, loan assets, investments
and other financial assets. The Company continuously monitors defaults of customers and other counterparties and
incorporates this information into its credit risk controls.
A.1 Credit risk management
The Company assesses and manages credit risk based on internal credit rating system. Internal credit rating is performed
for each class of financial instruments with different characteristics. The Company assigns the following credit ratings to
each class of financial assets based on the assumptions, inputs and factors specific to the class of financial assets -
(i) Low credit risk
(ii) Moderate credit risk
(iii) High credit risk
The Company provides for expected credit loss based on the following:
A.3 Management of credit risk for financial assets other than loans
Cash and cash equivalents and bank deposits
Credit risk related to cash and cash equivalents and bank deposits is considered to be very low as the Company only
deals with high rated banks. The risk is also managed by diversifying bank deposits and accounts in different banks
across the country.
Other receivables
The Company faces very low credit risk under this category as most of the transactions are entered with highly rated
organisations and credit risk relating to these are managed by monitoring recoverability of such amounts continuously.
Other financial assets measured at amortised cost
Other financial assets measured at amortised cost includes advances to employees and security deposits. Credit risk
related to these financial assets is managed by monitoring the recoverability of such amounts continuously.
Credit risk on loans is the single largest risk of the Company's business, and therefore the Company has developed
several processes and controls to manage it. The Company is engaged in the business of providing unsecured micro
finance facilities to women having limited source of income, savings and credit histories repayable in weekly or monthly
instalments.
The Company duly complies with the RBI guidelines (‘Non-Banking Financial Company-Micro Finance Institutions'
(NBFC-MFIs - Directions) with regards to qualifying assets criteria, namely:
- Microfinance unsecured loans are given to an individual having annual household income up to ' 3,00,000
- Maximum FOIR (Fixed Obligation to Income Ratio) should be 50%
The credit risk on loans can be further bifurcated into the following elements:
(i) Credit default risk
(ii) Concentration risk
(i) Management of credit default risk:a) Credit Risk Management for Joint Liability Group (JLG) Loans
Credit default risk is the risk of loss arising from a debtor being unlikely to pay the loan obligations in full or the
debtor is more than 90 days past due on any material credit obligation. The Company majorly manages this
risk by following “"joint liability mechanism”” wherein the loans are disbursed to borrowers who form a part of
an informal joint liability group (“JLG”), generally comprising of five to forty five members. Each member of the
JLG provide a joint and several guarantees for all the loans obtained by each member of the group.
I n addition to this, there is set criteria followed by the Company to process the loan applications. Loans are
generally disbursed to the identified target segments which include economically active women having regular
cash flow engaged in the business such as small shops, vegetable vendors, animal husbandry business,
tailoring business and other self-managed business. Out of the people identified out of target segments, loans
are only disbursed to those people who meet the set criterion - both financial and non-financial as defined in
the credit policy of the Company. Some of the criteria include - annual income, repayment capacity, multiple
borrowings, age, group composition, health conditions, and economic activity etc. Some of the segments
identified as non-target segments are not eligible for a loan. Such segments include - wine shop owners,
political leaders, police & lawyers, individuals engaged in the business of running finance & chit funds and their
immediate family member or people with criminal records etc.
b) Credit Risk Management for Non -Joint Liability Group (Non-JLG) Loans
Company provides other than Group Loans to its existing customers or Co-applicants with a minimum vintage
of one cycle year and having proven track records. Loans are disbursed to those having a regular income
from existing business or service (Including agriculture and agri-allied sectors). The income shall be based on
the independent assessment carried out by Credit team. A combo credit check for both the Applicant and
Co-Applicant is also done.
(ii) Management of concentration risk:
Concentration risk is the risk associated with any single exposure or group of exposures with the potential to
produce large enough losses to threaten Company's core operations. It may arise in the form of single name
concentration or industry concentration. In order to avoid excessive concentrations of risk, the Company's policies
and procedures include specific guidelines to focus on maintaining a diversified portfolio in terms of geography and
product. Identified concentration risks are controlled and managed accordingly.
