Northern Arc - AR 2020 21 - V Feb11 1644577258
Northern Arc - AR 2020 21 - V Feb11 1644577258
REPORT
2020-21
MISSION
Catering to the diverse credit requirements of
under-served households and businesses by providing
efficient and reliable access to debt finance.
OUR
VALUES
RESOLUTE
We are unwavering in our commitments
and stand by them.
EMPATHETIC
We understand the needs of our stakeholders and
are aligned with them.
ETHICAL
We adhere to a shared code of ethics and high
standards of professional conduct.
INNOVATIVE
We push the frontiers of finance through knowledge
and innovation.
RESPONSIVE
We are nimble and quick to adapt, learning and
evolving as we go.
TABLE OF
CONTENTS
04 Message
From The Chair
06 Message
From CEO
08 Board &
Key Management
12 Business Update
34 In the News
40 Board’s
Report
66 Standalone
Financial Statements
152 Consolidated
Financial Statements
The importance of
Northern Arc’s mission
of providing access to
finance for the underbanked
cannot be overstated in
this environment.
P.S. Jayakumar
Non-Executive
Independent Chairman
THE CHAIR
The past year has been amongst the most challenging has catalyzed growth, streamlined processes, enabled
in recent human history. Across the world, nations, seamless integrations with partners and introduced
governments and communities battled courageously efficiencies at multiple levels.
against a crisis that cut across health, social and
economic fronts. India has been amongst the worst The country’s financial services ecosystem is
affected countries in the world. Even as I write this witnessing an increasing trend of inter-dependency
letter, the pandemic is beginning to rear its head again between banks, SFBs, NBFCs, fintechs and other
in the form of Covid 2.0. We are beginning to witness institutions. Northern Arc is at a vantage position to
a rise in infections forcing governments at various capitalize on this trend due to its unique place in the
levels to adopt lockdowns of varying intensities. credit ecosystem. We are leveraging our relationships
Unfortunately, as in past such instances, this and technology to forge and deepen partnerships,
catastrophe has affected the economically pioneer new business models, grow existing
marginalized sections of society the most. businesses, diversify into new segments, build
granular exposure and optimize risk. We continue to
In this backdrop, the critical nature of Northern Arc’s explore both organic and inorganic partnerships to
mission cannot be overstated. Enabling access to establish and build new competitive moats and
financial services to under-served small businesses achieve better risk adjusted returns.
and households, who form the backbone of the
country’s social and economic fabric, is of paramount We continue to progress across the value chain and
importance. It is imperative to ensure that credit have diversified into segments that are more granular
keeps flowing to those who most deserve and need it. in nature. To this end, we established Pragati, our MFI
The Company disbursed over INR 4,000 crore during subsidiary to provide credit to under-served women,
the year, nearly a 50% increase over FY20. It households and small entrepreneurs through a digital
partnered with several reputed global Development platform. In addition to real-time portfolio monitoring
Finance Institutions including US DFC, FMO and CDC and credit modelling, we will make use of our data
to ensure that there is sufficient liquidity for small & repositories and analytics capability to build
mid-sized financial institutions, mid-market corporates predictive models on borrower behaviour and geo risk
and retail borrowers. management. Data and data-driven decisioning will
enable development of unique product offerings that
An unexpected positive fallout of the events of the will support business growth and risk management.
past year has been the industry’s rapid transition
towards digitalization. At Northern Arc, we had I wish to take this opportunity to thank my fellow
embarked on our technological journey much earlier. Directors for their proactive guidance during these
The new-age Nimbus system, which was pioneered as turbulent times. I also thank the management and
a key disruptor to the market ecosystem, has received team of Northern Arc for their passion in the purpose
unanimous customer acceptance and endorsement. It of the organization and wish them continued success
as they attempt to scale new unconquered heights.
CEO
A large part of FY21 was spent in the shadows of asset quality trends in segments and geographies. Our
Covid-19, as the pandemic swept across various parts technology based customized solutions have helped
of the country. It caused a tremendous impact on lives us serve unique customer requirements and benefit
and livelihoods, as movement and economic from superior risk-adjusted returns.
restrictions were imposed at different levels. It
brought about a lot of conservatism in the financial Our financing to mid market companies grew
services sector as most lenders adopted a cautious substantially during the period. It is a segment we are
stance in the early part of the year, to observe asset highly optimistic about, given the rapidly evolving
quality performance before sanctioning fresh lines. start up ecosystem and the interest it has evinced
from equity investors. By the end of the year, it
The Northern Arc platform’s role in the ecosystem has contributed close to 10% of our total AUM. We
always been unique. Our breadth of partnerships executed our first syndication transaction in this
across regions and sectors, data repositories, and our space, and we believe that the synergies with the
feet-on-the-street monitoring approach help us placements business will help us achieve traction.
understand risk better and quicker. This helps us
become an indispensable partner for many of our In our endeavour to further diversify the book and
investors, especially during times of crisis. Many enter new segments that will help us capitalize on our
reputed global investors prefer to work with Northern expertise, we have set up the Supply Chain Finance
Arc for this reason and this became evident during the vertical and an MFI subsidiary. Both initiatives will be
year as we enabled multiple DFIs finance our sectors led by industry veterans who have joined us with
and partners. decades of experience of building similar businesses
before.
While we were cautious, we commenced
disbursements in a calibrated manner on a The fund management business has firmly established
case-by-case basis. We were able to support our well itself, providing a combination of credit and liquid
governed partners across sectors with much needed products. The business closed at an AUM of nearly
liquidity both from our Balance Sheet as well as 1,600 crore from around 300 investors. The impact
through other investors across categories. And we fund, targeting offshore investors primarily, has
were able to do it much earlier than most lenders, at a received anchor commitments from three reputed
time it was needed most. We disbursed over INR DFIs. The money market fund has found widespread
2,500 crore to originator partners for on-lending to acceptability from corporates, HNIs and family offices
retail borrowers through a spectrum of credit and targeting liquid higher yield products.
capital market products.
The past year has been challenging but was also full of
Our retail lending gained substantial traction during learnings. The resilience of our sectors and partners
the year. We have established a total of 27 was reinforced as they bounced back strongly from
partnerships so far and disbursed over INR 1,100 crore the crisis. We approach the coming year with high
through the year, nearly double of FY20. A large part hopes and optimism, to conquer new frontiers and
of these disbursements happened in the latter half of scale fresh peaks.
the year based on our in-depth assessment of the
MANAGEMENT
BOARD
10 BOARD
KEY MANAGEMENT
Ravi Vukkadala
CEO Investments
KEY MANAGEMENT
11
BUSINESS
UPDATE
NORTHERN ARC CAPITAL
BUSINESS UPDATE
FY21
Northern Arc is a platform in the financial services also engage with certain originator partners who
sector set up primarily with the mission of catering to enable us to lend directly to retail borrowers. We also
the diverse credit requirements of under-served have an equally large network of investors across
households and businesses by providing efficient and different investor classes who use our platform to
reliable access to debt finance. access opportunities to invest in under-served sectors
in India.
Our diversified platform taps into a large network of
financial institution partners, technology platforms Since 2009, when we entered the financial inclusion
and other entities that act as business correspondents space, we have enabled financing for originator
to originate financial exposure as well as small partners who have impacted over 54 million lives
businesses and individuals. While we lend to such across India, of which more than 42 million were
originator partners which are in the nature of financial women.
institutions for the purpose of on-lending by them, we
The MSME sector had a volume share of 27.99% in The Vehicle Finance sector had a volume share of
FY21 and contributed 30.84% to our AUM at the end 11.44% in FY21 and contributed 17.85% to our AUM at
of the year. the end of the year.
0.0
NBFCs account for 61% of commercial vehicle FY17 FY18 FY19 FY20 FY21E
financing (as of March 2020) NBFCs account for 61% of commercial vehicle
financing (as of March 2020)
10
0
FY 18 FY 19 FY 20 FY 21
Source: CRISIL Research Estimates Agriculture Value Chain Finance (INR Billion)
OFFERINGS
As a platform, we make available diversified offerings with
the objective of expanding access to credit to under-served
businesses and households. These offerings include financing,
syndication and structuring, and fund management.
Financing – from our balance sheet, we (i) lend to and guarantee the
borrowings of originator partners for retail on-lending by them, and
invest in and/or credit enhance the portfolios sold down by them; (ii)
lend to under-served households and businesses through our retail
business; and (iii) lend to mid-market companies operating in
preferred sectors. As part of our financing offering, we also plan to
launch a dedicated rural finance business through our subsidiary,
Pragati.
Our Company extends financing from its balance originator partners reported a cumulative AUM of over
sheet to three borrower segments namely, originator INR 2.80 trillion and as of March 31, 2021, they had
partners, under-served retail borrowers, and borrowers in 657 districts spread across 28 states and
mid-market companies. The relationships built with seven UTs of India. Our exposure to originator
originator partners and mid-market companies partners from financing initiatives accounted 79.79%
pursuant to our financing initiatives have allowed us to of our total AUM for Fiscals 2021.
enable funding to them through other platform
offerings such as syndication and structuring and fund We finance originator partners in a variety of ways
management. For each of these segments, set out depending on their specific needs:
below is a summary of our financing initiatives. (i) lending to and investing in debt securities issued by
originator partners primarily for the purpose of retail
Originator Partners: on-lending by them. Such products include loans,
Our financing initiatives are aimed at originator NCDs, market-linked debenture (“MLDs”) and CPs.
partners, which include NBFCs (including NBFC-MFIs),
(ii) providing guarantees for borrowings by originator
and HFCs that lend to under-served borrowers. The
partners; and
market share of NBFCs in overall systemic credit has
increased from 16% in Fiscal 2015 to 20% in FY21, the (iii) investing in retail portfolios originated by
reason for which is their ability to offer differentiated originator partners through portfolio financing
solutions to cater to the large unmet demand of transactions such as rated securitization and direct
various retail lending sectors. The aggregate size of assignment, as well as providing credit enhancements
NBFC loans in the sectors that we operate in is INR in respect of such transactions to enable investment
12.7 trillion as of FY21, which is expected to witness by Investor Partners. These transactions involve a sale
strong growth in the next few years due to favourable of assets by the Originator Partner which allows them
demographics, increase in consumer spending and to avail liquidity.
business activity. As of September 30, 2020, our
As of March 31, 2021, our platform had disbursed more finance loans with ticket sizes ranging from
than 2.50 million loans amounting to over INR 17,500 INR 10,000 to INR 50 lakh.
crore. During the last three Fiscals, our Company
served over 0.28 million retail borrowers. The underwriting of these loans is heavily supported
by our analytical models which are increasingly
As of March 31, 2021, our financing offerings through built using machine learning techniques. These
this vertical comprises of microfinance loans, MSME underwriting models are recalibrated periodically by
finance loans, vehicle finance loans and consumer incorporating more variables and features as we
STRUCTURING
We work with our large community of Investor companies, family offices, HNIs, and offshore impact
Partners to structure and syndicate financing to funds.
clients, thus enabling the efficient flow of debt from
providers to users. The clients under this offering A deep dive into the Indian market in FY21
currently include our originator partners and During the first half of FY21, India witnessed its first
mid-market companies. nationwide lockdown from 25th March 2020 until 31st
May 2020. Except for permissible essential activity,
Since the inception of our platform business, we have the entire economy encountered a near-standstill
worked with over 170 domestic and overseas investors situation across all spectrums and sectors, including
across different investor classes such as public-sector, financial services. To alleviate the economic stress
private-sector and foreign banks, NBFCs, domestic induced by the pandemic on livelihoods, The Reserve
and international DFIs, mutual funds, insurance Bank of India along with The Ministry of Finance,
Despite the above tougher-than-ever macro situation, Since 2009, we have cumulatively raised over Rs. 650
the Investor Relations and Markets team at Northern billion for our clients from our Investor Partners
Arc, played a pivotal role in market making and pursuant to our syndication and structuring initiatives.
NEW PRODUCTS
We have demonstrated a track record of more than a specific lifecycles, credit ratings, and their
decade in offering customized products for various requirements on size, tenor, pricing, etc. We also offer
users of our platform. Our Company has pioneered portfolio financing products such as rated
the introduction of multiple innovative products such securitization, and direct assignment that help our
as the first securitization of microfinance loans, first clients avail liquidity through a sale of assets. Our
pooled multi-originator securitization transactions Company has enabled small and medium originator
(“MOSEC®”), persistent securitization (“PERSEC®”) partners to access securitization markets where large
involving securitization of vehicle loans with a NBFCs are active participants.
replenishing structure. Embedded in our product
designing capability is an understanding of the Further, we selectively assume skin-in-the-game in
diverse credit requirements of our retail borrowers, some of these products to enhance their credit rating
originator partners, and mid-market companies, the and enable our originator partners and other
sectors that they operate in, as also the risk and return businesses to raise debt from investors. The
expectations of our Investor Partners. Our knowledge skin-in-the-game could be in the form of guarantees
in product designing and customization is further for a stated amount, co-investment, and credit
strengthened by Nimbus, which makes use of enhancement in the form of investment in subordinate
technology and our Company’s large data lake to offer tranches of an instrument or unfunded second-loss
curated opportunities to both originator partners and credit enhancement.
Investor Partners. The overall securitization and direct assignment
For our originator partners, we offer a wide variety of volumes in the market stood at INR 900 billion for
debt and credit-enhanced debt products aimed at FY21, of which our Company has enabled funding of
access to efficient cost of funds. These include term INR 33.90 billion through securitization and direct
and working capital loans, Principal Protected assignment. Further, the overall market volumes for
Market-Linked Debentures (“PP-MLD”), commercial securitization and direct assignment in microfinance
paper, External Commercial Borrowings (“ECBs”), and MSME finance, being the sectors where a majority
sub-debt products, guarantee-backed lending, SPiCE of our originator partners operate, stood at INR 144
loans and SPiCE BOND®, pooled loan and bond billion for FY21, of which our share was INR 23.77
issuance programmes, Non-Convertible Debentures billion. Our Company has also ventured into
and Credit Enhanced Non-Convertible Debentures securitization of relatively newer asset classes such as
(“CENCDs”) Credit Enhanced Market-Linked cash loans, consumer durables and trade receivables
Debentures (“CEMLDs”) that are suited to their to cater to the funding needs of its existing and new
originator partners.
BUSINESS
Fund exit: In March 2021, the IFMR FImpact Ratings and external evaluation
Investment Fund - the very first fund from the NAIM During the year, CRISIL reaffirmed its ratings of
platform - reached its maturity and closure. Launched AA-(SO) for the FMR FImpact Medium Term
in 2015, the fund raised INR 1,000 million in investor Opportunities Fund, and AA+ (SO) to Northern Arc
commitments from banks, insurance companies and India Impact Fund, based on a number of factors
HNIs, and had an investment portfolio comprising 13 including the credit quality of the underlying
microfinance companies. During its 6-year tenure, the investments, portfolio composition, structural features
fund witnessed some very volatile phases in India’s and credit support available to external investors. This
financial history, including the Government’s is a very positive outcome for NAIM taking into
demonetization drive in November 2016; the GST consideration prevailing market conditions, and will
rollout in July 2017, which caused a paradigm shift in assist during fundraising from new investors,
how companies across India operated; the tightened especially from corporates, pension funds, and other
liquidity conditions afflicting the financial services such investors who may have credit rating
industry post the NBFC crisis in 2018-19; and the requirements.
Covid-19 induced national lockdown in 2020, one of
the most difficult socio-economic events in India’s Awards and Recognition
history. Despite these significant external headwinds, During the year, NAIM was included in the
the fund maintained excellent portfolio quality and ImpactAssets50, an annual showcase comprising fifty
delivered consistent cashflow payouts to investors fund managers from across the globe who lead their
throughout its tenure, with no instances of shortfall or respective fields in creating positive social impact,
delay, delivering net returns (pre-tax, post all other while generating financial returns for investors. This
expenses) of over 15% (in INR terms) to its investors award is an important recognition of our work in the
upon maturity. financial inclusion space and the seventh such
recognition that NAIM has been accorded since
Technology and Automation inception.
NAIM had been exploring migrating its fund-level data
to a fund accounting tool, in order to improve Outlook
operational efficiencies, avoiding human intervention Since establishing our fund management business in
and reducing timelines. This activity, which was FY2014, we have expanded the investor base in our
initiated in the previous year has now been funds to include all major classes of investors from
completed, and the tool has been made live during India, such as development financial institutions,
the year. Using the fund accounting tool entails several banks, insurance companies, corporate treasuries,
benefits for NAIM, such as standardised and family offices and HNIs.
consistent reporting of information, avoidance of In FY2020, we set up our first close-ended fund with
human intervention and error, improved efficiency and an impact focus targeted at offshore investors, to
quick turnaround times. expand and diversify our investor base beyond India.
In line with its objective of improving the investor We aim to expand our fund management business by:
onboarding experience, NAIM has been exploring (i) introducing new offerings targeted at specific
digitising the investor onboarding process, whereby classes of investors both in India and overseas; (ii)
investors desirous of subscribing to NAIM’s funds will tapping a wider set of investor classes such as
be sent pre-filled application forms which can be funds-of-funds, sovereign wealth funds, foundations,
signed digitally using their DSC or Aadhar credentials. endowments and pension funds; and (iii) expanding
Activity is presently underway on this tool and the our outreach and presence in offshore geographies
tool expected to go live in the coming months. Once such as Europe and North America where ESG and
completed, this will significantly improve the investor impact-oriented investments are established asset
onboarding process by increasing investor classes including through engagement of fund
convenience, avoiding corrections and over-writing, distributors.
and reducing overall onboarding timelines. Further, NAIM has applied for regulatory approvals
During the previous year, NAIM had developed and for grant of registration as a portfolio manager.
rolled out an in-house bond issuance tracker tool A portfolio management services ("PMS") product
(NBX), which helps track primary and market would complement our fund management business
issuances and issuance-related information, and would allow customization of portfolios to suit
yield/spread movement across rating categories, investor risk appetite and enable NAIM to reach a
rating transitions of a target portfolio along with larger base of investors. In the first phase, NAIM
collating a variety of wider macro-level information on intends to offer a bouquet of bonds and securitized
debt instruments as part of its product.
Treasury management at Northern Arc involves debt adherence to Liquidity Coverage Ratio (LCR). LCR
capital raise, relationship management with lenders, mandates the maintenance of adequate liquidity
credit rating agencies and various market participants, buffers in the form of High-Quality Liquid Assets
liquidity risk management by way of asset liability (HQLA) to survive any acute liquidity stress scenario
management, interest rate risk management, short lasting for 30 days. Such LCR requirement will be
term investments and asset sell down among others. binding on NBFC’s once their asset size exceeds
Our Company has adopted an asset/liability INR 5,000 crore or December 1, 2020 whichever is
management policy which requires us to monitor and later. The minimum LCR to be maintained as of
manage interest rates and liquidity risks proactively December 1, 2020 (if the asset size is INR 5,000 crore)
from time to time. This has enabled us to maintain is 30 percent and the same increases progressively to
a positive ALM position with no cumulative negative 100 percent by December 1, 2024.
mismatches in any of the time buckets as of
March 31, 2021. Northern Arc Capital achieved a balance sheet size of
INR 5000 crore during the year. The company has
As a part of asset-liability management, treasury accordingly started complying with LCR by
actively manages liquidity and interest rate risk. maintaining adequate liquidity buffers in the form of
Liquidity risk relates to risk of loss in the event cash, investments in T-Bills or callable fixed deposits
sufficient liquid assets will be unavailable, or will be with scheduled commercial banks. Such investments
available only at excessive cost, to meet the cash flow and deposits also reduce the negative carry. Currently,
requirements of obligations when they are due. In this the company is compliant with LCR guidelines.
context, the company has a suitable liquidity risk
management framework in place, the purpose of The company also undertakes measures to actively
which is to ensure availability of adequate liquidity to manage the interest rate risk on the balance sheet.
meet upcoming repayment commitments as well as Interest rate risk is the risk of loss resulting from
liquidity for on-going business requirements. Further, movements in interest rates and their impact on future
the company’s Asset Liability Committee (ALCO), profitability and cash flows. Northern Arc follows
which comes under the purview of Finance duration gap analysis to measure and control the
Committee, regularly monitors the liquidity position interest rate risk with the duration gap being the
and ensures that liquidity is managed in accordance difference between the duration of assets and the
with the ALCO policy, approved by the board. duration of liabilities. The company has a defined
internal threshold for equity duration and monitors it
In November 2019, Reserve Bank of India issued new on an ongoing basis. Given the floating rate nature of
guidelines on liquidity risk management framework, in a sizeable portion of our assets linked to an internal
order to strengthen the Asset Liability Management benchmark i.e. Floating Benchmark Linked Rate
(ALM) framework applicable for NBFCs. Apart from (FBLR), we expect the same to provide a buffer
re-defining ALM maturity buckets and tolerance limits against any adverse interest rate movements in the
on mismatches, the guidelines also stipulate future.