A.5.1 Credit risk measurement - Expected credit loss measurement
I nd AS 109 outlines a “three stage” model for impairment based on changes in credit quality since initial recognition as
summarised below:
- A financial instrument that is not credit impaired on initial recognition and whose credit risk has not increased
significantly since initial recognition is classified as “Stage 1”.
- If a significant increase in credit risk since initial recognition is identified, the financial instrument is moved to “Stage
2” but is not yet deemed to be credit impaired.
- If a financial instrument is credit impaired, it is moved to “Stage 3”.
ECL for depending on the stage of financial instrument:
- Financial instrument in Stage 1 have their ECL measured at an amount equal to expected credit loss that results
from default events possible within the next 12 months.
- Instruments in Stage 2 or Stage 3 criteria have their ECL measured on lifetime basis.
A.5.2 Criteria for significant increase in credit risk
The Company considers a financial instrument to have experienced a significant increase in credit risk when one or more
of the following quantitative or qualitative criteria are met.
(i) Quantitative criteria
The remaining lifetime probability of default at the reporting date has increased, compared to the residual lifetime
probability of default expected at the reporting date when the exposure was first recognised. The Company
considers loan assets as Stage 2 when the default in repayment is within the range of 30 to 90 days.
(ii) Qualitative criteria
If other qualitative aspects indicate that there could be a delay/default in the repayment of the loans, the Company
assumes that there is significant increase in risk and loan is moved to stage 2.
The Company considers the date of initial recognition as the base date from which significant increase in credit risk
is determined.
A.5.3 Criteria for default and credit-impaired assets
The Company defines a financial instrument as in default, which is fully aligned with the definition of credit-impaired, when
it meets the following criteria:
(i) Quantitative criteria
The Company considers loan assets as Stage 3 when the default in repayment has moved beyond 90 days.
(ii) Qualitative criteria
The Company considers factors that indicate unlikeliness of the borrower to repay the loan which include instances
like the significant financial difficulty of the borrower, borrower deceased or breach of any financial covenants by the
borrower etc
A.5.4 Measuring ECL - explanation of inputs, assumptions and estimation techniques
Expected credit losses are the discounted product of the probability of default (PD), exposure at default (EAD) and loss
given default (LGD), defined as follows:
- PD represents the likelihood of the borrower defaulting on its obligation either over next 12 months or over the
remaining lifetime of the instrument.
- EAD is based on the amounts that the Company expects to be owed at the time of default over the next 12 months
or remaining lifetime of the instrument.
- LGD represents the Company's expectation of loss given that a default occurs. LGD is expressed in percentage and
remains unaffected from the fact that whether the financial instrument is a Stage 1 asset, or Stage 2 or even Stage
3. However, it varies by type of borrower, availability of security or other credit support.
Probability of default (PD) computation model
The Probability of Default is an estimate of the likelihood of default over a given time horizon. A default may only happen
at a certain time over the assessed period, if the facility has not been previously derecognised and is still in the portfolio.
Loss given default (LGD) computation model
The loss rate is the likely loss intensity in case a borrower defaults. It provides an estimation of the exposure that cannot
be recovered in the event of a default and thereby captures the severity of the loss. The loss rate is computed by
factoring the main drivers for losses (e.g. joint group liability mechanism, historical recoveries trends etc.) and arriving at
the replacement cost.
During the year, the Company refined its Expected Credit Loss (“ECL”) model and updated the related ECL Policy
pursuant to recommendations arising from the Company's credit risk assessment framework. The revised ECL Policy,
incorporating the refined methodology and model changes was approved by the Audit Committee on March 20, 2025
and became effective from April 01,2025.
The revised ECL framework incorporates enhanced portfolio segmentation, refined Probability of Default (“PD”) and
Loss Given Default (“LGD”) methodologies, and updated forward-looking macroeconomic adjustments. The changes
were undertaken to better align the ECL model with the requirements of Ind AS 109, regulatory expectations and the
Company's internal risk management practices. The revised framework was independently reviewed and validated by
external experts.
Under the revised methodology, the Company transitioned from a geography-based segmentation approach to a
borrower cycle-based segmentation approach comprising IGL Cycle 1, IGL Cycle 2, IGL Cycle 3 and IGL Cycle 4 &
above, including consideration of secured, unsecured, third-party and restructured loan portfolios, where relevant. The
borrower cycle-based segmentation reflects the differentiated credit behaviour and relatively improved creditworthiness
associated with repeat borrowers across successive loan cycles.