MANAGEMENT
Risk management is core to our business and over the credit and risk underwriting has enabled our Company
years we have developed, fine-tuned and to diversify across sectors, geographies, borrower
implemented a customized risk management system. segments and products.
Our risk management systems are customized for
each sector that we operate in and are specific to Our quantitative analysis is based on our data lake of
each offering. This enables us to effectively build a 22 million granular loans, which includes: (a) loan
diversified portfolio and manage general risks and pools we have evaluated and invested in since
specific risks that are unique. Building and retaining a inception across more than 900 structured finance
team with expertise in sectors that we operate in, a transactions, and (b) 2.58 million retail loans disbursed
strong and independent risk governance structure, by us. Additionally, secondary data from external data
well-documented risk management practices and sources such as credit bureaus and economic research
effective implementation of such practices are the portals is used for analysing pin code level borrower
cornerstones of our risk management framework. This characteristics such as indebtedness, collection
has helped us in effectively building a quality credit efficiencies, sector growth trends, among others.
portfolio. Most of our credit risk management Our risk management approach is aimed at actively
processes are enhanced through deep analytical identifying, monitoring and managing risks.
models built on Nimbus. With additional data points
and sources being added every year to Nimbus, the Risk Management Framework
risk models continue getting robust. Overall risk management is governed by an enterprise
risk management framework (“ERM Framework”)
An understanding of economics of businesses and which covers nine types of principal risks faced by our
sectors at the grassroot level combined with robust Company. Our ERM Framework enables us to identify,
We consider technology as being of key importance execution with efficiency, deliver a superior customer
to our Company. At the core of our IT initiatives is experience and offer business and risk insights in a
Nimbus, our proprietary technology system which was context-sensitive manner, among others. As our
built in-house. clients and investors make greater use of Nimbus, the
increasing number of transactions on the platform can
We plan to build on the capabilities of Nimbus to provide larger datasets as inputs for our analytics
integrate seamlessly with our originator partners, algorithms which can further improve the quality of
Investor Partners and borrowers, enable transaction opportunities and insights that we can offer.
Originator Partners
Investor Partners
In FY21, on the Nimbus system we on-boarded 36 We have made, and intend to continue making,
originator partners and 21 mid-market companies, and investments in our technology system, Nimbus. Our
conducted risk monitoring on 148 originator partners. continued focus on the effective use of technology is
Further, we conducted transactions involving value of aimed at further improving the customer experience
87.41% of the aggregate value of financing and and streamlining processes leading to cost efficiencies
syndication and structuring transactions in FY21 on and productivity. For instance, we may explore greater
Nimbus. deployment of machine learning techniques to
enhance our data analytics capabilities, enable
We have hosted our data centre on Microsoft Azure Investor Partners to choose granular transaction-level
and created a virtual IT infrastructure to host new terms to customise syndication and structuring
applications. Our IT infrastructure is built on a robust transactions as per their requirements, deploying
architecture consisting of a primary data centre and a Nimbus for new products and new offerings including
disaster recovery centre that links all our offices. We for our proposed offering in relation to MSME supply
use a combination of customized, off-the-shelf, and chain financing.
tailored software developed in-house.
NEWS
IN THE
NEWS
36 IN THE NEWS
IN THE NEWS
37
BOARD’S
REPORT
Dear Shareholders,
Your directors have pleasure in presenting this annual report along with the audited financial statements of the Company
for the year ended March 31, 2021.
FINANCIAL HIGHLIGHTS
(INR in Lakhs)
Standalone Consolidated
Particulars Year ended Year ended Year ended Year ended
31-Mar-21 31-Mar-20 31-Mar-21 31-Mar-20
Total income 65,420.19 60,064.90 68,528.44 63,445.33
Finance costs 32,296.76 30,920.50 32,296.76 30,920.50
Net interest income 33,123.43 29,144.40 36,231.68 32,524.83
Operating expenses 11,213.70 11,885.87 12,017.29 13,854.01
Depreciation 673.83 671.62 674.10 672.97
Pre-provision profit 21,235.90 16,586.91 23,540.29 17,997.85
Impairment and write-offs 13,602.68 3,523.08 13,540.96 3,548.66
Profit before tax 7,633.22 13,063.83 9,999.33 14,449.19
Tax expense 2,028.23 4,101.90 2,340.10 4,155.84
Profit for the period 5,604.99 8,961.93 7,659.23 10,293.35
Other comprehensive income/(loss) 622.07 322.10 320.15 234.87
Total comprehensive income 6,227.06 9,284.03 7,979.38 10,528.22
Total comprehensive income to Owners 6,227.06 9,284.03 7,180.06 9,540.92
Opening balance of retained earnings 31,701.21 25,650.90 31,795.65 27,044.85
Profit transferred to reserve 5,614.25 9,002.70 6,787.59 8,425.19
Transfer to Capital Redemption Reserve -1,160.00 -1,882.00
Transfer to Statutory Reserve -1,120.99 -1,792.39 -1,120.99 -1,792.39
Closing balance of retained earnings 36,194.47 31,701.21 37,462.25 31,795.65
During the year ended March 31, 2021, on a consolidated basis, your company generated total income of INR 685.28 crores,
a growth of 8.01% over the earlier year. Net Interest Income was INR 362.32 crores, representing year-on-year increase of
11.40 % and Pre-provision profit increased 30.80% year-on-year to INR 235.40 crore. Impairment and write-off increased
significantly during the year, resulting in a profit after tax declining 25.59% year-on-year to INR 76.59 crores.
DIVIDEND
Due to the need for deploying the funds back into the business for the growth of your Company, your directors have not
proposed any dividend on equity shares for the year under review.
TRANSFER TO RESERVES
During FY21, your Company has transferred an amount of INR 11.21 crores to reserves in accordance with the requirements
of s. 45-IC(1) of the Reserve Bank of India Act, 1934. The Company has also transferred a sum of INR Nil crores into the
Capital Redemption Reserve towards redemption of redeemable preference shares.
CREDIT RATING
The Credit ratings of the company as on March 31, 2021, are summarised below:
Instrument Rating Agency Rated Amount Rating and rating action
(INR crore)
Long-term Fund-based Limits ICRA 2500 ICRA A+/Negative
Non-Convertible Debentures ICRA 1175 ICRA A+/Negative
India Ratings 800 IND A+/Stable
Market linked debentures ICRA 20 PP-MLD[ICRA]A+(Negative)
India Ratings 300 IND PP-MLD A+emr / Stable
Subordinated Debt ICRA 40 ICRA A+/Negative
Commercial Paper ICRA 300 ICRA A1+
CARE 500 CARE A1+
CAPITAL ADEQUACY
The company’s capital adequacy ratio as of March 31, 2021 was 28.70% as against 33.67% as at March 31, 2020. The
minimum capital adequacy ratio prescribed by Reserve Bank of India is 15%.
SHARE CAPITAL
During the financial year, your company had issued 4,43,647 equity shares under the Employees Stock Option Schemes of
the Company.
40 Board’s Report
Consequent to the aforesaid allotments of equity shares, the total paid up capital of the Company as on March 31, 2021,
was INR 170,56,79,580 comprising of 8,79,21,550 equity shares of INR 10 each and 4,13,23,204 compulsorily convertible
preference shares of INR 20 each.
The shareholding pattern of the Company as of March 31, 2021, on a fully diluted basis was as follows:
DIRECTORS AND KEY MANAGERIAL PERSONNEL Following were the changes in Key Managerial Personnel
during the financial year ended on March 31, 2021. Ms.
Directors
Bama Balakrishnan was redesignated as Chief Operating
The composition of the Board of Directors of the Company Officer of the Company and Ms. Nandita Ganapathy was
is in accordance with the provisions of section 149 of the designated as Chief Financial Officer of the Company with
Companies Act, 2013 with an appropriate combination of effect from July 06, 2020. Ms. Nandita Ganapathy had
Non-Executive Directors and Independent Directors. resigned with effect from January 27, 2021.
During the year under review Ms. Susan Thomas (DIN: Declaration of independence under Section 149(6) of the
00472794) resigned from the Board with effect from Companies Act, 2013
October 10, 2020. Mr. Leo Puri (DIN: 01764813) and Mr.
Rajiv Lochan (DIN: 05309534) also resigned from the The independent directors of the Company have submitted
Board with effect from October 31, 2020. The Board places a declaration that each of them meets the criteria of
on record its appreciation of the valuable services rendered independence as provided in Section 149(6) of the
by the aforesaid directors during their tenure with the Companies Act, 2013 and there has been no change in the
Company. circumstances which may affect their status as independent
director during the year.
Mr. Ashutosh Pednekar (DIN: 00026049) and Mr. P S
Jayakumar (DIN: 01173236) were appointed as Independent Pecuniary Transactions with non-executive directors
Directors of the Company with effect from September 14, Details of remuneration to non-executive directors
2020, and October 15, 2020, respectively for a period of are provided under the head “Remuneration to Other
three consecutive years. Mr. P S Jayakumar also assumed Directors” in Form MGT-9 annexed to this report.
office as Non-Executive Independent Chairman with effect
from November 01, 2020. Dr. Kshama Fernandes was MANAGEMENT DISCUSSION AND ANALYSIS REPORT
reappointed as Managing Director with effect from April 01,
State of the Company’s affairs
2020, for a period of three consecutive years.
The COVID-19 pandemic that had commenced its spread
In the opinion of the Board the independent directors in the fourth quarter of FY20, raged on through FY21
appointed during the year are having integrity, expertise taking a huge toll on public health, human life and the
and experience (including the proficiency as per the economy globally. After a strict lockdown across India
requirements of section 150(1) of the Companies Act, 2013). extending through most of the first quarter of FY21, the
Key Managerial Personnel gradual opening up of the economy coincided with a
steady rise in cases until around the middle of the financial
Dr. Kshama Fernandes, Managing Director and Chief year when the crisis appeared to have peaked. The steady
Executive Officer, Ms. Bama Balakrishnan, Chief Operating decline in infections in the subsequent months, coupled
Officer and Ms. R Srividhya, Company Secretary of the with the launch of a large-scale immunisation drive by the
Company have been designated as the Key Managerial Government of India in January 2021 gave hope that there
Personnel of the Company (KMP) pursuant to the would be a sustained improvement in the public health
provisions of Sections 2(51) and 203 of the Companies situation and consequently in economic activity, but there
Act, 2013 read with the Companies (Appointment and was a sudden reversal in March leading to a rapid rise in
Remuneration of Managerial Personnel) Rules, 2014.
Board’s Report
41
infections which heralded a second wave that has already Your Company continues to rapidly build out its digital
crossed the first peak and injected fresh uncertainty infrastructure under the aegis of the Nimbus platform.
regarding the economic outlook for FY22. During the year, the functionalities available to internal
users as well as our partners has been expanded
For the NBFC sector, the initial part of the financial
substantially. In what we believe is a first in the industry,
year was characterised by a wait-and-watch approach.
we are now able to provide loans to financial institutions
The Reserve Bank of India announced a three-month
in an entirely paperless fashion, including digital loan
moratorium on loan repayments by borrowers that was
documentation, digital stamping and e-signing. Nimbus
subsequently extended until August 2020. While this gave
is a key pillar of the Company’s strategy and a source of
businesses and individuals the room to recover without
competitive strength and differentiation.
affecting their credit histories, there was concern that
these measures would make it difficult to judge the true In summary, your Company has delivered consistent
quality of the exposures and in turn of the underlying asset performance in the face of extraordinary external
quality of NBFCs. As NBFCs’ collections were affected by conditions. We believe that our strong balance sheet,
the moratorium, RBI announced targeted liquidity schemes deep expertise in the sectors that we operate in, solid
and refinance programmes to provide liquidity support relationships with clients and investors, robust processes
and prevent any ALM crisis. Although these schemes were that have been honed over a decade and the unique talent
initially beset with a polarisation towards the higher rating pool that we have nurtured, will stand us in good stead
categories (banks initially lent only to AAA/AA rated going forward.
borrowers) and delays, liquidity did ultimately flow across
the sector, restoring a sense of stability. However, given all Subsidiaries
the uncertainty and lack of visibility on the underlying asset Your Company has four (4) subsidiary companies, i.e.,
quality, practically the entire sector preferred retaining Northern Arc Investment Managers Private Limited;
liquidity overgrowth for the first half of the financial year, Northern Arc Investment Adviser Services Private Limited,
with the confidence to increase credit exposure returning Northern Arc Foundation (a company incorporated under
only in in the second half of FY21. section 8 of the Act) and Pragati Finserv Private Limited.
The details of subsidiaries are as follows:
For the year as a whole, your Company achieved business
volume (including disbursements from own balance sheet) i. Northern Arc Investment Managers Private Limited
of INR 13,054 crore as against INR 15,011 crore for the earlier (NAIM)
year. The freezing of economic activity for a significant part NAIM continued its track record of achieving healthy
of the year due to the COVID-19 pandemic has resulted in a growth in its funds management business, closing
year-on-year decline in business volume. FY21 with cumulative investor commitments of INR
As at the end of FY21, your Company’s loan book (including 2,840 crore across all its funds, vs. INR 2,146 crore as
investments) stood at INR 5,015.27 crore, reflecting growth of end-FY20, registering a 32% growth. NAIM brought
of 25.6% for the year; the entire growth in book has been on board 82 new investors during the year, comprising
generated in the latter half of the year as the environment corporates, family offices and HNIs, taking the total
necessitated an extremely conservative stance in the first capital drawn down to INR 2,111 crore at end-FY21. A
half. The Company continues to hold higher cash and bank total of INR 1,687 crore was deployed across sectors
balances as compared to earlier years as greater liquidity during the year, while the cumulative distributions
provides the ability to tide over any dislocations in the made to investors stood at INR 641 crore, as at the end
market and opportunistically deploy funds profitably. of the year.
During the year under review, we added 47 NBFC The Northern Arc India Impact Fund (“NAIIF”) – the
Originator and Mid-Market Corporate clients, taking the eighth fund from the NAIM platform and the first
count to 289. The Direct Origination business, the mainstay offshore fund to be launched by NAIM successfully
of our strategy to increase the granularity of the book, achieved its first close milestone before the onset of
has crossed two significant milestones during the year – the COVID-19 pandemic. Fund-raising and deployment
disbursement for the year crossed the INR 1,000 crore mark were suspended during the first half of FY21 and
and the total number of loan accounts crossed 2 million. resumed in H2FY21 with final close expected during
The business has added 10 new partnerships, all of which FY22. In March 2020, NAIM fully exited the IFMR
are based on seamless integration of technology, taking the FImpact Investment Fund (NAIM’s first AIF, launched
number of such partnerships to 27. in March 2015), recording the second complete
maturity and exit from its investment platform. The
Over the years, your Company has consciously nurtured fund delivered healthy returns of over 15% to the
a risk culture that emphasises rigour and thoroughness, senior investor class against target returns of 13%. It
while allowing the business the space to operate with a may be recollected that in FY20, NAIM had exited
favourable risk-reward balance. This is enabled by your the IFMR FImpact Medium Term Microfinance Fund,
Company’s accumulated knowledge and experience exceeding the return guidance by over 150 bps. Despite
in sectors that it operates in, strong relationships with experiencing multiple external events over their tenure
Originators and Investors, granular risk monitoring at including demonetization (November 2016), the
the ground level, well developed analytics and modelling implementation of GST (July 2017), an extended tight
techniques and a robust early alert process. While on the liquidity scenario (September 2018 onwards) and the
one hand, our credit selection is backed by extensive data COVID-19 pandemic induced lockdown (March 2020
and very strong models, we have a conservative approach onwards), both funds maintained excellent portfolio
to making provisions for probable losses on the book. quality and delivered consistent cashflow pay-outs to
Accordingly, we have continued to maintain additional investors throughout their tenure, with no instances
provisions for the impact of COVID-19; this overlay stood at of shortfall or delay. In an environment of uncertainty
~INR 9.70 crore as at the end of FY21. Our risk management and widespread deterioration of credit quality, these
team has been entrusted with actively monitoring risks in successful exits are a testament to NAIM’s fund
the loan portfolio, liquidity profile and asset liability profile, management and underwriting capabilities.
which it continues to undertake unstintingly.
42 Board’s Report
Northern Arc Money Market Alpha Fund continued to (“Foundation”) acts as the CSR arm for Northern Arc
be a competent alternative for investors to park their Capital and focuses on skill building, employment
short term funds (1-3 months) with a target returns of development and education.
9-10%. The fund achieved a peak AUM of INR 387 crore
The following activities were undertaken:
in March 2021. The fund has received investments of
INR 526 crore from 34 investors and has successfully Capacity building at field level and managerial level:
redeemed investor capital of around INR 266 crore The rural employment drive was muted during the year, due
during the year under review. to the pandemic and the consequent lockdown. We expect
NAIM continued to focus on its three investor to resume this initiative, once the situation eases.
segments – domestic institutional, domestic private The Foundation, however continued its online training with
wealth and offshore investors – by offering innovative field officers across MFIs and enhance their conceptual
products across various tenors and addressing diverse knowledge about finance and financial products. As at the
investment objectives. On the operations front, the end of the Financial Year, we have provided training across
emphasis has been on setting up Standard Operating 9 MFIs impacting over 4,400 Field Officers. The curriculum
Procedures (SOPs) with contingency plans. In the for training is reviewed by the Northern Arc Group in line
light of COVID-19 lockdown, the Business Continuity with recent changes in regulatory framework and sound
Process was tested and implemented successfully. Data market practices and customer protection norms.
migration to a new fund accounting system has been
completed for all closed-ended funds. Our initiatives in collaboration with Dvara Research
Foundation:
In FY20, leveraging its fund structuring expertise
and understanding of analytical evaluation, NAIM The Financial Inclusion Survey:
had obtained from CRISIL a rating of AA+ (SO) The Foundation is supporting an ambitious financial
for the Northern Arc India Impact Fund at 10% inclusion survey which will not only determine the level of
first-loss protection, bettering the AA- (SO) rating financial inclusion but also try to understand the impact
earlier received for the IFMR FImpact Medium Term of financial inclusion on wellbeing of households. Financial
Opportunities Fund (“Fund 5”) which had a similar Inclusion surveys have tended to focus on the inputs,
structure. These ratings were reaffirmed during the measuring how many people have access to finance, but
year, on account on asset quality and recoveries made not on the outcomes and usage.
during the year.
The survey is designed to be a multi-year, comprehensive
Following the receipt of the ‘Best Investment one, which will become a benchmark for measuring effect
Management NBFC of the Year’ at the India NBFC of financial inclusion on households, especially the usage
Excellence Awards 2019 in August 2019, NAIM received and impact on financial well-being of households.
another recognition in February 2021, by being
included in ImpactAssets50, an annual showcase Some of the other key research initiatives in partnership
featuring fifty fund managers from across the world, with Dvara Research Foundation and their details are
who lead their respective fields in creating positive provided below:
social impact, while generating financial returns for
a) Household Finance Research Initiative
investors. Along with the earlier awards conferred
on NAIM for excellence and innovation in the fund This project aims at developing a comprehensive
management domain at domestic and international analytical framework for understanding customer
forums, these recognitions are a testimony of the deep financial wellbeing. The research was presented as
underwriting expertise, innovative approach towards a series of two blogposts by Dvara Research. The
investment management and thought leadership blog presented the theoretical underpinnings of
in that NAIM brings about in its target sectors. The household finance literature and provided an overview
recognitions reinforce our belief that NAIM is a unique of academic studies that analysed financial market
debt AIF platform delivering superior risk-adjusted participation and asset allocation of households in
returns to investors while creating positive social developed countries.
impact. The research team has also been developing a
ii. Northern Arc Investment Adviser Services Private comprehensive analytical framework for understanding
Limited (NAIA) customer financial wellbeing and reviewing literature
on financial wellbeing of Indian households to create
NAIA was established to provide high quality an Evidence Gap Map (EGM) to detect the gaps in
advice and products in asset classes that impact research in this subject. To further encourage research
the financially excluded. During FY21, the Company in India on these subjects, the team is also developing a
continued to offer transaction advisory services given data repository which is aimed at providing researchers
the limited growth opportunities resulting from the and institutions with access to a variety of data.
dislocations from the COVID-19 pandemic.
The team has also been undertaking research on
iii. Northern Arc Foundation: understanding and measuring over-indebtedness
At Northern Arc, our goal is to contribute to the well- among households. Dvara Research organized a
being of the communities and society we cater to workshop on Suitability in Micro-credit and presented
and on which we depend. At the same time, we also findings on over-indebtedness, to MFI practitioners
aim to align our company’s social and environmental and also engaged with them to think about
activities with its business purpose and values. This we alternative methods of income and debt assessment
believe will enhance our reputation and contribute to for microcredit borrowers and other ways to assess
business results. Through our CSR programs, we are customers with varying repayment capacity.
aiming to fulfill our true potential, and expect to spend Future of Finance Initiative (FFI):
across various community development programs
across the sectors, communities, and geographies, The FFI’s research questions are focused on three themes
where we create an impact. Northern Arc Foundation (1) the increased disintermediation in finance, and its
Board’s Report
43
implications (2) the growth public infrastructure for education to children in their pre-nursery stage through
finance in India, including Aadhaar, Indiastack and many their Balwadi program across various slum areas in Mumbai
other proposed structures and (3) the enhanced use of that benefits more than 1,000 children on an annual basis.
consumer data and advances analytics in retail finance. In Swadha Foundation is a renowned NGO from Bangalore,
considering these questions, the FFI seeks to understand that provides free education to bright, economically
the benefits and risks for low-income consumers as well as backward children and helps them complete their college
the regulatory gaps that arise as a consequence. education and also sharpens their skills that strengthens
their chances of employment.
We provide the key highlights and specific outcomes of the
projects over the last three years: Over Financial Year 2021-22, the Foundation will focus on
conducting a large financial inclusion survey in partnership
Funding Funded Key Outputs and Dissemination with the Finance Research Group and the Dvara Research
year project Foundation that is expected to provide deep insights in the
2018-19 a) Multi-year The following were completed: financial inclusion space across sectors and geographies
household - Created the Dvara Research Data in the country. The Dvara Research team is working on the
finance Repository and built research measurement framework and is expected to commence
research partnerships for sharing the field survey shortly.
datasets with multiple academic The CSR Committee of the Board of Northern Arc Capital
institutions, policy think-tanks has also encouraged the Foundation to make an impact
and individual researchers.
for its clients that have been disadvantaged due to the
- Developed the Financial Well- economic fallouts of Covid-19.
being Evidence Gap Map to
assimilate evidence on customer During the pandemic, we continued to support our
financial well-being and detect education initiatives and continued to work on the financial
gaps in research. inclusion survey.
- Conducted workshops on The key focus, during the last Financial Year, however, was
Suitability in Microcredit and the upgradation of government schools that were in dire
published proceedings from the
need of funds and upkeep. What started as a small initiative
conference.
consequent to the floods in Chennai has now become an
- Developed practical guidelines
impactful area for improving the lives of under-privileged
for assessing credit suitability
children. We have identified eight schools that need
at point-of-sale for microcredit
which were presented at the IFI immediate attention with respect to building of classrooms,
Summit in Dec 2018. toilets and safety measures for children. CSR funds towards
- Created a research brief on this project were used for:
flexibility in Microfinance Loan a) Construction/ renovation of classrooms, toilets,
Contracts and disseminated cleaning, weathering work, etc.
during workshop on suitability
on microfinance. b) Providing tables, chairs, uniforms, green boards,
stationery, etc.
- Participated and disseminated
the learnings from household c) Providing computers, laptops, printers, TVs, mike sets,
finance workshop at Lund amplifiers, projectors etc. for facilitating smart classes
University, Sweden.
The CSR focus areas for the upcoming financial year are as
- Updated existing paper on
follows:
Analysis of Household Balance
Sheets, based on feedback from a) Commencement of the field survey on financial
presentation at IGIDR Household inclusion
Finance Workshop and
b) Impacting through education initiatives through our
submitted to a peer-reviewed
journal.
implementing agencies
2019-20 a) Multi-year - Ran the Dvara Research c) Direct impact in education through renovation,
household Fellowship program. For this rebuilding of infrastructure of deserving government
finance year, it has been in collaboration schools
research with Rajasthan Shram Sarathi d) Driving impactful support for the eradication of
Association. Covid-19 from India
- Conducted the Dvara Research
Blog Competition 2019 to iv. Pragati Finserv Private Limited:
attract students to undertake Pragati Finserv was incorporated on February 25, 2021 as
research and writing on topics of
a private limited company under the Companies Act, 2013
household finance in India.
with a registration number U65990TG2021PTC148992.
2020-21 Financial - Completed working paper on Its registered office is located at 8-2-624/A/1, 4th Floor,
inclusion Household Finance in India: Meena Bazaar Towers, Road No. 10, Avenue 4, Banjara Hills,
survey Approaches and Challenges. Hyderabad. Pragati will shortly apply for undertaking the
- Announced a call for research Microfinance business license with the Reserve Bank of
proposals on key themes in India (RBI).
Household Finance in India
in collaboration with NACL, Future Outlook
Robert Bosch Centre for Data
Science and Artificial Intelligence
The dislocations from the COVID-19 pandemic have
(RBCDSAI) at IIT-Madras and extracted a huge human and economic toll globally in
Omidyar Network. FY21. The Indian economy is projected to experience its
first ever contraction in real terms since independence. On
Learning and education: the brighter side, there has been timely intervention from
In furtherance of its education objective, the Foundation the Government in the form of relief packages, safety nets
has partnered with the Doorstep School and Swadha for the vulnerable and fiscal expansion to stimulate the
Foundation. The Doorstep School focuses on providing free economy, and from the Reserve Bank of India in the form
44 Board’s Report
of targeted liquidity support and calibration of macro- - Publishing our ESG and impact report for the financial
prudential regulation to ensure systemic stability. The year 2021-22.
combination of these factors has ensured that there is a
- We intend to institute a structured approach to
visible pathway for the economy to return to its growth
measuring and tracking emissions intensity per
trajectory. It goes without saying that timely and sufficient
employee (Scope 1 and Scope 2) and undertake
delivery of finance to the real sector is a key requirement
planned initiatives for reduction in our carbon footprint
to ensure restoration of growth and NBFCs are a vital
and waste generation.
component of the financial system, and particularly crucial
to last-mile delivery to the underbanked segment. In the - Renewed focus on climate risks associated with lending
near-term, the trajectory of the pandemic may lead to practices and growth of green financing products and
some variations in the pace of recovery, but the medium- to services
long-term outlook for the NBFC sector remains attractive
as before. Northern Arc’s depth of experience across all FOREIGN EXCHANGE EARNINGS AND OUTGO
sectors that it operates in – microfinance, two-wheeler There were no foreign exchange earnings during the year
finance, vehicle finance, MSME finance, agri supply chain or the previous year. Total foreign exchange outgo during
finance, affordable housing finance, gold finance and the year under review was INR [•] crore (previous year: INR
consumer finance – enables it to capitalise on growth 0.63 crore) under the heads listed below:
opportunities across all segments of the underbanked
(INR in Lakhs)
space as the economy returns to its growth path.
Head of Expense March 31, 2021 March 31, 2020
FIXED DEPOSITS
Travel 0.00 15.66
The Company being non-deposit taking Non-Banking
Financial Company - Investment and Credit Company Subscription 0.56 0.75
(NBFC-ICC), has not accepted any deposits during Consultancy charges 133.28 46.67
the year under review. Further, the Company had also Advertisement and 4.51 0.00
passed a resolution to the effect that the company has publishing
neither accepted public deposit nor would accept any
Loan processing fees 241.05 0.00
public deposit during the year under review, as per the
requirements of Master Direction - Non-Banking Financial Total 379.40 63.08
Companies Acceptance of Public Deposits (Reserve Bank)
Directions, 2016. MEETING OF INDEPENDENT DIRECTORS
In terms of Para VII of the Code for Independent Directors,
CONSERVATION OF ENERGY AND TECHNOLOGY your Company conducted a meeting of its independent
ABSORPTION directors on March 25, 2021, without the presence of non-
Our mission is to create sustainable impact with independent directors and members of the management.
a returns-focused approach. We have focused on The Directors, inter alia, discussed the following:
building a consistently profitable business with a strong a) review the performance of non-independent directors
focus on environment, social and governance (“ESG”) and the Board as a whole.
considerations. While Social and Governance dimensions b) review the performance of the Chairperson of the
have been a strong area of focus since inception, we have company, taking into account the views of executive
also been committed to contribute to climate action. directors and non-executive directors.
By way of our areas of operation and focus business c) assess the quality, quantity, and timeliness of flow of
sectors, we have endeavoured to work with businesses information between the company management and
that display strong social and governance models while the Board that is necessary for the Board to effectively
ensuring environmental sustainability. This has helped and reasonably perform their duties.
us adhere to several ESG parameters and further our
contribution to the Sustainable Development Goals STATUTORY AUDITORS AND AUDITORS REPORT
(“SDGs”). Our underwriting guidelines incorporate a M/s BSR & Co. LLP, Chartered Accountants (Registration
responsible financing framework across governance, Number: 101248W/W-100022) have been appointed as
customers, employees and environment. We have also Statutory Auditors of the Company at the annual general
specifically committed to abide by Leapfrog’s Responsible meeting held on July 04, 2018, for a period of 5 years
Investor Code including to minimize adverse impact on from the conclusion of annual general meeting held in the
the environment and communities that we serve and our calendar year 2018 till the conclusion of annual general
employees. meeting to be held in the calendar year 2023.
While the ESG principles are ingrained in our everyday The requirement to place the matter relating to
actions, to further strengthen our vision and focus on ESG, appointment of auditors for ratification by members at
we are committed to instituting certain formal structures every annual general meeting has been done away by the
and practices and taking more concrete actions over the Companies (Amendment) Act, 2017 with effect from May
coming 3 years. These include: 7, 2018. Accordingly, no resolution is being proposed for
- Constitution of a separate ESG committee of the ratification of appointment of statutory auditors at the
Board which will formulate an organization wide 3- ensuing annual general meeting.
year strategy and roadmap with priorities, targets and There has been no qualification, reservation or adverse
planned activities While we have identified our material remark given by the Statutory Auditors in their Report for
ESG issues based on the Sustainability Accounting the year under review.
Standards Board (SASB) and other international
frameworks which have been central to our current REPORTING OF FRAUDS BY THE AUDITORS TO THE
sustainability initiatives, we intend to undertake COMPANY
a comprehensive materiality assessment through During the year, the Auditors have not reported any
external stakeholder engagement and understand their instance of fraud to the Audit Committee and Board as per
expectations and accordingly to revisit our initiatives Section 143 (12) of the Companies Act, 2013.
with stretch goals and targets.
Board’s Report
45
COMPLIANCE Nomination and Remuneration Committee
Your Company is registered with Reserve Bank of India The Composition of Nomination and Remuneration
under Section 45IA of the Reserve Bank of India Act, 1934. Committee of the Company as on March 31, 2021, is as
Further, your Company has complied with and continues follows:
to comply with all applicable laws, rules, circulars and
Name Category
regulations and it does not carry on any other those
specifically permitted by RBI for NBFCs. Ms. Anuradha Rao Independent Director,
Chairperson of the Committee
PARTICULARS OF LOANS, GUARANTEES OR Mr. P S Jayakumar Independent Director
INVESTMENTS IN SECURITIES Mr. Samir Shah Nominee Director
Being a non-banking financial company, the disclosures Mr. Rajesh Dugar Nominee Director
regarding particulars of loans given, guarantees given and
security provided is exempt under the provisions of section Consequent to the resignation of Ms. Susan Thomas, Mr.
186(11) of the Companies Act, 2013. As regards investments Leo Puri and Mr. Rajiv Lochan from the Board of Directors,
made by the company, the details of the same are provided and the appointment of Mr. Ashutosh Pednekar and Mr. P
in the financial statements. S Jayakumar as an Independent Directors of the Company
the Audit Committee was reconstituted by the Board of
POLICY ON APPOINTMENT OF DIRECTORS AND Directors with effect from October 28, 2020.
REMUNERATION POLICY OF THE COMPANY The Terms of Reference for the Nomination and
The policy on directors’ appointment is based on the Remuneration Committee are below:
evaluation of fit and proper criteria for directors by a) To identify persons who are qualified to become
the Nomination and Remuneration Committee prior to directors and who may be appointed in senior
appointment of directors. At present, only the Managing management in accordance with the criteria laid down
Director cum Chief Executive Officer receives remuneration
from the Company. b) To carry out evaluation of every director’s performance
c) To formulate the criteria for determining qualifications,
The Company’s policy on directors’ appointment and
positive attributes and independence of a director
remuneration along with Terms of Reference and other
matters provided in Section 178(3) of the Act is available d) To recommend to the Board, a policy relating to
on website of the Company and the weblink for the same is the remuneration for the directors, key managerial
https://www.northernarc.com/governance. personnel and other employees
e) To determine that relationship of remuneration
BOARD MEETINGS to performance is clear and meets appropriate
During FY21, seven meetings of the Board of Directors were performance benchmarks
held on the following dates:
DIRECTORS’ RESPONSIBILITY STATEMENT
May 20, 2020, June 26, 2020, August 20, 2020, October 28,
The directors’ responsibility statement as required under
2020, November 09, 2020, December 29, 2020, February
section 134(5) of the Companies Act, 2013, reporting the
05, 2021. compliance with the Accounting Standards is attached and
forms a part of the Board’s Report.
COMMITTEES OF BOARD OF DIRECTORS
The Directors accept the responsibility for the integrity
The Company has various Committees which have been
and objectivity of the Profit & Loss Account for the year
constituted as a part of good corporate governance
ended March 31, 2021 and the Balance Sheet and Cash
practices and the same are in compliance with the
Flow Statement as at that date (“financial statements”) and
requirements of the relevant provisions of applicable laws
confirm that:
and statutes.
a) in the preparation of the annual accounts, the
Audit Committee applicable accounting standards have been followed
Pursuant to provisions of Section 177(8) of the Companies along with proper explanation relating to material
Act, 2013, the composition of Audit Committee of the departures;
Company as on March 31, 2021, is as follows: b) the directors have selected such accounting policies
and applied them consistently and made judgments
Name Category and estimates that are reasonable and prudent so as
Mr. Ashutosh Pednekar Independent Director, to give a true and fair view of the state of affairs of the
Chairman of the Committee company at the end of the financial year and of the
profit and loss of the company for that period;
Mr. P S Jayakumar Independent Director
c) the directors have taken proper and sufficient care
Ms. Anuradha Rao Independent Director
for the maintenance of adequate accounting records
Mr. Vijay Nallan Chakravarthi Nominee Director in accordance with the provisions of the Companies
Mr. Amit Mehta Nominee Director
Act, 2013 for safeguarding the assets of the company
and for preventing and detecting fraud and other
Consequent to the resignation of Ms. Susan Thomas, Mr. irregularities.
Leo Puri and Mr. Rajiv Lochan from the Board of Directors, d) the directors have prepared the annual accounts on a
and the appointment of Mr. Ashutosh Pednekar and Mr. P going concern basis;
S Jayakumar as an Independent Directors of the Company,
e) the directors have laid down internal financial controls
the Audit Committee was reconstituted by the Board of
to be followed by the company and that such internal
Directors with effect from October 28, 2020.
financial controls are adequate and were operating
The recommendations of the Audit Committee were duly effectively; and
approved and accepted by the Board during the year under f) the directors have devised proper systems to ensure
review. compliance with the provisions of all applicable laws
and that such systems were adequate and operating
effectively.
46 Board’s Report
BOARD EVALUATION between the end of the financial year and date of this
The evaluation of all the Directors, the Board as a whole report. We also hereby confirm that there has been no
and each of the Committees of the Board was conducted change in the nature of business of the Company.
based on the following criteria as recommended by the
Nomination & Remuneration Committee adopted by the DETAILS OF SIGNIFICANT AND MATERIAL ORDERS
Board. PASSED BY THE REGULATORS OR COURTS OR
TRIBUNALS IMPACTING THE GOING CONCERN STATUS
Evaluation criteria for independent directors and non- AND COMPANY’S OPERATION IN FUTURE
executive directors: No significant or material orders were passed by the
1. Understanding of the business of the company and Regulators or Courts or Tribunals which impact the going
contribution towards its strategic direction. concern status operations of your Company in future.
2. Attendance and participation in Board Meetings,
RELATED PARTY TRANSACTIONS
whether in person, telephone or via video conferencing
The Company has adopted a policy on related party
3. Providing timely and effective inputs on minutes and transactions for the purpose of identification, monitoring
other materials circulated to the Board and approving of such transactions.
4. Inter-personal relations with the rest of the Board and
A statement containing details of material contracts or
management
arrangements or transactions with Related Parties on an
5. Adherence to ethical standards and disclosure of non- arm’s length basis with respect to transactions covered
independence, where it exists under Section 188(1) of the Companies Act, 2013 in the
prescribed Form No. AOC-2, is attached as Annexure 4.
DISCLOSURE UNDER THE SEXUAL HARASSMENT OF Further, details of related party transactions, as required
WOMEN AT WORKPLACE (PREVENTION, PROHIBITION to be disclosed by Indian Accounting Standard – 24
AND REDRESSAL) ACT, 2013 on “Related Party Disclosure” specified under Section
The Company has in place a Policy for prevention of 133 of the Companies Act, 2013 read with Rule 7 of the
Sexual Harassment, in line with the requirements of the Companies (Accounts) Rules, 2014 are given in the Notes
“Sexual Harassment of Women at Workplace (Prevention, to the Financial Statements.
Prohibition and Redressal) Act, 2013.” Internal Complaints During the year, your Company has not entered into any
Committee (ICC) has been set up to redress complaints, transactions with Related Parties which are not in the
as and when received, regarding sexual harassment and all ordinary course of its business or not on an arm’s length
employees are covered under this Policy. basis and which require disclosure in this Report in terms of
The Policy has been hosted on the Company’s website: the provisions of Section 188(1) of the Companies Act, 2013.
https://www.northernarc.com The Related party policy is available on website
There were no referrals received by the Committee, during of the Company and the weblink for the same is
the FY21. https://www.northernarc.com/governance.
Board’s Report
47
REQUIREMENTS UNDER SECTION 197(12) OF THE COMPANIES ACT, 2013 READ WITH RULE 5 OF THE COMPANIES
(APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL) RULES, 2014
Disclosure to be made under Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules,
2014 are given below:
Ratio of remuneration of each director to the median employee’s remuneration for the financial year:
Percentage increase in remuneration of each director, Chief Executive Officer, Chief Operating Officer, Chief Financial
Officer, Company Secretary in the Financial Year vis-à-vis last financial year:
Name of director/ Key Managerial Personnel % increase in remuneration vis-à-vis last financial year
Dr. Kshama Fernandes, Managing Director and CEO 0%
Ms. Bama Balakrishnan, Chief Operating Officer 0%
Ms. Nandita Ganapathi, Chief Financial Officer* 0%
Ms. R. Srividhya, Company Secretary 0%
*from July 06, 2020 to January 27, 2021
• Percentage increase in the median remuneration of Board’s Report is being sent to all the members excluding
employees in the financial year: 3.3% Annexure 6. The said Annexure is available for inspection
by the members at the Registered Office of the Company
• Number of permanent employees on the rolls of the
during business hours on working days. Any member
company: 207 (as of 31st March 2021)
interested in obtaining a copy of the same may write to
• Average percentage increase in the salaries of the Company Secretary at the Registered Office of the
employees other than the KMP in FY21: 0%* and Company.
percentage increase in key managerial remuneration:
0% VIGIL MECHANISM AND WHISTLE BLOWER POLICY
• Affirmation that the remuneration is as per the Adequate vigil mechanism for directors and employees
remuneration policy of the company: The Company to report genuine concerns is in place and the same
affirms that remuneration of directors and employees have been disclosed on the website of the company,
of the company is in accordance with the remuneration www.northernarc.com.
policy of the company.
SECRETARIAL STANDARDS COMPLIANCES
• The remuneration paid are as per the remuneration
The company has complied with the applicable Secretarial
policy of the Company.
Standards issued by The Institute of Company Secretaries
* the average increase in salaries of employees based on of India.
performance appraisal during the last year.
ACKNOWLEDGEMENT
PARTICULARS OF EMPLOYEES UNDER RULE 5(2) OF THE The Directors wish to thank the Reserve Bank of India and
COMPANIES (APPOINTMENT AND REMUNERATION OF other statutory authorities for their continued support and
MANAGERIAL PERSONNEL) RULES, 2014 guidance. The Directors also place on record their sincere
The statement containing particulars of employees as thanks for the support and co-operation extended by the
required under section 197(12) of the Act read with Rule bankers and shareholders of the Company.
5(2) of the Companies (Appointment and Remuneration
The Directors also thank the employees of the Company for
of Managerial Personnel) Rules, 2014, is in a separate
their contribution toward the performance of the Company
Annexure 6 forming part of this report. A copy of the
during the financial year.