The Company continues to consider forward-looking macroeconomic information in the determination of ECL. The
revised framework incorporates macroeconomic variables such as GDP growth, inflation, unemployment and per capita
income, with appropriate scenario-based weighting under baseline, upside and downside economic conditions. The
Company has used historical and forecasted macroeconomic data obtained from publicly available sources, including
the International Monetary Fund (IMF), for assessing the impact of macroeconomic factors on default behaviour.
Further, the Company has refined the estimation methodology for PD and LGD. The PD framework explicitly defines
Stage 1 exposures using a 12-month PD approach and Stage 2 exposures using lifetime PD estimates, while Stage 3
exposures continue to carry 100% PD. The LGD methodology has also been enhanced through the incorporation of
actual recovery trends and discounted cash flow techniques from the date of NPA recognition.
The inputs, assumptions and models used for estimating ECL are reviewed and recalibrated periodically based on
available historical experience, current conditions and forward-looking information. Management believes that the revised
ECL methodology results in a more robust and representative assessment of credit impairment in the loan portfolio.
A.7 Loss allowance
The loss allowance recognised in the period is impacted by a variety of factors, as described below:
- Transfers between Stage 1 and Stages 2 or 3 due to financial instruments experiencing significant increases (or
decreases) of credit risk or becoming credit-impaired in the period, and the consequent “step up” (or “step down”)
between 12-month and Lifetime ECL.
- Additional allowances for new financial instruments recognised during the period, as well as releases for financial
instruments de-recognised in the period
- I mpact on the measurement of ECL due to changes in PDs, EADs and LGDs in the period, arising from regular
refreshing of inputs to models
A.7.1 Management Overlay
During 2024-25, the Company has created a management overlay of ' 2,296.53 million, which include ' 971.21 million
as general overly and ' 1,325.32 million for Karnataka impact due to the implementation of Karnataka Micro Loan and
Small Loan (Prevention of Coercive Actions) Ordinance, 2025 in Q4 last financial year. The Company has consumed the
overly in current year, for the intended purpose.
Considering the stable portfolio performance in current year with respect to customer behavior and collection efficiency
and the policy level change in terms of ECL, it is decided that a separate management overlay is no longer necessary.
A.7.2 In respect of loans granted by the Company -
i) The schedule of repayment of principal and payment of interest has been duly stipulated and the repayments
of principal amounts and receipts of interest have generally been regular as per repayment schedules except
for 454,152 cases having loan outstanding balance at year end aggregating to ' 9,076.27 million wherein the
repayments of principal and interest are not regular; and
ii) The total amount overdue for more than 90 days as at the balance sheet date are ' 2,144.18 million (Principal
amount ' 1,755.89 million and Interest amount ' 388.29 million) for 269,883 cases. Necessary steps are being
taken by the Company for recovery thereof.
A.8 Concentration of credit risk
The Company monitors concentration of credit risk by type of industry in which the borrower operates, further bifurcated
into type of borrower, whether state or private.
A.9 Write off policy
The Company writes off financial assets, in whole or in part, when it has exhausted all practical recovery efforts and has
concluded there is no reasonable expectation of recovery.
Indicators that there is no reasonable expectation of recovery include:
- No effective communication with the borrower despite repeated attempts for over six months
- Legal proceedings pending for over six months with remote recovery prospects
- Continuation of recovery efforts is not cost-effective
- Specific identification by Management
The outstanding contractual amounts of such assets written off during the year ended March 31,2026 was ' 3,116.00
million (March 31, 2025: ' 3,320.42 million). These loans were identified through vintage analysis, borrower business
discontinuation and multiple lender exposures with negligible recovery prospects. The Company continues to pursue
recovery through its established recovery mechanism including legal proceedings, field collection efforts, and one-time
settlement negotiations, in line with regulatory guidelines.
B Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial
liabilities that are settled by delivering cash or another financial asset. The Company's approach to managing liquidity is to
ensure as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due. Management monitors
rolling forecasts of the Company's liquidity position and cash and cash equivalents on the basis of expected cash flows.