48 Board’s Report
Annexure 1
Board’s Report
49
50
IV. SHARE HOLDING PATTERN (Equity Share Capital Breakup as percentage of Total Equity)
i) Category-wise Shareholding – (On Fully diluted basis, excluding unvested ESOP Pool)
No. of Shares held at the beginning of the year* No. of Shares held at the end of the year*
% Change
% of total % of total during the
Category of Shareholders year
shares (on shares (on
Demat Physical Total Demat Physical Total
fully diluted fully diluted
basis) basis)
Board’s Report
A. Promoters (1) Indian
a) Individual/HUF 0 0 0 0 0 0 0 0 0
b) Central Govt 0 0 0 0 0 0 0 0 0
c) State Govt(s) 0 0 0 0 0 0 0 0 0
d) Bodies Corp 0 0 0 0 0 0 0 0 0
e) Banks / FI 0 0 0 0 0 0 0 0 0
f) Any Other 0 0 0 0 0 0 0 0 0
(2) Foreign
a) NRIs - Individuals 0 0 0 0 0 0 0 0 0
b) Other – Individuals 0 0 0 0 0 0 0 0 0
c) Bodies Corp. 0 0 0 0 0 0 0 0 0
d) Banks / FI 0 0 0 0 0 0 0 0 0
e) Any Other…. 0 0 0 0 0 0 0 0 0
B. Public Shareholding
1. Institutions
a) Mutual Funds 0 0 0 0 0 0 0 0 0
b) Banks / FI 0 0 0 0 0 0 0 0 0
c) Central Govt 0 0 0 0 0 0 0 0 0
d) State Govt(s) 0 0 0 0 0 0 0 0 0
e) Venture Capital Funds 0 0 0 0 0 0 0 0 0
f) Insurance Companies 0 0 0 0 0 0 0 0 0
g) FIIs 0 0 0 0 0 0 0 0 0
h) Foreign Venture Capital Funds 0 0 0 0 0 0 0 0 0
g) Others
i. AIF 34006698 0 34006698 26.40% 34006698 0 34006698 26.31% -0.09%
ii. Foreign Company 81852241 0 81852241 63.55% 81852241 0 81852241 63.33% -0.22%
Sub-total (B)(1):- 115858939 0 115858939 89.95% 115858939 0 115858939 89.64% -0.31%
2. Non-Institutions
a) Bodies Corp. 0 0 0 0 0 0 0 0 0
i) Indian 0 0 0 0 0 0 0 0 0
ii) Overseas 0 0 0 0 0 0 0 0 0
b) Individuals 0 0 0 0 0 0 0 0 0
i)
Individual shareholders 3 0 3 0 3 0 3 0 0
holding nominal share
capital upto Rs. 1 lakh
ii)
Individual shareholders 0 0 0 0 0 0 0 0 0
holding nominal share
capital in excess of Rs. 1 lakh
c) Others 63483 0 63483 0.05% 507130 0 507130 0.004 0.34
i. Dvara Trust 12878682 0 12878682 9.99% 12878682 0 12878682 9.96% -0.03
Sub-total (B)(2):- 12942168 0 12942168 10.05% 13385815 0 13385815 10.05 0.00
Total Public Shareholding(B)= 128801107 0 128801107 100.00% 129244754 0 129244754 100.00% –
(B)(1)+ (B)(2)
C. Shares held by Custodian for GDRs & 0 0 0 0 0 0 0 0 0
ADRs
Board’s Report
Grand Total (A+B+C) 128801107 0 128801107 100.00% 129244754 0 129244754 100.00% –
51
(ii) Shareholding of Promoters
Shareholding at the beginning of the
Shareholding at the end of the year
year
% of total % change in
Sl. %of Shares %of Shares shareholding
Shareholder’s Name Shares % of total
No. Pledged / Pledged / during the
No. of of the No. of Shares
encumbered encumbered year
Shares company on Shares of the
to total to total
fully diluted company
shares shares
basis
-- NIL – NIL NIL NIL NIL –
(iii) Change in Promoters’ Shareholding (please specify, if there is no change) – Not Applicable
(iv) Shareholding Pattern of top ten Shareholders (other than Directors, Promoters and Holders of GDRs and ADRs)-*
Shareholding at the beginning of the Cumulative Shareholding during the
Sl. year year
For Each of the Top 10 Shareholders
No % of total shares % of total shares
No. of shares No. of shares
of the company of the company#
1 Leapfrog Financial Inclusion India (II) Limited
At the beginning of the year 2,99,52,665 22.09% 2,99,52,665 21.60%
Date wise Increase / Decrease in No change in
shareholding during the year specifying the shareholding
reasons for increase/ decrease* during the year
At the End of the year 2,99,52,665 22.09% 2,99,52,665 21.60%
2 Augusta Investments Pte II Ltd
At the beginning of the year 23,584,935 17.39% 23,584,935 17.01%
Date wise Increase / Decrease in No change in
shareholding during the year specifying the shareholding
reasons for increase/ decrease* during the year
At the End of the year 23,584,935 17.39% 23,584,935 17.01%
3 Dvara Trust
At the beginning of the year 12878682 9.50% 12878682 9.29%
Date wise Increase / Decrease in No change in
shareholding during the year specifying the shareholding
reasons for increase/ decrease* during the year
At the End of the year 12878682 9.50% 12878682 9.29%
4 Accion Africa Asia Investment Company
At the beginning of the year 76,99,529 5.68% 76,99,529 5.55%
Date wise Increase / Decrease in No change in
shareholding during the year specifying the shareholding
reasons for increase/ decrease* during the year
At the End of the year 76,99,529 5.68% 76,99,529 5.55%
5 Sumitomo Mitsui Banking Corporation
At the beginning of the year 70,04,364 5.17% 70,04,364 5.05%
Date wise Increase / Decrease in No change in
shareholding during the year specifying the shareholding
reasons for increase/ decrease* during the year
At the End of the year 70,04,364 5.17% 70,04,364 5.05%
6 IIFL Special Opportunities Fund
At the beginning of the year 67,21,940 4.96% 67,21,940 4.85%
Date wise Increase / Decrease in No change in
shareholding during the year specifying the shareholding
reasons for increase/ decrease* during the year
At the End of the year 67,21,940 4.96% 67,21,940 4.85%
52 Board’s Report
Shareholding at the beginning of the Cumulative Shareholding during the
Sl. year year
For Each of the Top 10 Shareholders
No % of total shares % of total shares
No. of shares No. of shares
of the company of the company#
7 IIFL Special Opportunities Fund – Series 7
At the beginning of the year 61,25,875 4.52% 61,25,875 4.42%
Date wise Increase / Decrease in No change in
shareholding during the year specifying the shareholding
reasons for increase/ decrease* during the year
At the End of the year 61,25,875 4.52% 61,25,875 4.42%
8 Eight Roads Investments Mauritius (II) Limited
At the beginning of the year 13610748 10.04% 13610748 9.82%
Date wise Increase / Decrease in No change in
shareholding during the year specifying the shareholding
reasons for increase/ decrease* during the year
At the End of the year 13610748 10.04% 13610748 9.82%
9 IIFL Special Opportunities Fund – Series 4
At the beginning of the year 7538980 5.56% 5423564 5.44 %
Date wise Increase / Decrease in No change in
shareholding during the year specifying the shareholding
reasons for increase/ decrease* during the year
At the End of the year 7538980 5.56% 7538980 5.44%
10 IIFL Special Opportunities Fund – Series 5
At the beginning of the year 6185901 4.56% 6185901 4.46%
Date wise Increase / Decrease in No change in
shareholding during the year specifying the shareholding
reasons for increase/ decrease* during the year
At the End of the year 6185901 4.56% 6185901 4.46%
*On fully diluted basis excluding unvested ESOP pool
#Change in percentage holding is due to the allotments made under ESOP Scheme during the year
VI. INDEBTEDNESS
Indebtedness of the Company including interest outstanding / accrued but not due for payment
Particulars Secured Loans Unsecured Loans Total
and debentures and debentures Indebtedness
Deposits (INR
excluding (INR lakh) (INR lakh)
lakh)
deposits (INR
lakh)
Indebtedness at the beginning of the financial year.
i) Principal Amount 2,56,598.75 34,242.59 1,269.09 2,92,110.43
ii) Interest due but not paid – – – –
iii) Interest accrued but not due 1,162.48 104.28 89.96 1,356.72
Total (i+ii+iii) 2,57,761.23 34,346.87 1,359.05 2,93,467.15
Change in Indebtedness during the financial year
· Addition 3,64,579.94 – 432.31 3,65,012.25
· Reduction 2,50,651.30 27,574.42 539.47 2,78,765.19
Net Change 1,13,928.64 -27,574.42 -107.16 86,247.06
Board’s Report
53
Particulars Secured Loans Unsecured Loans Total
and debentures and debentures Indebtedness
Deposits (INR
excluding (INR lakh) (INR lakh)
lakh)
deposits (INR
lakh)
Indebtedness at the end of the financial year
i) Principal Amount 3,68,619.27 6,765.25 1,129.13 3,76,513.65
ii) Interest due but not paid – – – –
iii) Interest accrued but not due 3,070.60 7.20 122.76 3,200.56
Total (i+ii+iii) 3,71,689.87 6,772.45 1,251.89 3,79,714.21
54 Board’s Report
C. Remuneration to Key Managerial Personnel other than MD/Manager/WTD
Key Managerial Personnel
Place: Chennai
Date: May 06, 2021
Board’s Report
55
Annexure 2
56 Board’s Report
c) passed a Special Resolution under section 42, 71 and all General Meeting held on 18th January, 2021 for
other applicable provisions of the Companies Act, 2013 appointment of Mr. Ashutosh Arvind Pednekar to act as
at the Annual General Meeting held on 26th August, Independent Director of the Company for a period of
2020 for issue of secured/unsecured non-convertible 3 consecutive years from 14th September 2020 to 13th
debentures in one or more tranches up to a maximum September 2023.
amount not exceeding Rs. 5,000 Cr. (Rupees Five
i) passed a Special Resolution under section 42, 55 and
Thousand Crore) during a period of one year.
62 of the Companies Act, 2013 at the Extra-ordinary
d) passed a Special Resolution under section 180(1)(c) General Meeting held on 18th January, 2021 to issue
of the Companies Act, 2013 at the Annual General 0.01% Compulsorily Convertible Preference Shares
Meeting held on 26th August, 2020 to increase the up to 7,14,286 (Seven Lakhs Fourteen Thousand Two
Borrowing limit of the Company up to Rs. 12,000 Cr Hundred and Eighty Six Only) on a private placement
(Rupees Twelve Thousand Crore Only). basis.
e) passed a Special Resolution under section 180(1)(a) j) passed a Special Resolution under section 5 & 14 of
of the Companies Act, 2013 at the Annual General the Companies Act, 2013, at the Extra-ordinary General
Meeting held on 26th August, 2020 to create security Meeting held on 18th January, 2021 for alteration of
on the assets of the Company up to Rs. 12,000 Cr Articles of Association of the Company.
(Rupees Twelve Thousand Crore Only).
k) passed a Special Resolution at the Extra-ordinary
f) passed an Ordinary Resolution under section 196, 197 General Meeting held on 18th January, 2021 to approve
and 203 of the Companies Act, 2013 at the Annual the amendments made in Northern Arc Employee
General Meeting held on 26th August, 2020 for re- Stock Option Plan 2016.
appointment of Dr. Kshama Fernandes as Managing
l) passed a Special Resolution under section 62 of the
Director, for a term of 3 years from 01st April 2020 to
Companies Act, 2013 at the Extra-ordinary General
31st March 2023.
Meeting held on 18th January, 2021 to approve the
g) passed an Ordinary Resolution under section 149 and Northern Arc Capital Limited Employees Stock Option
152 of the Companies Act, 2013 at the Annual General 2020 – Scheme IV.
Meeting held on 26th August, 2020 for appointment
m) passed a Special Resolution under section 5 & 14 of
of Mr. P S Jayakumar to act as Independent Director of
the Companies Act, 2013 at the Extra-ordinary General
the Company for a period of 3 consecutive years from
Meeting held on 26 February, 2021 for alteration of
15th October 2020 to 14th October 2023.
Articles of Association of the Company.
h) passed an Ordinary Resolution under section 149 and
152 of the Companies Act, 2013 at the Extra-ordinary
M. Damodaran
Managing Partner
Membership No.: 5837
Place: Chennai COP. No.: 5081
Date: 11.05.2021 ICSI UDIN No.: F005837C000278791
Board’s Report
57
Annexure - 1 to Secretarial Audit Report of even date
M. Damodaran
Managing Partner
Membership No.: 5837
Place: Chennai COP. No.: 5081
Date: 11.05.2021 ICSI UDIN: F005837C000278791
58 Board’s Report
Annexure 3
Disclosure relating to Employees Stock Option Scheme in accordance with Rule 12(9) of the Companies (Share Capital
and Debentures) Rules, 2014
Scheme 1* Scheme 2* Scheme 3*
(a) Options granted 721371 6197500 1657524
(b) Options vested 397371 1921500 525814
(c) Options exercised 281097 215033 11000
(d) The total number of shares arising as a result of exercise of – – –
option
(e) Options lapsed 324000 2684000 509741
(f) The exercise price INR 10 INR 110 and INR 121 INR 181 and INR 188
(g) Variation of terms of options – – –
(h) Money realized by exercise of options INR 2810970 INR 24368630 INR 1991000
(i) Total number of options in force
(j) Employee wise details of options granted to:
(i) key managerial personnel; i. 256371 No’s i. 930000 No’s i. 246746 No’s
ii. None ii. None ii. None
(ii) any other employee who receives a grant of options
iii. None iii. None iii. None
in any one year of option amounting to five percent or
more of options granted during that year.
(iii) identified employees who were granted option, during
any one year, equal to or exceeding one percent of the
issued capital (excluding outstanding warrants and
conversions) of the company at the time of grant;
*Note: Scheme 1, Scheme 2 and Scheme 3 mentioned above refers to Northern Arc Capital Employees Stock Option Plan - Scheme I, IFMR
Capital Employees Stock Option Plan - Scheme II; and Northern Arc Capital Limited Employees Stock Option Scheme 2018 respectively.
Board’s Report
59
Annexure 4
Place: Chennai
Date: May 06, 2021
60 Board’s Report
Annexure 5
3. Web-link where Composition of CSR committee, CSR Policy and CSR projects approved by the board are disclosed
on the website of the company: https://www.northernarc.com/governance.
4. Details of Impact assessment of CSR projects carried out in pursuance of sub-rule (3) of rule 8 of the Companies
(Corporate Social responsibility Policy) Rules, 2014, if applicable (attach the report): Not Applicable.
5. Details of the amount available for set off in pursuance of sub-rule (3) of rule 7 of the Companies (Corporate Social
responsibility Policy) Rules, 2014 and amount required for set off for the financial year, if any: Not Applicable.
6. Average net profit of the company as per section 135(5): INR 1,23,68,75,667
7. (a) Two percent of average net profit of the company as per section 135(5): INR 2,47,37,513
(b) Surplus arising out of the CSR projects or programs or activities of the previous financial years: INR 40,00,000
(unspent amount carried forward from previous year)
(c) Amount required to be set off for the financial year, if any: NIL
(d) Total CSR obligation for the financial year (7a+7b-7c): INR 2,87,37,513
8. (a) CSR amount spent or unspent for the financial year: NIL
Amount Unspent (in Rs.)
Total Amount
Spent for the Total Amount transferred to Unspent Amount transferred to any fund specified under Schedule VII
Financial Year. CSR Account as per section 135(6). as per second proviso to section 135(5).
(in Rs.)
Amount. Date of transfer. Name of the Fund Amount. Date of transfer.
2,87,37,513 NIL – – – –
Board’s Report
61
62
(b) Details of CSR amount spent against ongoing projects for the financial year: NIL
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11)
Amount Amount Mode of Implementation
Location of the
Item from Allocated transferred to - Through Implementing
project. Amount
the list of For the Unspent CSR Agency
Spent in Mode of
S Name of the activities in Local area Project Project (Rs) Account for
the current Implementation - Name
No Project. Schedule (Yes/No) Duration the project as
financial Direct (Yes/No) CSR Regn
VII to the State Dist. per Section
year (in Rs) number.
Act. 135(6) (in
Board’s Report
Rs.)
– – – – – – – – – – – – –
(c) Details of CSR amount spent against other than ongoing projects for the financial year:
(1) (2) (3) (4) (5) (6) (7) (8)
Item from the Mode of Mode of implementation -
Location of the project Amount spent
S list of activities Local area implementation Through implementing agency.
Name of the Project for the project
No. in schedule VII (Yes/No) State Dist - Direct CSR registration
(in Rs.). Name
to the Act. (Yes/No). number
1 Conducting of Employment Item (ii) – Skill Yes Tamilnadu Chennai 50,00,000 50,00,000 Northern Arc –
Linked Skilling Program and development Foundation
BFSI Skilling Program for the
benefit of public at large
2 Doorstep school project for Item (ii) – No 25,00,000 25,00,000 Northern Arc –
the benefit of underprivileged Promotion of Foundation
children education
3 Swadha Foundation Item (ii) – Yes Tamilnadu Chennai 15,00,000 15,00,000 Northern Arc –
project for providing higher Promotion of Foundation
education facilities for education
deserving economically
disadvantaged children
4 Providing amenities and Item (ii) – Yes Tamilnadu Chennai 1,10,00,000 1,10,00,000 Northern Arc –
upgrading facilities in Promotion of Foundation
government schools in and education
around Chennai
5 Sponsoring the education Item (ii) – Yes Tamilnadu Chennai 35,00,000 35,00,000 Northern Arc –
of a woman student at Krea Promotion of Foundation
University education
6 Providing education to Item (ii) – Yes Tamilnadu Chennai 10,00,000 10,00,000 Northern Arc –
marginalised children Promotion of Foundation
affected due to the pandemic education
through Hand in Hand
Foundation
7 Engaging with IFC’s Financial Item (iii) - Yes (Pan India) Pan India Pan India 42,50,000 42,50,000 Northern Arc –
Advisory Group for assisting Promoting Foundation
Northern Arc in building a gender
gender sensitive framework equality and
empowerment
of women
(d) Amount spent in Administrative Overheads: NIL
(e) Amount spent on Impact Assessment, if applicable: Not Applicable
(f) Total amount spent for the Financial Year (8b+8c+8d+8e):
(g) Excess amount for set off, if any: Not Applicable
SI No. Particulars Amount (in Rs)
(i) Two percent of average net profit of the company as per section 135(5) –
(ii) Total amount spent for the Financial Year –
(iii) Excess amount spent for the financial year [(ii)-(i)] –
(iv) Surplus arising out of the CSR projects or programmes or activities of the previous financial years, if any –
(v) Amount available for set off in succeeding financial years [(iii)-(iv)] –
9. (a) Details of Unspent CSR amount for the preceding three financial years:
Amount Amount transferred to any fund specified
Amount
transferred Amount under Schedule VII as per section 135(6), if
remaining to
to Unspent spent in the any.
S Preceding Financial be spent in
CSR Account reporting
No. Year succeeding
under section Financial Name of the Amount (in Date of financial
135 (6) (in Year (in Rs.) Fund Rs). transfer. years (in Rs.)
Rs.)
1 2017-18 21,50,387 – NA NA NA NA
2 2018-19 1,16,31,443 – NA NA NA NA
3 2019-20 40,00,000 40,00,000 NA NA NA NA
Total
(b) Details of CSR amount spent in the financial year for ongoing projects of the preceding financial year(s):NIL
(1) (2) (3) (4) (5) (6) (7) (8) (9)
Cumulative
Amount
Total amount
Financial spent on Status
amount spent at
Year in the project of the
S Name of Project allocated the end of
Project ID which the in the project -
No. the Project duration for the reporting
project was reporting Completed
project (in Financial
commenced Financial /Ongoing.
Rs.) Year. (in
Year (in Rs)
Rs.)
1 – – – – – – – –
Total
10. In case of creation or acquisition of capital asset, furnish the details relating to the asset so created or acquired
through CSR spent in the financial year: NIL
(asset-wise details).
(a) Date of creation or acquisition of the capital asset(s): Nil
(b) Amount of CSR spent for creation or acquisition of capital asset: Nil
(c) Details of the entity or public authority or beneficiary under whose name such capital asset is registered, their address
etc: Nil
(d) Provide details of the capital asset(s) created or acquired (including complete address and location of the capital
asset): Nil
11. Specify the reason(s), if the company has failed to spend two per cent of the average net profit as per section
135(5): Not Applicable
Place: Chennai
Date: May 06, 2021
Board’s Report
63
STANDALONE
FINANCIAL
STATEMENTS
Independent Auditors’ Report
To the Members of Northern Arc Capital Limited
Report on the Audit of the Standalone Financial Statements
In our opinion and to the best of our information and Emphasis of Matter
according to the explanations given to us, the aforesaid As more fully described in Note 79 to the standalone
standalone financial statements give the information financial statements, the extent to which the ongoing
required by the Companies Act, 2013 (“Act”) in the manner COVID-19 pandemic will have impact on the Company’s
so required and give a true and fair view in conformity with financial performance including the Company’s estimates
the accounting principles generally accepted in India, of of impairment and fair valuation of financial instruments
the state of affairs of the Company as at 31 March 2021, and are dependent on the future developments, the severity
profit and other comprehensive income, changes in equity and duration of the pandemic, that are highly uncertain.
and its cash flows for the year ended on that date. The Company has considered the aforesaid context of the
pandemic to develop the estimates and assumptions in
Basis for Opinion
determining the impairment of financial instruments. The
We conducted our audit in accordance with the Standards impact assessment of COVID-19 is a continuing process. The
on Auditing (SAs) specified under section 143(10) of Company will continue to monitor any material changes to
the Act. Our responsibilities under those SAs are further the future economic conditions.
described in the Auditors’ Responsibilities for the Audit of
Our opinion is not modified in respect of this matter.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the
standalone financial statements of the current period. These matters were addressed in the context of our audit of the
standalone financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion
on these matters.
Description of Key Audit Matter:
Key Audit Matter How the matter was addressed in our audit
Impairment loss allowance – refer notes 3.6, 3.7, 7, 8, 17, 26 and 79 to the standalone financial statements
The Company has recognized impairment loss allowance of INR In view of the significance of the matter, we applied the following
15,031.48 lakhs as at 31 March 2021 and has recognized an expense key audit procedures, among others to obtain sufficient
for INR 13,602.68 lakhs (including write offs) in its statement of appropriate audit evidence:
profit and loss.
• Performed process walkthroughs to identify the controls used
Under Ind AS 109 - Financial Instruments, credit loss assessment in the impairment allowance processes.
is based on expected credit loss (ECL) model. The Company’s
• Assessed the design and implementation of controls in respect
impairment allowance is derived from estimates including the
of the Company’s impairment allowance process such as the
historical default, loss ratios etc. Management exercises judgement
timely recognition of impairment loss, the completeness and
in determining the quantum of loss based on a range of factors.
accuracy of reports used in the impairment allowance process
Further, in relation to ongoing COVID-19 pandemic, judgements and management review processes over the calculation of
and assumptions include the extent and duration of the pandemic, impairment allowance.
the impacts of actions of governments and other authorities, and
• Obtained understanding of management’s revised processes,
the responses of businesses and consumers in different industries,
compliance with the RBI circulars pertaining to impairment loss
along with the associated impact on the economy.
allowance, systems and controls implemented in relation to
The determination of impairment loss allowance is inherently impairment allowance process, specifically in view of providing
judgmental and relies on managements’ best estimate due to the moratorium as per board approved policy read with RBI
following: COVID-19 regulatory package including management rationale
for determination of criteria of significant increase in credit risk.
• Segmentation of loans given to the customer
Information other than the Standalone financial Management’s and Board of Directors’ Responsibility for
statements and Auditors’ Report thereon the Standalone Financial Statements
The Company’s Management and Board of Directors are The Company’s Management and Board of Directors are
responsible for the other information. The other information responsible for the matters stated in section 134(5) of the
comprises the information included in the Company’s Act with respect to the preparation of these standalone
annual report but does not include the financial statements financial statements that give a true and fair view of the
and our auditors’ report thereon. The other information is state of affairs, profit / loss and other comprehensive
expected to be made available to us after the date of this income, changes in equity and cash flows of the Company
Auditors’ report. in accordance with the accounting principles generally
accepted in India, including the Indian Accounting
Our opinion on the standalone financial statements does
Standards (Ind AS) specified under section 133 of the Act.
not cover the other information and we do not express any
This responsibility also includes maintenance of adequate
form of assurance conclusion thereon.
accounting records in accordance with the provisions of
In connection with our audit of the standalone financial the Act for safeguarding of the assets of the Company
statements, our responsibility is to read the other and for preventing and detecting frauds and other
information and, in doing so, consider whether the other irregularities; selection and application of appropriate
information is materially inconsistent with the standalone accounting policies; making judgments and estimates that
financial statements or our knowledge obtained in the audit are reasonable and prudent; and design, implementation
or otherwise appears to be materially misstated. If, based and maintenance of adequate internal financial controls
on the work we have performed, we conclude that there is that were operating effectively for ensuring accuracy and
a material misstatement of this other information, we are completeness of the accounting records, relevant to the
required to report that fact. preparation and presentation of the standalone financial
statements that give a true and fair view and are free from
When we read the Company’s annual report, if we conclude
material misstatement, whether due to fraud or error.
that there is a material misstatement therein, we are
required to communicate the matter to those charged with In preparing the standalone financial statements, the
governance. Management and Board of Directors are responsible for
S Sethuraman
Partner
Membership No. 203491
UDIN: 21203491AAAACV7845
Place: Chennai
Date: 6 May 2021
(i) (a) The Company has maintained proper records relevant provisions of the Act and the relevant rules
showing full particulars, including quantitative framed thereunder. Accordingly, the provisions of
details and situation of fixed assets. paragraph 3(v) of the Order is not applicable to the
Company.
(b) The Company has a regular programme of physical
verification of its fixed assets by which all fixed (vi) The Central Government has not prescribed the
assets are verified in a phased manner over a maintenance of cost records under section 148(1) of the
period of two years. In accordance with this Act, for any of the services rendered by the Company.
programme certain fixed assets were physically Accordingly, paragraph 3(vi) of the Order is not
verified by the management during the year and applicable.
as explained to us, no material discrepancies were
(vii) (a) According to the information and explanations
noticed on such verification. In our opinion, this
given to us and on the basis of our examination of
periodicity of physical verification is reasonable
the records of the Company, amounts deducted
having regard to the size of the Company and the
/ accrued in the books of account in respect of
nature of its assets.
undisputed statutory dues including provident
(c) According to the information and explanations fund, employees’ state insurance, income-tax,
given to us and on the basis of our examination of goods and services tax, cess and other material
the records of the Company, the Company does statutory dues have been deposited regularly
not hold any immovable properties. Accordingly, during the year by the Company with the
paragraph 3(i)(c) of the Order is not applicable. appropriate authorities. As explained to us, the
Company did not have dues on account of service
(ii) According to the information and explanations given to
tax, sales tax, duty of customs, duty of excise and
us and on the basis of our examination of the records
value added tax.
of the Company, the Company is primarily engaged
in the business of lending activities, accordingly, it According to the information and explanations
does not hold any physical inventories. Accordingly, given to us, no undisputed amounts payable
paragraph 3(ii) of the Order is not applicable. in respect of provident fund, employees’ state
insurance, income-tax, goods and services tax, cess
(iii) In our opinion and according to the information
and other material statutory dues were in arrears
and explanations given to us, the Company has
as at 31 March 2021 for a period of more than six
granted unsecured loans to one company covered
months from the date they became payable.
in the register maintained under Section 189 of the
Companies Act, 2013: (b) According to the information and explanations
given to us, there are no dues of income-tax,
a) In our opinion, the rate of interest and other terms
service tax and goods and services tax which
and conditions on which the loans had been
have not been deposited with the appropriate
granted to the Company listed in the register
authorities on account of any dispute except for
maintained under Section 189 of the Act were
the following dues:
not, prima facie, prejudicial to the interest of the
Company. Period to Forum
Amount
b) In the case of the loans granted to the company Name of which the where the
- Rs. in
listed in the register maintained under Section the statute amount dispute is
Lakhs.
189 of the Act, the borrowers have been, where relates pending
stipulated, regular in the payment of principal and Income-Tax 255.99 AY 2014-15 Income tax
interest. Act, 1961 Appellate
Tribunal
c) There are no overdue amounts in respect of the
loan granted to the company listed in the register Income-Tax 172.54 AY 2017-18 Commissioner
maintained under Section 189 of the Act. Act, 1961 of Income Tax
(Appeals)
(iv) According to the information and explanations given to
(viii) In our opinion and according to the information
us, the Company has complied with the provisions of
and explanations given to us, the Company has not
section 185 in respect of loan, guarantees, investments
defaulted in repayment of dues to its bankers or to
and security, as applicable. The Company has complied
any financial institutions or to debenture holders. The
with the provisions of Section 186(1) of the Act in
Company has not taken any loans or borrowings from
relation to investments made by the Company. The
Government during the year.
remaining provisions related to section 186 of the Act
do not apply to the Company as it is a non-banking (ix) According to the information and explanations given
financial company. to us, the Company has utilised the money raised by
way of issue of non-convertible debentures and the
(v) According to the information and explanations given to
terms loans during the year for the purpose for which
us and on the basis of our examination of the records
they were raised. During the year, the Company has not
of the Company, the Company has not accepted
raised moneys by way of initial public offer or further
any deposits from the public within the meaning of
public offer.
the directives issued by the Reserve Bank of India,
provisions of Section 73 to 76 of the Act, any other (x) According to the information and explanations given
S Sethuraman
Partner
Membership No. 203491
UDIN: 21203491AAAACV7845
Place: Chennai
Date: 6 May 2021
Report on the internal financial controls with reference our audit in accordance with the Guidance Note and the
to the aforesaid standalone financial statements Standards on Auditing, prescribed under section 143(10)
under Clause (i) of Sub-section 3 of Section 143 of the of the Act, to the extent applicable to an audit of internal
Companies Act, 2013 financial controls with reference to financial statements.
(Referred to in paragraph 2A(f) under ‘Report on Other Those Standards and the Guidance Note require that we
Legal and Regulatory Requirements’ section of our report comply with ethical requirements and plan and perform
of even date) the audit to obtain reasonable assurance about whether
adequate internal financial controls with reference to
Opinion financial statements were established and maintained and
We have audited the internal financial controls with whether such controls operated effectively in all material
reference to financial statements of Northern Arc Capital respects.
Limited (“the Company”) as of 31 March 2021 in conjunction Our audit involves performing procedures to obtain
with our audit of the standalone financial statements of the audit evidence about the adequacy of the internal
Company for the year ended on that date. financial controls with reference to financial statements
In our opinion, the Company has, in all material respects, and their operating effectiveness. Our audit of internal
adequate internal financial controls with reference to financial controls with reference to financial statements
financial statements and such internal financial controls included obtaining an understanding of such internal
were operating effectively as at 31 March 2021, based financial controls, assessing the risk that a material
on the internal financial controls with reference to weakness exists, and testing and evaluating the design
financial statements criteria established by the Company and operating effectiveness of internal control based on
considering the essential components of internal control the assessed risk. The procedures selected depend on
stated in the Guidance Note on Audit of Internal Financial the auditor’s judgement, including the assessment of the
Controls Over Financial Reporting (the “Guidance Note”) risks of material misstatement of the standalone financial
issued by the Institute of Chartered Accountants of India statements, whether due to fraud or error.
(the “ICAI”). We believe that the audit evidence we have obtained is
Emphasis of Matter sufficient and appropriate to provide a basis for our audit
opinion on the Company’s internal financial controls with
As described in Emphasis of Matter paragraph of our report reference to financial statements.
on the standalone financial statements, the extent to which
the COVID-19 pandemic will have impact on the Company’s Meaning of Internal Financial controls with Reference to
internal financial controls with reference to the financial Financial Statements
statements is dependent on future developments, which A company’s internal financial controls with reference
are highly uncertain. to financial statements is a process designed to provide
Our opinion is not modified in respect of the above matter. reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements
Management’s Responsibility for Internal Financial for external purposes in accordance with generally
Controls accepted accounting principles. A company’s internal
The Company’s Management and the Board of Directors financial controls with reference to financial statements
are responsible for establishing and maintaining internal include those policies and procedures that (1) pertain
financial controls based on the internal financial controls to the maintenance of records that, in reasonable
with reference to financial statements criteria established detail, accurately and fairly reflect the transactions and
by the Company considering the essential components dispositions of the assets of the company; (2) provide
of internal control stated in the Guidance Note. These reasonable assurance that transactions are recorded as
responsibilities include the design, implementation and necessary to permit preparation of financial statements in
maintenance of adequate internal financial controls that accordance with generally accepted accounting principles,
were operating effectively for ensuring the orderly and and that receipts and expenditures of the company are
efficient conduct of its business, including adherence being made only in accordance with authorisations of
to Company’s policies, the safeguarding of its assets, management and directors of the company; and (3)
the prevention and detection of frauds and errors, the provide reasonable assurance regarding prevention or
accuracy and completeness of the accounting records, timely detection of unauthorised acquisition, use, or
and the timely preparation of reliable financial information, disposition of the company’s assets that could have a
as required under the Companies Act, 2013 (hereinafter material effect on the standalone financial statements.
referred to as “the Act”). Inherent Limitations of Internal Financial controls with
Auditors’ Responsibility Reference to Financial Statements
Our responsibility is to express an opinion on the Because of the inherent limitations of internal financial
Company’s internal financial controls with reference to controls with reference to financial statements, including
financial statements based on our audit. We conducted the possibility of collusion or improper management
S Sethuraman
Partner
Membership No. 203491
UDIN: 21203491AAAACV7845
Place: Chennai
Date: 6 May 2021
As at As at
Particulars Note
March 31, 2021 March 31, 2020
ASSETS
Financial assets
Cash and cash equivalents 4 38,790.21 32,485.12
Bank balances other than cash and cash equivalents 5 6,837.98 7,720.21
Trade receivables 6 1,558.79 821.57
Loans 7 376,215.08 294,597.06
Investments 8 125,312.01 104,828.13
Other financial assets 9 851.27 1,173.42
549,565.34 441,625.51
Non-financial assets
Current tax assets (net) 3,502.11 3,662.18
Deferred tax assets (net) 30 2,061.88 360.35
Property, plant and equipment 10.1 104.85 178.19
Right of use asset 10.2 985.44 1,324.14
Intangible assets under development 10.3 54.02 94.94
Intangible assets 10.4 972.77 831.54
Other non-financial assets 11 172.83 244.11
7,853.90 6,695.45
Total assets 557,419.24 448,320.96
LIABILITIES AND EQUITY
LIABILITIES
Financial liabilities
Derivative financial instruments 12 898.51 –
Trade payables 13
Total outstanding dues of micro enterprises and small enterprises – –
Total outstanding dues of creditors other than micro enterprises and 1,648.35 793.17
small enterprises
Debt securities 14 163,956.78 86,020.70
Borrowings (Other than debt securities) 15 229,247.09 206,087.40
Other financial liabilities 16 3,648.97 4,683.04
399,399.70 297,584.31
Non-financial liabilities
Provisions 17 1,724.05 1,327.09
Other non-financial liabilities 18 409.47 127.68
2,133.52 1,454.77
EQUITY
Equity Share capital 19 8,792.15 8,747.79
Other Equity 20 147,093.87 140,534.09
155,886.02 149,281.88
Total liabilities and equity 557,419.24 448,320.96
Significant accounting policies 2 and 3
The notes referred to above form an integral part of standalone financial statements
As per our report of even date attached
for B S R & Co. LLP for and on behalf of the board of directors of
Chartered Accountants Northern Arc Capital Limited
Firm’s Registration no.: 101248W/W-100022 CIN: U65910TN1989PLC017021
The notes referred to above form an integral part of standalone financial statements
As per our report of even date attached
for B S R & Co. LLP for and on behalf of the board of directors of
Chartered Accountants Northern Arc Capital Limited
Firm’s Registration no.: 101248W/W-100022 CIN: U65910TN1989PLC017021
As at As at
Note
March 31, 2021 March 31, 2020
Notes to cash flow statement
1 Components of cash and cash equivalents: 4
Balances with banks
- in current accounts 32,155.52 28,482.40
- in deposit accounts 6,634.69 4,002.72
38,790.21 32,485.12
2 The above cashflow statement has been prepared under the “indirect
method” as set out in the Ind AS-7 on statement of cashflows specified
under section 133 of the Companies Act, 2013.
Significant accounting policies 2 and 3
The notes referred to above form an integral part of standalone financial statements
As per our report of even date attached
for B S R & Co. LLP for and on behalf of the board of directors of
Chartered Accountants Northern Arc Capital Limited
Firm’s Registration no.: 101248W/W-100022 CIN: U65910TN1989PLC017021
Equity Share capital of INR 10 each Issued, Subscribed and Fully Paid
Balance as at March 31, 2019 7,836.57
Changes in equity share capital during the year 911.22
Balance as at March 31, 2020 8,747.79
Changes in equity share capital during the year 44.36
Balance as at March 31, 2021 8,792.15
B. Other Equity
Other equity
Total Other
Compulsorily Reserves and surplus Other Comprehensive Income (OCI)
Equity
Convertible
Employee attributable
Preference
Capital Securities Stock Financial Cash Flow Remeasurements to Equity
Shares Statutory Capital Retained
Redemption Premium Options Instruments Hedge of Defined Benefit Holders of
(CCPS) Reserve Reserve Earnings
Reserve Account Outstanding through OCI Reserve Obligations the Company
Account
Change in equity for the year
ended March 31, 2021
Premium received on shares issued – – – – 556.61 (386.91) – – – – 169.70
during the year
Utilisation of the share premium – – – – – – – – – – –
Profit for the year – – – – – – 5,604.99 – – – 5,604.99
Transfer to statutory reserve – 1,120.99 – – – – (1,120.99) – – – –
Employee stock compensation – – – – – 163.02 – – – – 163.02
expense
Remeasurement of net defined – – – – – – – – – 9.26 9.26
benefit liability
Reclassification of remeasurement – – – – – – 9.26 – – (9.26) –
of net defined liability
Fair valuation of financial – – – – – – – 995.03 (382.22) – 612.81
instruments (net)
Balance as at March 31, 2021 8,264.64 9,890.76 2,660.00 3.57 83,897.44 2,297.81 36,194.47 4,267.40 (382.22) – 147,093.87
79
Northern Arc Capital Limited
Notes to the Standalone Financial Statements for the year ended March 31, 2021
(All amounts are in Indian Rupees in lakhs, except share data and unless otherwise stated)
2.5 Use of estimates and judgements (continued) This estimation, by nature, requires an element of
Information about judgements, estimates and judgement regarding the expected behaviour and
assumptions made in applying accounting policies life-cycle of the instruments, as well as expected
that have the most significant effects on the amounts changes to interest rates and other fee income/
recognised in the standalone financial statements is expense that are integral parts of the instrument.
included in the following notes: iv) Impairment of financial assets
i) Business model assessment The measurement of impairment losses across all
Classification and measurement of financial categories of financial assets requires judgement,
assets depends on the results of business model in particular, the estimation of the amount and
test and the solely payments of principal and timing of future cash flows and collateral values
interest (‘SPPI’) test. The Company determines when determining impairment losses and the
the business model at a level that reflects how assessment of a significant increase in credit risk.
groups of financial assets are managed together These estimates are driven by a number of factors,
to achieve a particular business objective. This changes in which can result in different levels of
assessment includes judgement reflecting all allowances.
relevant evidence including how the performance The Company’s expected credit loss (‘ECL’)
of the assets is evaluated and their performance calculations are outputs of complex models
measured, the risks that affect the performance with a number of underlying assumptions
of the assets and how these are managed and regarding the choice of variable inputs and their
how the managers of the assets are compensated. interdependencies. Elements of the ECL models
The Company monitors financial assets measured that are considered accounting judgements and
at amortised cost or fair value through other estimates include :
comprehensive income or fair value through
profit and loss that are derecognised prior to a) The Company’s criteria for assessing if there
their maturity to understand the reason for their has been a significant increase in credit risk
disposal and whether the reasons are consistent and so allowances for financial assets should
with the objective of the business for which be measured on a life time expected credit
the asset was held. Monitoring is part of the loss (‘LTECL’) basis.