The Company takes into account the liquidity of the market in which the entity operates.
B.1 Maturities of financial liabilities
The tables below analyse the Company financial liabilities into relevant maturity groupings based on their contractual
maturities.
The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal
their carrying balances as the impact of discounting is not significant.
C Market risk - Interest rate risk
C.1 Liabilities
The Company's policy is to minimize interest rate cash flow risk exposures on long-term financing. The Company is
exposed to changes in market interest rates through borrowings at variable interest rates.
Interest rate risk exposure
Below is the overall exposure of the Company to interest rate risk:
C.2 Assets
The Company's fixed deposits are carried at amortised cost and are fixed rate deposits. The Company's loan assets are
at fixed interest rate. They are therefore not subject to interest rate risk as defined in Ind AS 107, since neither the carrying
amount nor the future cash flows will fluctuate because of a change in market interest rates.
C.3 Foreign Exchange Rate Risk
In the normal course of its business, the Company does not deal in foreign exchange in a significant way. Any foreign
exchange exposure on account of foreign exchange borrowings is fully hedged to safeguard against exchange rate risk.
The Company's treasury risk management policy covers the framework for managing currency risk including hedging.
The Company determines hedge effectiveness for hedging instrument at the inception of the hedge relationship and
through periodic prospective effectiveness assessments to ensure that an economic relationship exists between the
hedged item and hedging instrument. The Company enters into hedge relationships where the critical terms of the
hedging instrument match with the terms of the hedged item, and so a qualitative and quantitative assessment of
effectiveness is performed.
Exposure to currency risks
Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in
foreign currency rates. The Company's exposure to the risk of changes in foreign exchange rates relates primary to the
foreign currency borrowings taken from banks and External Commercial Borrowings (ECB).
In order to minimise any adverse effects on the financial performance of the Company, derivative financial instruments,
such as cross currency interest rate swaps and forwards contracts are entered to hedge certain foreign currency risk
exposures and variable interest rate exposures, the Company's central treasury department identifies, evaluates and
hedges financial risks in close co- operation with the Company's operating units.
The Company follows a conservative policy of hedging its foreign currency exposure through Forwards and/or Cross
Currency Interest Rate Swaps in such a manner that it has fixed determinate outflows in its functional currency and as
such there would be no significant impact of movement in foreign currency rates on the Company's profit before tax
(PBT) and equity.
Since the Company has entered into derivative transaction to hedge this borrowing, the Company is not exposed to any
currency risk on this borrowing.
C.4 Hedging activities and derivativesDerivatives designated as hedging instruments
The foreign currency and interest rate risk on borrowings have been actively hedged through cross currency interest rate
swaps.
The Company is exposed to interest rate risk arising from its foreign currency borrowings amounting to USD 161.33
million . (March 31,2025 USD 154.67 million ). Interest on the borrowing is payable at a floating rate linked to SOFR.
The Company hedged the interest rate risk arising from the debt with a ‘receive floating pay fixed' cross currency interest
rate swap.
The Company uses Cross Currency Interest Rate Swaps (IRS) Contracts (Floating to Fixed) to hedge its risks associated
with interest rate and currency fluctuations arising from external commercial borrowings. The Company designates
such contracts in a cash flow hedging relationship by applying the hedge accounting principles as per IND AS. These
contracts are stated at fair value at each reporting date.
The Company uses Critical Terms Matching to determine Hedge effectiveness. If the hedge is ineffective, then the
movement in the Fair Value is charged to the Statement of Profit and Loss. If the hedge is effective, the movement in the
Fair Value of the underlying and the derivative instrument is transferred to “Other Comprehensive Income” in Other Equity.
There is an economic relationship between the hedged item and the hedging instrument as the critical terms of the Cross
Currency Interest Rate Swaps match that of the foreign currency borrowings (notional amount, interest payment dates,
principal repayment date etc.). The Company has established a hedge ratio of 1:1 for the hedging relationships as the
underlying risk of the Cross currency interest rate swaps are identical to the hedged risk components.
D Operational Risk
Operational risk is the risk arising from inadequate or failed internal processes, people or systems, or from external
events. The Company manages operational risks through comprehensive internal control systems and procedures laid
down around various key activities in the Company viz. loan acquisition, customer service, IT operations, finance function
etc. This enables the Management to evaluate key areas of operation risks and the process to adequately mitigate them
on an ongoing basis.
E Compliance Risk
Compliance Risk is the risk of legal or regulatory sanctions, penalties, material financial loss or damage to reputation
an entity may suffer as a result of its failure to comply with laws, regulations, rules, supervisory instructions and codes
of conduct, etc., applicable to its business activities. The Company has a strong compliance framework to ensure
compliance standards are robust across all divisions of the Company.
46 CAPITAL MANAGEMENT
The Company's capital management objectives are
- to ensure the Company's ability to continue as a going concern
- to provide an adequate return to shareholders
As an NBFC-MFI, the RBI requires us to maintain a minimum capital to risk weighted assets ratio (“CRAR”) consisting of Tier I
and Tier II capital of 15% of our aggregate risk weighted assets. Further, the total of our Tier II capital cannot exceed 100% of
our Tier I capital at any point of time. The Capital management process of the Company ensures to maintain to healthy CRAR
at all the time. (refer note 54 (xvi)).
The Company has a board approved treasury policy, which states that the treasury of the Company shall be based on the
Asset Liability Management (ALM) requirement. The policy also covers the objectives of the regulatory requirement and
prescribes the sources of funds, threshold for mix from various sources, tenure, manner of raising the funds etc.
Management assesses the Company's capital requirements in order to maintain an efficient overall financing structure while
avoiding excessive leverage. This takes into account the subordination levels of the Company's various classes of debt. The
Company manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the
risk characteristics of the underlying assets. In order to maintain or adjust the capital structure the Company may issue new
shares, or sell assets to reduce debt.
For the purpose of the Company's capital management, capital includes equity share capital and other equity. Net debt
includes term loans from banks and financial institutions and debentures including interest accrued, netted with cash and
cash equivalents and bank balances other than cash and cash equivalents. The Company monitors capital on the basis of the
following debt to equity ratio/gearing ratio.
47 SHARE BASED PAYMENTS
The Company has implemented Employee Stock Option Plan under Muthoot Microfin Employee Stock Option Plan 2016
(“ESOP 2016”) and Muthoot Microfin Limited Employee Stock Option Plan 2022 (“ESOP 2022”). The objective is to reward
employees for their association with the Company, their performance as well as to attract, retain and motivate employees to
contribute to the growth and profitability of the Company. The Trust is consolidated in the financial statements of the Company.
48 OPERATING SEGMENTS
The Company is primarily engaged in business of micro finance and the business activity falls within one operating segment,
as this is how the chief operating decision maker of the Company looks at the operations. All activities of the Company revolve
around the main business. Hence, the disclosure requirement of Indian Accounting Standard 108 of “Segment Reporting” is
not considered applicable.
49 TRANSFER OF FINANCIAL ASSETSTransferred financial assets that are derecognised in their entirety
During the year ended March 31,2026, the Company has sold some loans and advances measured at fair value through other
comprehensive income as per assignment deals, as a source of finance. As per the terms of these deals, since substantial risks
and rewards related to these assets were transferred to the buyer, the assets have been derecognised from the Company's
balance sheet.
The Company has assessed the business model under Ind AS 109 “’’Financial Instruments”” and consequently, the financial
assets are measured at fair value through other comprehensive income.
The gross carrying value of the loan assets derecognised during the year ended March 31, 2026 amounts to ' 15,516.63
million (March 31,2025: ' 18,463.91 million) and the gain from derecognition during the year ended March 31,2026 amounts
to ' 1,270.53 million (March 31,2025: ' 1,379.65 million)
Transferred financial assets that are not derecognised in their entirety
I n the course of its micro finance or lending activity, the Company makes transfers of financial assets, where legal rights to
the cash flows from the asset are passed to the counterparty and where the Company retains the rights to the cash flows but
assumes a responsibility to transfer them to the counterparty.