Company’s continuous assessment of whether the
business model for which the remaining financial b) Development of ECL models, including the
assets are held continues to be appropriate and various formulas and the choice of inputs.
if it is not appropriate whether there has been a c) Determination of associations between
change in business model and so a prospective macroeconomic scenarios and economic
change to the classification of those assets. inputs, such as consumer spending, lending
ii) Fair value of financial instruments interest rates and collateral values, and
the effect on probability of default (‘PD’),
The fair value of financial instruments is the price exposure at default (‘EAD’) and loss given
that would be received to sell an asset or paid default (‘LGD’).
to transfer a liability in an orderly transaction
in the principal (or most advantageous) market d) Selection of forward-looking macroeconomic
at the measurement date under current market scenarios and their probability weightings, to
conditions (i.e. an exit price) regardless of whether derive the economic inputs into ECL models.
that price is directly observable or estimated using v) Provisions and other contingent liabilities
another valuation technique. When the fair values
of financial assets and financial liabilities recorded The Company operates in a regulatory and legal
in the balance sheet cannot be derived from active environment that, by nature, has a heightened
markets, they are determined using a variety element of litigation risk inherent to its operations.
of valuation techniques that include the use of As a result, it is involved in various litigation,
valuation models. The inputs to these models are arbitration and regulatory inspections in the
taken from observable markets where possible, but ordinary course of the Company’s business.
where this is not feasible, estimation is required in When the Company can reliably measure the
establishing fair values. outflow of economic benefits in relation to a
iii) Effective Interest Rate (‘EIR’) method specific case and considers such outflows to be
probable, the Company records a provision against
The Company’s EIR methodology recognises the case. Where the outflow is considered to be
interest income / expense using a rate of return probable, but a reliable estimate cannot be made,
that represents the best estimate of a constant a contingent liability is disclosed.
rate of return over the expected behavioural life
of loans given / taken and recognises the effect of Given the subjectivity and uncertainty of
potentially different interest rates at various stages determining the probability and amount of
and other characteristics of the product life cycle losses, the Company takes into account a number
(including prepayments and penalty interest and of factors including legal advice, the stage of
charges). the matter and historical evidence from similar
incidents. Significant judgement is required to Step 4: Allocate the transaction price to the
conclude on these estimates. performance obligations in the contract:
These estimates and judgements are based on For a contract that has more than one
historical experience and other factors, including performance obligation, the Company
expectations of future events that may have a allocates the transaction price to each
financial impact on the Company and that are performance obligation in an amount
believed to be reasonable under the circumstances. that depicts the amount of consideration
Management believes that the estimates used in to which the Company expects to be
preparation of the standalone financial statements entitled in exchange for satisfying each
are prudent and reasonable. performance obligation.
vi) Other assumptions and estimation uncertainities Step 5: Recognise revenue when (or as) the
Company satisfies a performance
Information about critical judgements in applying obligation.
accounting policies, as well as estimates and
assumptions that have the most significant effect A. Recognition of interest income on loans
to the carrying amounts of assets and liabilities Under Ind AS 109, interest income is recorded using
within the next financial year are included in the the effective interest rate (EIR) method for all financial
following notes: instruments measured at amortised cost. The EIR is
a) Measurement of defined benefit obligations: the rate that exactly discounts estimated future cash
key actuarial assumptions; receipts through the expected life of the financial
instrument or, when appropriate, a shorter period, to
b) Estimated useful life of property, plant and the net carrying amount of the financial asset.
equipment and intangible assets;
The EIR (and therefore, the amortised cost of the
c) Recognition of deferred taxes; asset) is calculated by taking into account any fees
d) Upfront recognition of Excess Interest Spread and costs that are an integral part of the EIR. The
(EIS) in relation to assignment transactions. Company recognises interest income using a rate of
return that represents the best estimate of a constant
3 Significant accounting policies rate of return over the expected life of the financial
3.1 Revenue Recognition instrument.
Revenue (other than for those items to which Ind AS If expectations regarding the cash flows on the
109 Financial Instruments are applicable) is measured financial asset are revised for reasons other than credit
at fair value of the consideration received or receivable. risk, the adjustment is booked as a positive or negative
Ind AS 115 Revenue from contracts with customers adjustment to the carrying amount of the asset in the
outlines a single comprehensive model of accounting balance sheet with an increase or reduction in interest
for revenue arising from contracts with customers income. The adjustment is subsequently amortised
and supersedes current revenue recognition guidance through interest income in the statement of profit and
found within Ind ASs. loss.
The Company recognises revenue from contracts with The Company calculates interest income by applying
customers based on a five step model as set out in Ind the EIR to the gross carrying amount of financial assets
AS 115 : other than credit-impaired assets.
When a financial asset becomes credit-impaired, the
Step 1: Identify contract(s) with a customer:
Company calculates interest income by applying the
A contract is defined as an agreement
effective interest rate to the net amortised cost of
between two or more parties that creates
the financial asset. If the financial asset cures and is
enforceable rights and obligations and sets
no longer credit-impaired, the Company reverts to
out the criteria for every contract that must
calculating interest income on a gross basis.
be met.
Step 2: Identify performance obligations in the B. Interest income on deposits
contract: A performance obligation is a Interest income on deposits is recognised on a time
promise in a contract with a customer to proportionate basis.
transfer a good or service to the customer.
C. Fees and commission income
Step 3: Determine the transaction price: The
Fees and commission income such as guarantee
transaction price is the amount of
commission, professional fee, service income etc. are
consideration to which the Company
recognised on point in time or over the period basis, as
expects to be entitled in exchange for
applicable.
transferring promised goods or services to
a customer, excluding amounts collected on D. Dividend income
behalf of third parties. Dividend income (including from FVOCI investments)
is recognised when the Company’s right to receive
the payment is established, it is probable that the d) The expected frequency, value and timing of sales
economic benefits associated with the dividend will are also important aspects of the Company’s
flow to the Company and the amount of the dividend assessment.
can be measured reliably. This is generally when the
shareholders approve the dividend Sole Payments of Principal and Interest (SPPI) test
As a second step of its classification process, the
E. Other income Company assesses the contractual terms of financial
All items of other income is recognized on an accrual assets to identify whether they meet SPPI test.
basis, when there is no uncertainty in the ultimate ‘Principal’ for the purpose of this test is defined as the
realisation / collection. fair value of the financial asset at initial recognition
and may change over the life of a financial asset
3.2 Financial instruments - initial recognition (for example, if there are repayments of principal or
A. Date of recognition amortisation of the premium/ discount). The most
Debt securities issued are initially recognised when significant elements of interest within a lending
they are originated. All other financial assets and arrangement are typically the consideration for the
financial liabilities are initially recognised when time value of money and credit risk. To make the SPPI
the Company becomes a party to the contractual assessment, the Company applies judgement and
provisions of the instrument. considers relevant factors such as the period for which
the interest rate is set.
B. Initial measurement of financial instruments
In contrast, contractual terms that introduce a more
The classification of financial instruments at initial than de minimis exposure to risks or volatility in the
recognition depends on their contractual terms and contractual cash flows that are unrelated to a basic
the business model for managing the instruments. lending arrangement do not give rise to contractual
Financial instruments are initially measured at their cash flows that are solely payments of principal and
fair value, except in the case of financial assets and interest on the amount outstanding. In such cases, the
financial liabilities recorded at FVTPL, transaction costs financial asset is required to be measured at FVTPL.
are added to, or subtracted from this amount.
Accordingly, financial assets are measured as follows:
C. Measurement categories of financial assets and
liabilities i) Financial assets carried at amortised cost (AC)
The Company classifies all of its financial assets based A financial asset is measured at amortised cost if
on the business model for managing the assets and the it is held within a business model whose objective
asset’s contractual terms, measured at either: is to hold the asset in order to collect contractual
cash flows and the contractual terms of the
i) Amortised cost financial asset give rise on specified dates to cash
ii) Fair value through other comprehensive income flows that are solely payments of principal and
(‘FVOCI’) interest on the principal amount outstanding.
iii) Fair value through profit and loss (‘FVTPL’) ii) Financial assets at fair value through other
comprehensive income (FVOCI)
3.3 Financial assets and liabilities
A financial asset is measured at FVOCI if it is
A. Financial assets held within a business model whose objective is
Business model assessment achieved by both collecting contractual cash flows
and selling financial assets and the contractual
The Company determines its business model at the
terms of the financial asset give rise on specified
level that best reflects how it manages groups of
dates to cash flows that are solely payments of
financial assets to achieve its business objective.
principal and interest on the principal amount
The Company’s business model is not assessed on an outstanding. Since the financial assets are held to
instrument-by-instrument basis, but at a higher level sale and collect contractual cash flows, they are
of aggregated portfolios and is based on observable measured at FVOCI.
factors such as:
iii) Financial assets at fair value through profit or
a) How the performance of the business model and loss (FVTPL)
the financial assets held within that business model
A financial asset which is not classified in any
are evaluated and reported to the Company’s key
of the above categories is measured at FVTPL.
management personnel.
Subsequent changes in fair value are recognised in
b) The risks that affect the performance of the the statement of profit and loss.
business model (and the financial assets held
The Company records investments in Alternative
within that business model) and, in particular, the
investment funds (AIF), mutual funds and Treasury
way those risks are managed.
Bills at FVTPL
c) How managers of the business are compensated
iv) Investment in subsidiaries
(for example, whether the compensation is based
on the fair value of the assets managed or on the The Company has accounted for its investments in
contractual cash flows collected). subsidiaries at cost.
Stage 3: Financial assets considered credit impaired Stage 3: For financial assets considered credit-
are the financial assets which are past impaired, the Company recognises the
due for more than 90 days. The Company lifetime expected credit losses for these
records an allowance for life time ECL. financial assets. The method is similar to
that for Stage 2 assets, with the PD set at
B. Calculation of ECLs 100%.
The mechanics of ECL calculations are outlined below
and the key elements are, as follows: C. Financial Assets measured at FVOCI
The ECLs for financial assets measured at FVOCI do
PD: not reduce the carrying amount of these financial
Probability of Default (“PD”) is an estimate of the assets in the balance sheet, which remains at fair value.
likelihood of default over a given time horizon. A Instead, an amount equal to the allowance that would
default may only happen at a certain time over the arise if the assets were measured at amortised cost
assessed period, if the facility has not been previously is recognised in OCI as an accumulated impairment
derecognised and is still in the portfolio. amount, with a corresponding charge to profit or loss.
The accumulated loss recognised in OCI is recycled to
EAD:
the profit and loss upon derecognition of the assets.
Exposure at Default (“EAD”) is an estimate of the
exposure at a future default date, taking into account D. Forward looking information
expected changes in the exposure after the reporting In its ECL models, the Company relies on forward
date, including repayments of principal and interest looking macro parameters such as consumer spending
and interest rates to estimate the impact on probability
LGD:
of the default at a given point of time.
Loss Given Default (“LGD”) is an estimate of the
loss arising in the case where a default occurs at a 3.7 Write-offs
given time. It is based on the difference between the The gross carrying amount of a financial asset is
contractual cash flows due and those that the lender written-off when there is no reasonable expectation
would expect to receive, including from the realisation of recovering the asset. If the amount to be written
of any collateral. It is usually expressed as a percentage off is greater than the accumulated loss allowance,
of the EAD the difference is first treated as an addition to the
The Company has calculated PD, EAD and LGD to allowance that is then applied against the gross
determine impairment loss on the portfolio of financial carrying amount. Any subsequent recoveries are
assets and discounted at an approximation to the EIR. credited to impairment on financial instruments in the
At every reporting date, the above calculated PDs, EAD statement of profit and loss.
and LGDs are reviewed and changes in the forward 3.8 Determination of fair value
looking estimates are analysed.
Fair value is the price that would be received to sell
The mechanics of the ECL method are summarised an asset or paid to transfer a liability in an orderly
below: transaction between market participants at the
measurement date, regardless of whether that price
Stage 1: The 12 months ECL is calculated as the is directly observable or estimated using another
portion of LTECLs that represent the valuation technique. In estimating the fair value of
ECLs that result from default events on a an asset or a liability, the Company has taken into
financial instrument that are possible within account the characteristics of the asset or liability as
the 12 months after the reporting date. The if market participants would take those characteristics
Company calculates the 12 months ECL into account when pricing the asset or liability at the
allowance based on the expectation of a measurement date.
default occurring in the 12 months following
In addition, for financial reporting purposes, fair
the reporting date. These expected
value measurements are categorised into Level 1,
12-months default probabilities are applied
2, or 3 based on the degree to which the inputs to
to a forecast EAD and multiplied by the
the fair value measurements are observable and the
expected LGD and discounted by an
significance of the inputs to the fair value measurement
approximation to the original EIR.
in its entirety, which are described as follows:
Stage 2: When a financial asset has shown a
significant increase in credit risk since Level 1 financial instruments: Those where the inputs
origination, the Company records an used in the valuation are unadjusted quoted prices
allowance for the LTECLs. The mechanics from active markets for identical assets or liabilities
are similar to those explained above, but that the Company has access to at the measurement
PDs and LGDs are estimated over the date. The Company considers markets as active only
lifetime of the instrument. The expected if there are sufficient trading activities with regards
cash shortfalls are discounted by an to the volume and liquidity of the identical assets or
approximation to the original EIR. liabilities and when there are binding and exercisable
price quotes available on the balance sheet date;
Level 2 financial instruments: Those where the residual values over their estimated useful lives
inputs that are used for valuation and are significant, using the written down value method, and is
are derived from directly or indirectly observable generally recognised in the statement of profit and
market data available over the entire period of the loss.
instrument’s life. Such inputs include quoted prices for
The Company follows estimated useful lives which
similar assets or liabilities in active markets, quoted
are given under Part C of the Schedule II of the
prices for identical instruments in inactive markets and
Companies Act, 2013. The estimated useful lives
observable inputs other than quoted prices such as
of items of property, plant and equipment are as
interest rates and yield curves, implied volatilities, and
follows:
credit spreads; and
Level 3 financial instruments : Those that include one Asset category Estimated Useful life
or more unobservable input that is significant to the
measurement as whole. Plant and machinery 15 years
Monetary assets and liabilities denominated in foreign Leasehold improvements are depreciated over the
currencies are translated into the functional currency at remaining period of lease or estimated useful life
the exchange rate at the reporting date. Non-monetary of the assets, whichever is lower.
assets and liabilities that are measured at fair value in
a foreign currency are translated into the functional Depreciation on additions (disposals) is provided
currency at the exchange rate when the fair value was on a pro-rata basis i.e. from (upto) the date on
determined. Non-monetary assets and liabilities that which asset is ready for use (disposed of).
are measured based on historical cost in a foreign 3.11 Intangible assets
currency are translated at the exchange rate at the
i. Intangible assets
date of the transaction. Exchange differences are
recognized in profit or loss. Intangible assets including those acquired by
the Company are initially measured at cost. Such
3.10 Property, plant and equipment intangible assets are subsequently measured
i. Recognition and measurement at cost less accumulated amortisation and any
Items of property, plant and equipment are accumulated impairment losses.
measured at cost, which includes capitalised ii. Subsequent expenditure
borrowing costs, less accumulated depreciation
and accumulated impairment losses, if any. Subsequent expenditure is capitalised only when it
increases the future economic benefits embodied
Cost of an item of property, plant and equipment in the specific asset to which it relates. All other
comprises its purchase price, including import expenditure, including expenditure on internally
duties and non-refundable purchase taxes, after generated goodwill and brands, is recognised in
deducting trade discounts and rebates, any profit or loss as incurred.
directly attributable cost of bringing the item to
its working condition for its intended use and iii. Internally generated: Research and development
estimated costs of dismantling and removing the Expenditure on research activities is recognised in
item and restoring the site on which it is located. profit or loss as incurred
If significant parts of an item of property, plant
and equipment have different useful lives, then Developing expenditure is capitalised as part of
they are accounted for as separate items (major the cost of the resulting intangible asset only if the
components) of property, plant and equipment. expenditure can be measured reliably, the product
is technically and commercially feasible, future
Any gain or loss on disposal of an item of property, economic benefits are probable, and the Company
plant and equipment is recognised in profit or loss. intends to and has sufficient resources to complete
ii. Subsequent expenditure development and to use the asset. Otherwise, it is
recognised in profit or loss as incurred. Subsequent
Subsequent expenditure is capitalised only if it to initial recognition, the asset is measured at
is probable that the future economic benefits cost less accumulated amortisation and any
associated with the expenditure will flow to the accumulated impairment losses.
Company.
iv. Amortisation
iii. Depreciation
Amortisation is calculated to write off the cost
Depreciation is calculated on cost of items of of intangible assets less their estimated residual
property, plant and equipment less their estimated values over their estimated useful lives using
the straight line method, and is included in curtailment is recognised immediately in profit or
depreciation and amortisation in statement of loss. The Company recognises gains and losses on
profit and loss. the settlement of a defined benefit plan when the
settlement occurs.
Asset category Estimated Useful life
ii. Other long-term employee benefits
Computer softwares 5 years Compensated absences
Amortisation method, useful lives and residual The employees can carry forward a portion of the
values are reviewed at the end of each financial unutilised accrued compensated absences and
year and adjusted if appropriate. utilise it in future service periods or receive cash
compensation on termination of employment.
3.12 Employee benefits Since the compensated absences do not fall due
i. Post-employment benefits wholly within twelve months after the end of
such period, the benefit is classified as a long-
Defined contribution plan
term employee benefit. The Company records an
The Company’s contribution to provident fund obligation for such compensated absences in the
are considered as defined contribution plan and period in which the employee renders the services
are charged as an expense as they fall due based that increase this entitlement. The obligation is
on the amount of contribution required to be measured on the basis of independent actuarial
made and when the services are rendered by the valuation using the projected unit credit method.
employees.
iii. Short-term employee benefits
Defined benefit plans
The undiscounted amount of short-term employee
Gratuity benefits expected to be paid in exchange for the
services rendered by employees are recognized
A defined benefit plan is a post-employment
during the year when the employees render the
benefit plan other than a defined contribution plan.
service. These benefits include performance
The Company’s net obligation in respect of defined
incentive and compensated absences which are
benefit plans is calculated separately for each plan
expected to occur within twelve months after the
by estimating the amount of future benefit that
end of the year in which the employee renders
employees have earned in the current and prior
the related service. The cost of such compensated
periods, discounting that amount and deducting
absences is accounted as under :
the fair value of any plan assets.
(a) in case of accumulated compensated
The calculation of defined benefit obligation is
absences, when employees render the services
performed annually by a qualified actuary using
that increase their entitlement of future
the projected unit credit method. When the
compensated absences; and
calculation results in a potential asset for the
Company, the recognised asset is limited to the (b) in case of non-accumulating compensated
present value of economic benefits available in absences, when the absences occur.”
the form of any future refunds from the plan or
iv. Stock based compensation
reductions in future contributions to the plan (‘the
asset ceiling’). In order to calculate the present The grant date fair value of equity settled share
value of economic benefits, consideration is given based payment awards granted to employees
to any minimum funding requirements. is recognised as an employee expense, with a
corresponding increase in equity, over the period
Remeasurements of the net defined benefit
that the employees unconditionally become
liability, which comprise actuarial gains and losses
entitled to the awards. The amount recognised as
and the effect of the asset ceiling (if any, excluding
expense is based on the estimate of the number
interest), are recognised in OCI. The Company
of awards for which the related service and non-
determines the net interest expense (income)
market vesting conditions are expected to be met,
on the net defined benefit liability (asset) for
such that the amount ultimately recognised as an
the period by applying the discount rate used
expense is based on the number of awards that do
to measure the defined benefit obligation at
meet the related service and non-market vesting
the beginning of the annual period to the then-
conditions at the vesting date.
net defined benefit liability (asset), taking into
account any changes in the net defined benefit 3.13 Provisions
liability (asset) during the period as a result of A provision is recognised if, as a result of a past event,
contributions and benefit payments. Net interest the Company has a present legal or constructive
expense and other expenses related to defined obligation that can be estimated reliably, and it is
benefit plans are recognised in profit or loss. probable that an outflow of economic benefits will
When the benefits of a plan are changed or be required to settle the obligation. Provisions are
when a plan is curtailed, the resulting change in determined by discounting the expected future
benefit that relates to past service (‘past service cash flows (representing the best estimate of the
cost’ or ‘past service gain’) or the gain or loss on expenditure required to settle the present obligation at
the balance sheet date) at a pre-tax rate that reflects of the right-of-use asset is adjusted to zero, any further
current market assessments of the time value of money reduction is recognised in statement of profit and loss.
and the risks specific to the liability. The unwinding of
For contracts that both convey a right to the Company
the discount is recognised as finance cost. Expected
to use an identified asset and require services to be
future operating losses are not provided for.
provided to the Company by the lessor, the Company
3.14 Leases has elected to account for the entire contract as a
lease, i.e. it does allocate any amount of the contractual
Lease liabilities are measured at the present value
payments to, and account separately for, any services
of the contractual payments due to the lessor over
provided by the supplier as part of the contract.
the lease term, with the discount rate determined by
reference to the rate inherent in the lease unless (as is 3.15 Income tax
typically the case) this is not readily determinable, in
Income tax comprises current and deferred tax. It is
which case the Company’s incremental borrowing rate
recognised in profit or loss except to the extent that
on commencement of the lease is used. Variable lease
it relates to a business combination or to an item
payments are only included in the measurement of
recognised directly in equity or in other comprehensive
the lease liability if they depend on an index or rate. In
income.
such cases, the initial measurement of the lease liability
assumes the variable element will remain unchanged i. Current tax
throughout the lease term. Other variable lease
Current tax comprises the expected tax payable
payments are expensed in the period to which they
or receivable on the taxable income or loss for
relate.
the year and any adjustment to the tax payable
On initial recognition, the carrying value of the lease or receivable in respect of previous years. The
liability also includes: amount of current tax reflects the best estimate
of the tax amount expected to be paid or received
- amounts expected to be payable under any
after considering the uncertainty, if any, related to
residual value guarantee;
income taxes. It is measured using tax rates (and
- the exercise price of any purchase option granted tax laws) enacted or substantively enacted by the
in favour of the Company if it is reasonably certain reporting date.
to assess that option;
Current tax assets and current tax liabilities are
- any penalties payable for terminating the lease, if offset only if there is a legally enforceable right to
the term of the lease has been estimated on the set off the recognised amounts, and it is intended
basis of termination option being exercised. to realise the asset and settle the liability on a net
basis or simultaneously.
Right-of-use assets are initially measured at the
amount of the lease liability, reduced for any lease ii. Deferred tax
incentives received, and increased for:
Deferred tax is recognised in respect of temporary
- lease payments made at or before commencement differences between the carrying amounts
of the lease; of assets and liabilities for financial reporting
purposes and the corresponding amounts used for
- initial direct costs incurred; and
taxation purposes. Deferred tax is also recognised
- the amount of any provision recognised where the in respect of carried forward tax losses and tax
Company is contractually required to dismantle, credits. Deferred tax is not recognised for:
remove or restore the leased asset
- temporary differences arising on the initial
Subsequent to initial measurement lease liabilities recognition of assets or liabilities in a
increase as a result of interest charged at a constant transaction that is not a business combination
rate on the balance outstanding and are reduced and that affects neither accounting nor taxable
for lease payments made. Right-of-use assets are profit or loss at the time of the transaction;
amortised on a straight-line basis over the remaining
- temporary differences related to investments
term of the lease or over the remaining economic life of
in subsidiaries, associates and joint
the asset if, rarely, this is judged to be shorter than the
arrangements to the extent that the Company
lease term.
is able to control the timing of the reversal of
When the Company revises its estimate of the term the temporary differences and it is probable
of any lease, it adjusts the carrying amount of the that they will not reverse in the foreseeable
lease liability to reflect the payments to make over future; and
the revised term, which are discounted using a revised
- taxable temporary differences arising on the
discount rate. The carrying value of lease liabilities is
initial recognition of goodwill.”
similarly revised when the variable element of future
lease payments dependent on a rate or index is Deferred tax assets are recognised to the extent
revised, except the discount rate remains unchanged. that it is probable that future taxable profits will be
In both cases an equivalent adjustment is made to available against which they can be used. The existence
the carrying value of the right-of-use asset, with the of unused tax losses is strong evidence that future
revised carrying amount being amortised over the taxable profit may not be available. Therefore, in case
remaining (revised) lease term. If the carrying amount of a history of recent losses, the Company recognises
a deferred tax asset only to the extent that it has Per Share. Basic earnings per equity share is computed
sufficient taxable temporary differences or there is by dividing net profit / loss after tax attributable to
convincing other evidence that sufficient taxable profit the equity share holders for the year by the weighted
will be available against which such deferred tax asset average number of equity shares outstanding during
can be realised. Deferred tax assets – unrecognised the year. Diluted earnings per equity share is computed
or recognised, are reviewed at each reporting date and disclosed by dividing the net profit/ loss after tax
and are recognised/ reduced to the extent that it is attributable to the equity share holders for the year
probable/ no longer probable respectively that the after giving impact of dilutive potential equity shares
related tax benefit will be realised. for the year by the weighted average number of equity
shares and dilutive potential equity shares outstanding
Deferred tax is measured at the tax rates that are
during the year, except where the results are anti-
expected to apply to the period when the asset is
dilutive.
realised or the liability is settled, based on the laws that
have been enacted or substantively enacted by the 3.20 Cash flow statement
reporting date. Cash flows are reported using the indirect method,
The measurement of deferred tax reflects the tax whereby profit after tax is adjusted for the effects of
consequences that would follow from the manner in transactions of a non–cash nature and any deferrals or
which the Company expects, at the reporting date, to accruals of past or future cash receipts or payments.
recover or settle the carrying amount of its assets and The cash flows from regular revenue generating,
liabilities. financing and investing activities of the Company
are segregated. Cash flows in foreign currencies are
Deferred tax assets and liabilities are offset if there is a accounted at the actual rates of exchange prevailing at
legally enforceable right to offset current tax liabilities the dates of the transactions.
and assets, and they relate to income taxes levied by
the same tax authority on the same taxable entity, 3.21 Derivative financial instruments
or on different tax entities, but they intend to settle The Company enters into derivative financial
current tax liabilities and assets on a net basis or their instruments to manage its exposure to interest rate risk
tax assets and liabilities will be realised simultaneously. and foreign exchange rate risk. Derivatives held include
3.16 Borrowing cost foreign exchange forward contracts, interest rate swaps
and cross currency interest rate swaps.
Borrowing costs are interest and other costs
incurred in connection with the borrowings of funds. Derivatives are initially recognised at fair value on
Borrowing costs directly attributable to acquisition the date when a derivative contract is entered into
or construction of an asset which necessarily take and are subsequently remeasured to their fair value
a substantial period of time to get ready for their at each balance sheet date. The resulting gain/loss
intended use are capitalized as part of the cost of the is recognised in the statement of profit and loss
asset. Other borrowings costs are recognized as an immediately unless the derivative is designated and is
expense in the statement of profit and loss account effective as a hedging instrument, in which event the
on an accrual basis using the Effective Interest Rate timing of the recognition in the statement of profit and
Method. loss depends on the nature of the hedge relationship.
The Company designates certain derivatives as hedges
3.17 Cash and cash equivalents of highly probable forecast transactions (cash flow
Cash and cash equivalents comprises cash on hand hedges). A derivative with a positive fair value is
and demand deposits with banks. Cash equivalents recognised as a financial asset whereas a derivative
are short-term balances (with an original maturity of with a negative fair value is recognised as a financial
three months or less from the date of acquisition), liability.
highly liquid investments that are readily convertible
into known amounts of cash and which are subject to Hedge accounting policy
insignificant risk of changes in value. The Company makes use of derivative instruments
to manage exposures to interest rate and foreign
3.18 Segment reporting- Identification of segments: currency. In order to manage particular risks, the
An operating segment is a component of the Company Company applies hedge accounting for transactions
that engages in business activities from which it may that meet specific criteria. At the inception of a
earn revenues and incur expenses, whose operating hedge relationship, the Company formally designates
results are regularly reviewed by the Company’s Chief and documents the hedge relationship to which
Operating Decision Maker (CODM) to make decisions the Company wishes to apply hedge accounting
for which discrete financial information is available. and the risk management objective and strategy
Based on the management approach as defined for undertaking the hedge. The documentation
in Ind AS 108, the CODM evaluates the Company’s includes the Company’s risk management objective
performance and allocates resources based on an and strategy for undertaking hedge, the hedging /
analysis of various performance indicators by business economic relationship, the hedged item or transaction,
segments and geographic segments. the nature of the risk being hedged, hedge ratio and
how the Company would assess the effectiveness
3.19 Earnings per share of changes in the hedging instrument’s fair value in
The Company reports basic and diluted earnings per offsetting the exposure to changes in the hedged
equity share in accordance with Ind AS 33, Earnings item’s fair value or cash flows attributable to the
hedged risk. Such hedges are expected to be highly in OCI and is recognised when the hedged forecast
effective in achieving offsetting changes in fair value transaction is ultimately recognised in the statement
or cash flows and are assessed on an on-going basis to of profit and loss. When a forecast transaction is no
determine that they actually have been highly effective longer expected to occur, the cumulative gain or loss
throughout the financial reporting periods for which that was reported in OCI is immediately transferred to
they were designated. the statement of profit and loss.
Cash Flow Hedges The Company’s hedging policy only allows for
effective hedging relationships to be considered
A cash flow hedge is a hedge of the exposure to
as hedges as per the relevant Ind-AS. Hedge
variability in cash flows that is attributable to a
effectiveness is determined at the inception of the
particular risk associated with a recognised asset or
hedge relationship, and through periodic prospective
liability (such as all or some future interest payments
effectiveness assessments to ensure that an economic
on variable rate debt) or a highly probable forecast
relationships exists between the hedged item and
transaction and could affect profit and loss. For
hedging instrument. The Company enters into hedge
designated and qualifying cash flow hedges, the
relationships where the critical terms of the hedging
effective portion of the cumulative gain or loss on
instrument match with the terms of the hedged item,
the hedging instrument is initially recognised directly
and so a qualitative and quantitative assessment of
in OCI within equity (cash flow hedge reserve). The
effectiveness is performed.
ineffective portion of the gain or loss on the hedging
instrument is recognised immediately in Finance Cost 3.22 Recent pronouncements
in the statement of profit and loss. When the hedged
On March 24, 2021, the Ministry of Corporate Affairs
cash flow affects the statement of profit and loss, the
(“MCA”) through a notification, amended Schedule III
effective portion of the gain or loss on the hedging
of the Companies Act, 2013. The amendments revise
instrument is recorded in the corresponding income or
Division I, II and III of Schedule III and are applicable
expense line of the statement of profit and loss. When
from April 1, 2021. These are primarily disclosure related
a hedging instrument expires, is sold, terminated,
amendments and the Company is in the process of
exercised, or when a hedge no longer meets the criteria
evaluating the potential implications, if any, upon
for hedge accounting, any cumulative gain or loss
adoption.
that has been recognised in OCI at that time remains
6 Trade receivables
As at March 31, 2021 As at March 31, 2020
Unsecured
Low risk 1,576.39 709.10
Significant increase in credit risk 0.79 84.24
Credit impaired 9.03 99.89
1,586.21 893.23
Less: Impairment loss allowance (27.42) (71.66)
Total 1,558.79 821.57
7 Loans
As at March 31, 2021 As at March 31, 2020
At Fair Value At Fair Value
Particulars through Other through Other
At Amortised cost Total At Amortised cost Total
Comprehensive Comprehensive
Income Income
A. Based on nature
Term loans 281,364.57 102,275.31 383,639.88 226,307.73 73,160.07 299,467.80
Less : Impairment loss allowance (7,424.80) – (7,424.80) (4,870.74) – (4,870.74)
Total 273,939.77 102,275.31 376,215.08 221,436.99 73,160.07 294,597.06
B. Based on Security
(i) Secured by tangible assets* 245,975.42 67,346.94 313,322.36 186,931.28 67,142.06 254,073.34
(ii) Unsecured 35,389.15 34,928.37 70,317.52 39,376.45 6,018.01 45,394.46
Total Gross Loans 281,364.57 102,275.31 383,639.88 226,307.73 73,160.07 299,467.80
Less:Impairment loss allowance (7,424.80) – (7,424.80) (4,870.74) – (4,870.74)
Total Net Loans 273,939.77 102,275.31 376,215.08 221,436.99 73,160.07 294,597.06
C. Based on region
(I) Loans in India
(i) Public Sector – – – – – –
(ii) Private Sector 281,364.57 102,275.31 383,639.88 226,307.73 73,160.07 299,467.80
Total gross loans 281,364.57 102,275.31 383,639.88 226,307.73 73,160.07 299,467.80
Less: Impairment loss allowance (7,424.80) – (7,424.80) (4,870.74) – (4,870.74)
Total (I)-Net loans 273,939.77 102,275.31 376,215.08 221,436.99 73,160.07 294,597.06
(II) Loans outside India
Loans outside India – – – – – –
Total (I) and (II) 273,939.77 102,275.31 376,215.08 221,436.99 73,160.07 294,597.06
* Term loans are secured by way of hypothecation of underlying loan receivables.
Notes : Of the above, loans to related parties are as below:
91
92
Northern Arc Capital Limited
Notes to the Standalone Financial Statements for the year ended March 31, 2021
(All amounts are in Indian Rupees in lakhs, except share data and unless otherwise stated)
8 Investments
As at March 31, 2021 As at March 31, 2020
At Fair At Fair
At Fair Value At Fair Value
Particulars At Value At Value
through Other through Other
Amortised through At Cost Total Amortised through At Cost Total
Comprehensive Comprehensive
cost Profit and cost Profit and
Income Income
loss loss
Investment in debentures (quoted)
Non-convertible redeemable – 68,825.12 – – 68,825.12 – 54,067.27 – – 54,067.27
debentures
Investment in pass-through
Gross Balance
Interest
Particulars as at Terms of Redemption Security
rate
March 31, 2021
7500 units (March 31, 2020: nil units) 750.00 Coupon payment frequency: on 10.20% The Debentures are
of 10.2% Redeemable, Market linked maturity secured by way of a
non-convertible debentures of INR Principal repayment frequency: on first ranking, exclusive,
10,000 each, maturing on April 29, maturity and continuing charge
2022 Tenure of security: 1.75 years to the present and
Redemption date: April 29, 2022 future loan receivables
500 units (March 31, 2020: nil 5,000.00 Coupon payment frequency: semi 9.50% The Debentures are
units) of 9.50% Redeemable non- annual secured by way of a
convertible debentures of INR Principal repayment frequency: on first ranking, exclusive,
1,000,000 each, maturing on January maturity and continuing charge
17, 2022 Tenure of security: 1.5 years to the present and
Redemption date: January 17, 2022 future loan receivables
500 units (March 31, 2020: nil 5,000.00 Coupon payment frequency: annually 11.25% The Debentures are
units) of 11.25% Redeemable non- Principal repayment frequency: on secured by way of a
convertible debentures of INR maturity first ranking, exclusive,
1,000,000 each, maturing on June Tenure of security: 3 years and continuing charge
26, 2023 Redemption date: June 26, 2023 to the present and
future loan receivables
500 units (March 31, 2020: nil 4,166.67 Coupon payment frequency: quarterly 10.40% The Debentures are
units) of 10.40% Redeemable Principal repayment frequency: 12 equal secured by way of a
non-convertible debentures of INR quarterly instalment first ranking, exclusive,
833,333 each, maturing on July 13, Tenure of security: 3 years and continuing charge
2023 Redemption date: July 13, 2023 to the present and
future loan receivables
500 units (March 31, 2020: nil 5,000.00 Coupon payment frequency: semi 9.50% The Debentures are
units) of 9.50% Redeemable non- annual secured by way of a
convertible debentures of INR Principal repayment frequency: Maturity first ranking, exclusive,
1,000,000 each, maturing on March Tenure of security: 1.5 years and continuing charge
8, 2022 Redemption date: March 8, 2022 to the present and
future loan receivables
1500 units (March 31, 2020: nil 15,000.00 Coupon payment frequency: semi 9.50% The Debentures are
units) of 9.50% Redeemable non- annual secured by way of a
convertible debentures of INR Principal repayment frequency: Maturity first ranking, exclusive,
1,000,000 each, maturing on March Tenure of security: 1.5 years and continuing charge
14, 2022 Redemption date: March 8, 2022 to the present and
future loan receivables
1000 units (March 31, 2020: nil 10,000.00 Coupon payment frequency: semi 10.45% The Debentures are
units) of 10.45% Redeemable annual secured by way of a
non-convertible debentures of Principal repayment frequency: first ranking, exclusive,
INR 1,000,000 each, maturing on maturity and continuing charge
September 30, 2022 Tenure of security: 2 years to the present and
Redemption date: September 30, 2022 future loan receivables
1500 units (March 31, 2020: nil units) 15,000.00 Coupon payment frequency: semi 9.15% The Debentures are
of 9.15% Redeemable non-convertible annual secured by way of a
debentures of INR 1,000,000 each, Principal repayment frequency: 4 equal first ranking, exclusive,
maturing on May 13, 2022 quarterly instalments and continuing charge
Tenure of security: 1.5 years to the present and
Redemption date: May 13, 2022 future loan receivables
2949 units (March 31, 2020: nil 29,490.00 Coupon payment frequency: semi 9.97% The Debentures are
units) of 9.966% Redeemable annual secured by way of a
non-convertible debentures of Principal repayment frequency: 7 equal first ranking, exclusive,
INR 1,000,000 each, maturing on half-yearly instalments and continuing charge
December 18, 2025 Tenure of security: 5 years to the present and
Redemption date: December 18, 2025 future loan receivables
12500 units (March 31, 2020: nil units) 1,250.00 Coupon payment frequency: on 10.00% The Debentures are
of 10.00% Redeemable, market linked maturity secured by way of a
non-convertible debentures of INR Principal repayment frequency: on first ranking, exclusive,
10,000 each, maturing on March 11, maturity and continuing charge
2022 Tenure of security: 1.25 years to the present and
Redemption date: March 11, 2022 future loan receivables
Gross Balance
Interest
Particulars as at Terms of Redemption Security
rate
March 31, 2021
12500 units (March 31, 2020: nil units) 1,250.00 Coupon payment frequency: on 10.00% The Debentures are
of 10.00% Redeemable, market linked maturity secured by way of a
non-convertible debentures of INR Principal repayment frequency: on first ranking, exclusive,
10,000 each, maturing on June 11, maturity and continuing charge
2022 Tenure of security: 1.5 years to the present and
Redemption date: June 11, 2022 future loan receivables
23200 units (March 31, 2020: nil 2,320.00 Coupon payment frequency: on 9.05% The Debentures are
units) of 9.05% Redeemable, market maturity secured by way of a
linked non-convertible debentures Principal repayment frequency: on first ranking, exclusive,
of INR 10,000 each, maturing on maturity and continuing charge
January 21, 2023 Tenure of security: 2 years to the present and
Redemption date: January 20, 2023 future loan receivables
696 units (March 31, 2020: nil units) 3,480.00 Coupon payment frequency: on 8.95% The Debentures are
of 8.95% Redeemable, market linked maturity secured by way of a
non-convertible debentures of INR Principal repayment frequency: on first ranking, exclusive,
500,000 each, maturing on February maturity and continuing charge
25, 2023 Tenure of security: 2 years to the present and
Redemption date: February 24, 2023 future loan receivables
294 units (March 31, 2020: nil units) 1,470.00 Coupon payment frequency: on 8.90% The Debentures are
of 8.90% Redeemable, market linked maturity secured by way of a
non-convertible debentures of INR Principal repayment frequency: on first ranking, exclusive,
500,000 each, maturing on February maturity and continuing charge
24, 2023 Tenure of security: 2 years to the present and
Redemption date: February 24, 2023 future loan receivables
150 units (March 31, 2020: nil units) 1,500.00 Coupon payment frequency: on 9.30% The Debentures are
of 9.30% Redeemable, market maturity secured by way of a
linked non-convertible debentures Principal repayment frequency: on first ranking, exclusive,
of INR 1,000,000 each, maturing on maturity and continuing charge
September 17, 2022 Tenure of security: 18 Months to the present and
Redemption date: September 16, 2022 future loan receivables
1800 units (March 31, 2020: nil 18,000.00 Coupon payment frequency: semi 9.85% The Debentures are
units) of 9.85% Redeemable non- annually secured by way of a
convertible debentures of INR Principal repayment frequency: on first ranking, exclusive,
1,000,000 each, maturing on March maturity and continuing charge
23, 2026 Tenure of security: 5 Years to the present and
Redemption date: March 23, 2026 future loan receivables
Unsecured, redeemable non-convertible debentures:
28,000,000 units (March 31, 2,800.00 Coupon payment frequency: Monthly 11.60% NA
2020: 30,000,000 units) of 11.6% Principal repayment frequency: Entire
Redeemable non-convertible principal repaid on maturity
debentures of INR 10 each, maturing Tenure of security: 4 years
on Sep 25, 2023 Redemption date: September 25, 2023
Unsecured, Commercial Paper:
200 units of 7.99% commercial paper 1,000.00 Tenure of instrument: 181 days 7.99% NA
of INR 500,000 each, maturing on Redemption date: August 9, 2021
Aug 9, 2021
200 units of 7.75% commercial paper 1,000.00 Tenure of instrument: 120 days 7.75% NA
of INR 500,000 each, maturing on Redemption date:June 9, 2021
Jun 9, 2021
400 units of 7.50% commercial paper 2,000.00 Tenure of instrument: 91 days 7.50% NA
of INR 500,000 each, maturing on Redemption date:May 15, 2021
May 15, 2021
200 units of 7.50% commercial paper 1,000.00 Tenure of instrument: 73 days 7.50% NA
of INR 500,000 each, maturing on Redemption date:May 15, 2021
May 15, 2021
500 units of 7.70% commercial paper 2,500.00 Tenure of instrument: 73 days 7.70% NA
of INR 500,000 each, maturing on Redemption date:May 31, 2021
May 31, 2021
Gross Balance
Interest
Particulars as at Terms of Redemption Security
rate
March 31, 2021
500 units of 8.25% commercial paper 2,500.00 Tenure of instrument: 180 days 8.25% NA
of INR 500,000 each, maturing on Redemption date:September 20, 2021
Sep 20, 2021
500 units of 7.7% commercial paper 2,500.00 Tenure of instrument: 62 days 7.70% NA
of INR 500,000 each, maturing on Redemption date:May 31, 2021
May 31, 2021
500 units of 7.7% commercial paper 2,500.00 Tenure of instrument: 61 days 7.70% NA
of INR 500,000 each, maturing on Redemption date:May 31, 2021
May 31, 2021
Note: The balances are net of accrued interest and gross of unamortised processing fees
Note : The Company has not defaulted in the repayment of principal and interest
Gross Balance
Interest
Particulars as at Terms of Redemption Security
rate
March 31, 2021
Term Loan 4 625.00 Repayments terms: Equated 36 month 9.30% Exclusive charge on identified
instalments with no moratorium unencumbered secured standard
Tenor of loan : 3 Years receivables/Book debts (eligible
Redemption date: December 31, 2021 for bank finance as per RBI
guidelines) with an Asset Cover
of at least 1.20 times
Term Loan 5 1,666.67 Repayments terms:12 Equal quarterly 10.55% First and Exclusive charge on
instalments the standard receivables with a
Tenor of loan : 3 Years security cover of 125%.