Revenue recognition for contract with customers - Commission income:
The Contract with customers through which the Company earns a commission income includes the following promises:
(i) Sourcing of loans
(ii) Servicing of loans
Both these promises are separable from each other and do not involve significant integration. Therefore, these promises
constitute separate performance obligations.
No allocation of the consideration between both the promises was required as the management believes that the
contracted price are close to the standalone fair value of these services.
Revenue recognition for both the promises:
(i) Sourcing of loans: The consideration for this service is arrived based on an agreed percentage/fee on the loans
disbursed during the year. Revenue for sourcing of loans shall be recognised as and when the loans are disbursed.
The revenue therefore, for this service, shall be recognised based on the disbursements actually made during each
year.
(ii) Servicing of loans: The consideration for this service is arrived based on an agreed percentage on the actual
collections during the year. The Company receives servicing commission only on actual collections. Revenue for
servicing of loans shall be recognised over a period of time, as the customer benefits from the services as and
when it is delivered by the Company. However, since the Company has a right to consideration from a customer
in an amount that corresponds directly with the value of service provided to date, applying the practical expedient
available under the standard, the Company shall recognise revenue for the amount to which it has a right to invoice.
51 MATURITY ANALYSIS OF ASSETS AND LIABILITIES
The table below shows an analysis of assets and liabilities analyzed according to when they are expected to be recovered
or settled. They have been classified to mature and/or be repaid within 12 months or after 12 months. With regard to loans
and advances to customers, the Company uses the same basis of expected repayment as used for estimating the Effective
Interest Rate (EIR).
53 The Company has used multiple accounting software/applications for maintaining its books of account during the year, which
has a feature of recording audit trail (edit log) facility and the same has been operated throughout the year for all relevant
transactions recorded in the respective software.
The Company migrated from Orion ERP to Oracle Fusion ERP w.e.f October 01,2025. Post-migration, user access to Orion
was disabled at both database and application levels, though Orion's service provider confirmed that transaction-level logs
remain available for future verification and saved as per regulatory requirement. For Oracle Fusion, the Company's new SaaS-
based ERP solution, maintains comprehensive audit trail logs with restricted database access to prevent unauthorised backend
modifications or edits. Oracle Fusion demonstrated SOC 2-Type 2 compliance during the audit period and provided an interim
bridge report for the period October 01, 2025 to March 31, 2026 confirming that no material changes to IT infrastructure
occurred that would compromise its SOC compliance posture. The Company retained full LMS/LOS application-level and
database-level logs and further enhanced log retrieval capabilities by implementing a SQL compliance monitoring tool on
February 01,2026, to capture database-level changes, including extraction of old and new values. Further, during the year,
there were no instance of the audit trail feature being tampered and the audit trail has been preserved by the Company as per
the statutory requirements for record retention.
54 ADDITIONAL REGULATORY INFORMATION AS PER AMENDMENTS IN SCHEDULE III OF COMPANIES ACT, 2013
(MCA NOTIFICATION DATED MARCH 24, 2021)
(i) The Company doesn't have any immovable property whose title deeds are not held in the name of the Company.
(ii) Investments made by the Company is carried at fair valued through Other Comprehensive Income in the financials.
(iii) The Company has not revalued its Property, Plant and Equipment (including Right-of-Use Assets) during the year or
previous year.
(iv) The Company has not revalued its intangible assets during the year or previous year.
(v) The Company has not given any loans or advances in the nature of loans to promoters, directors, KMPs and the related
parties (as defined under Companies Act, 2013), either severally or jointly with any other person, that are a) repayable on
demand; or b) without specifying any terms or year of repayment.
(vi) The Company does not have Capital Work in Progress & Intangible Assets under Development during the current year
and previous year.
(vii) The Company doen't hold any benami property under the Benami Transactions (Prohibition) Act, 1988 (45 of 1988) and
rules made thereunder and no proceedings have been initiated or pending against the Company for the same.
(viii) The Company has not made any default in repayment of its financial obligations and is not declared wilful defaulter by
any bank or financial Institution or other lender.
(ix) The Company has reviewed transactions to identify if there are any transactions with companies struck off under section
248 of the Companies Act, 2013 or section 560 of Companies Act, 1956. To the extent information is available on struck
off companies, there are no transaction with struck off companies.
(x) There is no charges or satisfaction to be registered with ROC beyond the statutory period.
(xi) The Company has complied with the number of layers prescribed under clause (87) of section 2 of the Act read with the
Companies (Restriction on number of Layers) Rules, 2017.
(xii) Company has not traded/invested in crypto currency or virtual currency during the current year and previous year.
(xiii) The Company has not advanced or loaned or invested funds (either borrowed funds or share premium or any other sources
or kind of funds) to any other person(s) or entity(ies), including foreign entities (Intermediaries) with the understanding
(whether recorded in writing or otherwise) that the Intermediary shall
a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf
of the Company (Ultimate Beneficiaries) or
(b) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries.
(xiv) The Company has not received any fund from any person(s) or entity(ies), including foreign entities (Funding Party) with
the understanding (whether recorded in writing or otherwise) that the Company shall
(a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of
the Funding Party (Ultimate Beneficiaries) or
54 ADDITIONAL REGULATORY INFORMATION AS PER AMENDMENTS IN SCHEDULE III OF COMPANIES ACT, 2013
(MCA NOTIFICATION DATED MARCH 24, 2021) (Contd.)
(b) provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
(xv) There have been no transactions which have not been recorded in the books of accounts, that have been surrendered
or disclosed as income during the year ended March 31,2026 and March 31,2025, in the tax assessments under the
Income Tax Act, 1961. There have been no previously unrecorded income and related assets which were to be properly
recorded in the books of account during the year ended March 31,2026 and March 31,2025.
(vi) Details of Single Borrower Limit (SGL)/Group Borrower Limit (GBL) exceeded by the NBFC
The Company has not exceeded Single Borrower Limit (SGL)/Group Borrower Limit (GBL) during the year ended March
31,2026 (March 31,2025: ' Nil)
The Company has not exceeded the prudential exposure limits during the current and previous year.
(vii) Unsecured advances
The Company has not given any Loans and advances against intangible securities during the current and previous year.
Refer note 6 for details related to unsecured loans. The Company has not issued any advances against the right, licence,
authority etc as collateral.
(viii) Divergence in Asset classification and provisioning
Below two conditions are not satisfied hence the details of diversions are not required to be disclosed:
a) No additional provisions have been assessed by RBI exceeding 5 percent of the reported profits before tax and
impairment loss on financial instruments for the year ended March 31,2026 and March 31,2025.
b) RBI has not identified additional GNPAs exceeding 5 percent of reported GNPAs for the year ended March 31,2026
and March 31,2025.
(ix) Registration obtained from other financial sector regulators
The Company has obtained Corporate Agency Licence from Insurance Regulatory and Development Authority of India
vide Registration No. CA0953.
(x) Net profit or loss for the period, prior period items and changes in accounting policies
There are no prior period items that have impact on the current year's or previous year's profit and loss.
55 DISCLOSURE AS PER MASTER DIRECTION - RESERVE BANK OF INDIA (NON-BANKING FINANCIAL COMPANIES - FINANCIAL
STATEMENTS: PRESENTATION AND DISCLOSURES) DIRECTIONS, 2025, ISSUED VIDE CIRCULAR NO. RBI/DOR/2025-26/359 DOR.
ACC.REC.NO.278/21.04.018/2025-26 DATED NOVEMBER 28, 2025 AS AMENDED (Contd.)
(xi) Revenue Recognition
There is no transaction in which the Revenue recognition has been postponed or pending the resolution of significant
uncertainty.
(xii) Draw down from reserves
There has been no draw down from reserve during the year ended March 31,2026 (March 31,2025: ' Nil).
(xiii) Details of financing of parent Company products
The Company does not finance the products of the parent/holding company.
55 DISCLOSURE AS PER MASTER DIRECTION - RESERVE BANK OF INDIA (NON-BANKING FINANCIAL COMPANIES - FINANCIAL
STATEMENTS: PRESENTATION AND DISCLOSURES) DIRECTIONS, 2025, ISSUED VIDE CIRCULAR NO. RBI/DOR/2025-26/359 DOR.
ACC.REC.NO.278/21.04.018/2025-26 DATED NOVEMBER 28, 2025 AS AMENDED (Contd.)
(xix) Disclosure of Penalties/fines imposed by RBI & other regulators:-
There have been no instances of non-compliance by the Company on any matters relating to the Companies Act,
RBI Regulations, SEBI Regulations, Labour Laws, Income Tax and GST Laws and other applicable Acts, Rules, and
Regulations except for the details mentioned below:
For financial year 2025-26
The Company had paid an amount of ' 4 million towards penal damages and interest under section 14B & 7Q of the
Employees' Provident Funds and Miscellaneous Provisions Act, 1952.
For financial year 2024-25
The Company has received notice from BSE Ltd. with respect to Non-submission of Intimation of Board Meeting in
accordance with Regulation 50(1)(d) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The
Company has requested for the waiver of fine on account of interpretation of Law. Request for waiver is under process
and the Company is awaiting positive response.
Also, the Company received notice from the both the stock exchanges with respect to Delay in furnishing prior intimation
about the meeting of the board of directors (Regulation 29 (2)/29 (3) of SEBI (LODR) Regulations, 2015). The Company
has requested the waiver of fine mentioning that no action triggering the requirement of notice has occurred during the
current financial year. Request for waiver is under process and the Company is awaiting positive response.
(e) Institutional set-up for liquidity risk management
The Board has the overall responsibility for management of liquidity risk. The Company has a risk management
committee responsible for evaluating the overall risks faced by the Company including liquidity risk. The asset liability
management committee is also responsible for ensuring adherence to the risk tolerance and implementing the liquidity
risk management strategy.
57 LIQUIDITY COVERAGE RATIO:-
As per RBI guidelines no DOR.NBFC (PD) CC. No.102/03.10.001/2019-20 Dated November 04, 2019, NBFCs assets with
more than '5,000 crores, required to maintain Liquidity Coverage Ratio (LCR) as mentioned therein. The Liquidity Coverage
Ratio (LCR) is one of the key parameters closely monitored by RBI to enable a more resilient financial sector. The objective of
the LCR is to promote an environment wherein Balance Sheet carries a strong liquidity for short term cash flow requirements.
To ensure strong liquidity NBFCs are required to maintain adequate pool of unencumbered high-quality liquid assets (HQLA)
which can be easily converted into cash to meet their stressed liquidity needs for 30 calendar days. The LCR is expected to
improve the ability of financial sector to absorb the shocks arising from financial and/or economic stress, thus reducing the
risk of spill over from financial sector to real economy.
The Liquidity Risk Management of the Company is managed by the Asset Liability Committee (ALCO) under the governance
of Board approved Liquidity Risk Framework and Asset Liability Management policy. The LCR levels for the Balance Sheet
date is derived by arriving the stressed expected cash inflow and outflow for the next calendar month. To compute stressed
cash outflow, all expected and contracted cash outflows are considered by applying a stress of 15%. Similarly, inflows for the
Company is arrived at by considering all expected and contracted inflows by applying a haircut of 25%.
The Company, for the purpose of computing outflows, has considered: (1) all the contractual debt repayments, and (2) other
expected or contracted cash outflows. Inflows comprises of: (1) expected receipt from all performing loans, and (2) liquid
investment which are unencumbered and have not been considered as part of HQLA.
For the purpose of HQLA, the Company considers: (1) Unencumbered Government securities, and (2) Cash and Bank
balances.
The LCR is computed by dividing the stock of HQLA by its total net cash outflows over one-month stress period. LCR
guidelines have become effective from December 01, 2020, requiring NBFCs to maintain minimum LCR of 50%, LCR is
increased to 100% from December 2024. The Company has complied with this minimum requirement.
Unweighted values are calculated as outstanding balances maturing or callable within one month (for inflows and outflows).
Averages are calculated basis simple average of daily observations over the previous quarter.
@Weighted values are calculated after the application of respective haircuts (for HQLA) and stress factors on inflow (75%) and
outflow (115%).
LCR coverage ratio is based on Management estimations of future inflows and outflows which is relied upon by the auditors.
58 Previous year's figures have been regrouped and reclassified, wherever necessary to conform to current year's presentation/
classification.
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