Redemption date: October 23, 2021
Term Loan 6 833.33 Repayments terms: 12 equal quarterly 10.40% First and Exclusive charge on
instalments the standard receivables with a
Tenor of loan : 3 Years security cover of 115%.
Redemption date: January 9,2022
Term Loan 7 11,666.67 Repayments terms:30 monthly instalments 11.00% First and Exclusive charge on
Tenor of loan : 3 Years the standard receivables with a
Redemption date: May 16, 2022 security cover of 125%.
Term Loan 8 1,818.18 Repayments terms:11 quarterly instalments 11.00% First and Exclusive charge on
Tenor of loan : 3.3 Years the standard receivables with a
Redemption date: March 27, 2022 security cover of 120%.
Term Loan 9 500.00 Repayments terms:24 monthly instalments 11.00% First and Exclusive charge on
Tenor of loan : 2 Years the standard receivables with a
Redemption date: September 24, 2021 security cover of 110%.
Term Loan 10 480.00 Repayments terms:10 quarterly instalments 11.30% First and Exclusive charge on
Tenor of loan : 3 Years the standard receivables with a
Redemption date: September 21, 2022 security cover of 115%.
Term Loan 11 5,000.00 Repayments terms:12 quarterly instalments 10.40% First and Exclusive charge on
Tenor of loan : 2.3 Years the standard receivables with a
Redemption date: March 31, 2023 security cover of 110%.
Term Loan 12 1,125.00 Repayments terms:8 quarterly instalments 11.00% First and Exclusive charge on
Tenor of loan : 2 Years the standard receivables with a
Redemption date: December 31, 2021 security cover of 120%.
Term Loan 13 1,750.00 Repayments terms:36 monthly instalments 9.20% First and Exclusive charge on
Tenor of loan : 3 Years the standard receivables with a
Redemption date: December 31, 2022 security cover of 120%.
Term Loan 14 1,750.00 Repayments terms:36 monthly instalments 11.00% First and Exclusive charge on
Tenor of loan : 3 Years the standard receivables with a
Redemption date: December 31, 2022 security cover of 125%.
Term Loan 15 6,363.91 Repayments terms:11 quarterly installments 10.30% First and Exclusive charge on
Tenor of Security : 2.84 Years the standard receivables with a
Redemption date: December 31, 2022 security cover of 125%.
Term Loan 16 566.67 Repayments terms:35 monthly instalments 11.75% First and Exclusive charge on
Tenor of loan : 3.3 Years the standard receivables with a
Redemption date: January 5, 2023 security cover of 110%.
Term Loan 17 937.50 Repayments terms:8 quarterly instalments 11.25% First and Exclusive charge on
Tenor of loan : 2 Years the standard receivables with a
Redemption date: November 30, 2021 security cover of 115%.
Term Loan 18 2,500.00 Repayments terms:12 quarterly instalments 10.20% First and Exclusive charge on
Tenor of loan : 3 Years the standard receivables with a
Redemption date: December 31, 2022 security cover of 133%.
Term Loan 19 1,000.00 Repayments terms:24 monthly instalments 11.50% First and Exclusive charge on
Tenor of loan : 2 Years the standard receivables with a
Redemption date: March 31, 2022 security cover of 115%.
Term Loan 20 1,666.67 Repayments terms:6 quarterly installments 10.60% First and Exclusive charge on
Tenor of Security : 1.5 Years the standard receivables with a
Redemption date: August 28, 2021 security cover of 120%.
Term Loan 21 3,749.00 Repayments terms:12 quarterly instalments 10.75% First and Exclusive charge on
Tenor of loan : 3 Years the standard receivables with a
Redemption date: April 5, 2023 security cover of 110%.
Gross Balance
Interest
Particulars as at Terms of Redemption Security
rate
March 31, 2021
Term Loan 22 2,916.67 Repayments terms:48 monthly instalments 10.80% First and Exclusive charge on
Tenor of loan : 4 Years the standard receivables with a
Redemption date: March 31, 2024 security cover of 110%.
Term Loan 23 2,906.97 Repayments terms:48 monthly instalments 10.50% First and Exclusive charge on
Tenor of loan : 4 Years the standard receivables with a
Redemption date: March 31, 2024 security cover of 110%.
Term Loan 24 1,992.68 Repayments terms:10 quarterly instalments 11.25% First and Exclusive charge on
Tenor of loan : 3 Years the standard receivables with a
Redemption date: February 2, 2023 security cover of 110%.
Term Loan 25 500.00 Repayments terms:24 monthly instalments 11.25% First and Exclusive charge on
Tenor of loan : 2 Years the standard receivables with a
Redemption date: March 6, 2022 security cover of 110%.
Term Loan 26 6,363.91 Repayments terms:11 quarterly installments 10.30% First and Exclusive charge on
Tenor of Security : 2.84 Years the standard receivables with a
Redemption date: December 31, 2022 security cover of 125%.
Term Loan 27 2,916.67 Repayments terms:12 Monthly instalments 9.30% First and Exclusive charge over
Tenor of loan : 1 Years the loan receivables with a
Redemption date: October 3, 2021 security cover of 115%.
Term Loan 28 500.00 Repayments terms:4 Monthly instalments 6.32% First and Exclusive charge over
Tenor of loan : 5 months the loan receivables with a
Redemption date: April 10, 2021 security cover of 110%.
Term Loan 29 5,000.00 Repayments terms:9 Monthly instalments 9.20% First and Exclusive charge over
Tenor of loan : 1 Years the loan receivables with a
Redemption date: December 31, 2021 security cover of 125%.
Term Loan 30 3,500.00 Repayments terms:12 Quarterly instalments 9.00% First and Exclusive charge over
Tenor of loan : 3.25 Years the loan receivables with a
Redemption date: April 30, 2024 security cover of 110%.
Term Loan 31 20,000.00 Repayments terms:11 Quarterly instalments 8.70% First and Exclusive charge over
Tenor of loan : 2.8 Years the loan receivables with a
Redemption date: December 31, 2023 security cover of 125%.
Term Loan 32 1,437.50 Repayments terms: 24 monthly instalments 9.10% First and Exclusive charge over
Tenor of loan : 2 Years the loan receivables with a
Redemption date: February 28, 2023 security cover of 115%.
Term Loan 33 10,000.00 Repayments terms: 6 quarterly instalments 8.80% First and Exclusive charge over
Tenor of loan : 1.5 Years the loan receivables with a
Redemption date: September 29, 2022 security cover of 120%.
Term Loan 34 2,000.00 Repayments terms: 2 Half Yearly instalments 9.00% First and Exclusive charge over
Tenor of loan : 1 Years the loan receivables with a
Redemption date: March 31, 2022 security cover of 115%.
Term Loan 35 5,000.00 Repayments terms: 18 Monthly instalments 8.95% First and Exclusive charge over
Tenor of loan : 2 Years the loan receivables with a
Redemption date: February 28, 2023 security cover of 120%.
Term Loan 36 3,000.00 Repayments terms: 10 quarterly instalments 9.00% First and Exclusive charge over
Tenor of loan : 33 months the loan receivables with a
Redemption date: October 9, 2023 security cover of 110%.
Term Loan 37 4,000.00 Repayments terms: 36 monthly instalments 8.60% First and Exclusive charge over
Tenor of loan : 3 years the loan receivables with a
Redemption date: March 31, 2024 security cover of 110%.
Term Loan 38 1,500.00 Repayments terms: Repayment on Maturity 10.00% First and Exclusive charge over
Tenor of loan : 30 days the loan receivables with a
Redemption date: May 3, 2021 security cover of 120%.
Term Loan 39 5,000.00 Repayments terms: Repayment on Maturity 9.70% First and Exclusive charge over
Tenor of loan : 180 days the loan receivables with a
Redemption date: May 21, 2021 & June 9,2021 security cover of 120%.
Term Loan 40 3,000.00 Repayments terms: Repayment on Maturity 9.90% First and Exclusive charge over
Tenor of loan : 1 year the loan receivables with a
Redemption date: March 26, 2022 security cover of 110%.
Gross Balance
Interest
Particulars as at Terms of Redemption Security
rate
March 31, 2021
Term Loan 41 2,490.00 Repayments terms: Repayment on Maturity 9.00% First and Exclusive charge over
Tenor of loan : 1 year the loan receivables with a
Redemption date: December 28, 2021 security cover of 110%.
Term Loan 42 4,000.00 Repayments terms: Repayment on Maturity 8.80% First and Exclusive charge over
Tenor of loan : 90 days the loan receivables with a
Redemption date: June 21, 2021 security cover of 110%.
Term Loan 43 5,000.00 Repayments terms: Repayment on Maturity 9.25% First and Exclusive charge over
Tenor of loan : 6 months the loan receivables with a
Redemption date: September 25, 2021 security cover of 120%.
Term Loan 44 3,300.00 Repayments terms: Repayment on Maturity 6.30% Exclusive charge over book debt/
Tenor of loan : 1 year receivables providing security
Redemption date: December 4, 2021 cover of 1.33x.
Term Loan 45 1,500.00 Repayments terms: Repayment on Maturity 8.30% First and Exclusive charge over
Tenor of loan : 3 months the loan receivables with a
Redemption date: June 25, 2021 security cover of 110%.
Term Loan 46 1,500.00 Repayments terms: Repayment on Maturity 9.10% First and Exclusive charge over
Tenor of loan : 3 months the loan receivables with a
Redemption date: June 29, 2021 security cover of 120%.
Gross Balance
Interest
Particulars as at Terms of Redemption Security
rate
March 31, 2021
Term Loan 7 183.52 Repayment Terms: Repayment in 24 monthly 11.85% Exclusive hypothecation charge
instalments over receivables/loan assets/
Tenor: 2 Years book debts with a cover of 1.1
Redemption Date: July 1, 2021 times of the outstanding principal
at any point of time during
currency of the facility.
Term Loan 8 1,156.51 Repayment Terms: Repayment in 11 equal 11.75% Exclusive hypothecation charge
quarterly installments over receivables/loan assets/
Tenor: 2.8 Years book debts with a cover of 1.1
Redemption Date:November 30,2022 times of the outstanding principal
at any point of time during
currency of the facility.
Term Loan 9 325.64 Repayment Terms: Repayment in 24 monthly 11.25% Exclusive hypothecation charge
instalments over receivables/loan assets/
Tenor: 2 Years book debts with a cover of 1.1
Redemption Date: September 27, 2021 times of the outstanding principal
at any point of time during
currency of the facility.
Term Loan 10 1,818.20 Repayment Terms: Repayment in 36 monthly 12.25% Exclusive hypothecation charge
installments over receivables/loan assets/
Tenor: 3 Years book debts with a cover of 1.18
Redemption Date:February 22,2023 times of the outstanding principal
at any point of time during
currency of the facility.
Term Loan 11 445.36 Repayment Terms: Repayment in 24 equal 11.85% Exclusive hypothecation charge
monthly instalments over receivables/loan assets/
Tenor: 2 Years book debts with a cover of 1.1
Redemption Date: January 1, 2022 times of the outstanding principal
at any point of time during
currency of the facility.
Term Loan 12 555.55 Repayment Terms: Repayment in 18 equal 10.75% Exclusive hypothecation charge
monthly instalments over receivables/loan assets/
Tenor: 1.5 Years book debts with a cover of 1.15
Redemption Date: July 15, 2021 times of the outstanding principal
at any point of time during
currency of the facility.
Term Loan 13 1,500.00 Repayment Terms: Repayment in 12 equal 11.40% Exclusive hypothecation charge
quarterly installments over receivables/loan assets/
Tenor: 3 Years book debts with a cover of 1.1
Redemption Date:June 1, 2023 times of the outstanding principal
at any point of time during
currency of the facility.
Term Loan 14 599.94 Repayment Terms: Repayment in 11 equal 11.25% Exclusive hypothecation charge
quarterly installments over receivables/loan assets/
Tenor: 3 Years book debts with a cover of 1.1
Redemption Date:May 31, 2023 times of the outstanding principal
at any point of time during
currency of the facility.
Term Loan 15 3,333.33 Repayment Terms: Repayment in 36 equal 9.25% Exclusive hypothecation charge
monthly instalments over loan receivables/loan
Tenor: 3 Years assets/ book debts with a cover
Redemption Date: September 21, 2023 of 1.2 times of the outstanding
principal and interest at any point
of time during currency of the
facility.
Term Loan 16 3,827.86 Repayment Terms: Repayment in 24 equal 9.35% Exclusive hypothecation charge
monthly instalments over loan receivables/loan
Tenor: 2 Years assets/ book debts with a cover
Redemption Date: September 22, 2022 of 1.18 times of the outstanding
principal at any point of time
during currency of the facility.
Gross Balance
Interest
Particulars as at Terms of Redemption Security
rate
March 31, 2021
Term Loan 17 18,452.68 Repayment Terms: Repayment in 6 equal half- 9.35% Exclusive hypothecation charge
(Borrowings yearly instalments over loan receivables/loan
outside India) Tenor: 5 Years assets/ book debts with a cover
Redemption Date: November 17, 2025 of 1.25 times of the outstanding
principal at any point of time
during currency of the facility.
Term Loan 18 18,108.75 Repayment Terms: Repayment in 6 equal half- 9.50% Exclusive hypothecation charge
(Borrowings yearly instalments over loan receivables/loan
outside India) Tenor: 4.8 Years assets/ book debts with a cover
Redemption Date: November 15, 2025 of 1.25 times of the outstanding
principal at any point of time
during currency of the facility.
Term Loan 19 7,303.00 Repayment Terms: Repayment in 6 equal half 9.78% Exclusive hypothecation charge
(Borrowings yearly instalments over loan receivables/loan
outside India) Tenor: 5 Years assets/ book debts with a cover
Redemption Date: March 4, 2026 of 1.2 times of the outstanding
principal at any point of time
during currency of the facility.
Term Loan 20 4,000.00 Repayment Terms: Repayment in 36 equal 9.25% Exclusive hypothecation charge
monthly instalments over loan receivables/loan
Tenor: 3 Years assets/ book debts with a cover
Redemption Date: March 30, 2024 of 1.10 times of the outstanding
principal at any point of time
during currency of the facility.
Note: The balances are net of accrued interest and gross of unamortised processing fees
a) Reconciliation of the shares outstanding at the beginning and at the end of the reporting year
As at March 31, 2021 As at March 31, 2020
No. of shares Amount No. of shares Amount
Equity shares
At the commencement of the year 87,477,903 8,747.79 78,365,776 7,836.57
Add: Shares issued during the year 443,647 44.36 3,261,127 326.12
Add: Shares converted into equity – – 5,851,000 585.10
At the end of the year 87,921,550 8,792.15 87,477,903 8,747.79
0.0001% Compulsorily convertible preference shares
At the commencement of the year 41,323,204 8,264.64 37,784,296 7,556.86
Add: Shares issued during the year – – 9,389,908 1,877.98
Less: Shares converted into equity – – (5,851,000) (1,170.20)
At the end of the year 41,323,204 8,264.64 41,323,204 8,264.64
Redeemable preference shares
At the commencement of the year – – 1,160,000 1,160.00
Less: Shares Redeemed during the year – – (1,160,000) (1,160.00)
At the end of the year – – – –
Note:
During the year ended March 31, 2020, pursuant to amended share subscription and shareholders agreement, the
Company has issued:
1. Nil 0.0001% Compulsorily convertible preference shares (March 31, 2020: 6,133,793) of INR 20 each to IIFL Special
opportunities fund, IIFL Special opportunities fund Series 2 to 7; Nil 0.0001% Compulsorily convertible preference
shares (March 31, 2020:2,230,797) shares of INR 20 each to Standard Chartered Bank (Singapore Branch); Nil 0.0001%
Compulsorily convertible preference shares (March 31, 2020:1,025,318) shares of INR 20 each to Augusta Investments II
Pte. Ltd and Nil equity shares (March 31, 2019 : 3,197,644) of INR 10 each to Sumitomo Mitsui Banking Corporation.
2. During the year Nil 0.0001% compulsorily convertible preference shares (March 31, 2020: 5,851,000) were converted
into equity share capital.
3. During the year, the Company has issued 443,647 (March 31, 2020 : 63,483) equity shares which were allotted to
employees who exercised their options under ESOP scheme.
4. During the year, the Company has issued Nil (March 31, 2020 - Nil, March 31, 2019: 3) equity shares of INR 10 each
to Kshama Fernandes, Managing Director, Bama Balakrishnan, Chief Financial Officer (until June 30, 2020) and C
Kalyanasundaram, Senior Director and Head, Finance and Operations.
Add: Premium received on shares issued during the year 556.61 23,289.47
Less: Utilised during the year for writing off share issue expenses – (436.99)
b) Statutory reserve
The Company has established various equity-settled share based payment plans for certain categories of employees
of the Company. Refer note 40 for further details of these plans.
e) Capital reserve
Remeasurements of defined benefit asset/ (liability) (refer note (vii) (b) below) 9.26 40.77
Add : Fair valuation of financial instruments (refer note (vii) (a) below) 995.03 281.33
Less : Cash flow hedge reserve (refer note (vii) (c) below) (382.22) –
Year ended March 31, 2021 Year ended March 31, 2020
On financial assets measured at On financial assets measured at
Amortised Total Amortised Total
FVOCI FVTPL FVOCI FVTPL
cost cost
21 Interest income
Interest on loans 10,547.63 36,021.79 – 46,569.42 4,643.58 38,840.06 – 43,483.64
Interest from
investments:
-P
ass through 2,769.82 – – 2,769.82 2,951.58 – – 2,951.58
certificates
-N
on-convertible 5,440.02 – – 5,440.02 6,015.01 – – 6,015.01
debentures
Interest on deposits – 799.37 – 799.37 – 536.74 – 536.74
with banks
18,757.47 36,821.16 – 55,578.63 13,610.17 39,376.80 – 52,986.97
30 Income tax
A. The components of income tax expense for the years ended 31 March 2021 and 2020 are:
Year ended Year ended
Particulars
March 31, 2021 March 31, 2020
Current tax 3,939.00 3,370.00
Tax expenses recognised in the statement of profit and loss 2,028.23 4,101.90
C. Deferred tax
The following table shows deferred tax recorded in the balance sheet and changes recorded in the Income tax
expense
Other
As at Statement of As at
Particulars comprehensive
March 31, 2020 profit and loss March 31, 2021
income
Component of Deferred tax asset / (liability)
Deferred tax asset / (liability) in relation to:
Property plant and equipment (8.50) (9.12) – (17.62)
Impact of fair value of assets (1,276.92) (1.49) 954.84 (323.57)
Impairment on financial assets 1,587.74 1,499.21 (1,160.98) 1,925.97
Provision for employee benefits 158.78 21.70 (3.10) 177.38
Unamortised component of processing fee (48.87) 356.50 – 307.63
Others (51.88) 43.97 – (7.91)
Total 360.35 1,910.77 (209.24) 2,061.88
Other
As at Statement of As at
Particulars comprehensive
March 31, 2019 profit and loss March 31, 2020
income
Component of Deferred tax asset / (liability)
Net profit attributable to equity shareholders for calculation of basic EPS 5,604.99 8,961.93
Net profit attributable to equity shareholders for calculation of diluted EPS 5,850.70 9,558.19
Shares
Total number of equity shares outstanding at the end of the period 87,921,550 87,477,903
Weighted average number of equity shares outstanding during the year for 87,619,183 83,977,665
calculation of basic EPS
Weighted average number of equity shares outstanding during the year for 130,721,522 126,676,387
calculation of diluted EPS
Bank balances other than cash and cash 6,837.98 – 6,837.98 7,720.21 – 7,720.21
equivalents
Liabilities
Trade payables – –
Borrowings (Other than debt securities) 126,289.44 102,957.65 229,247.09 104,176.60 101,910.80 206,087.40
As at Exchange As at
Particulars Cash flows Others* New Leases
April 1, 2019 difference March 31, 2020
Debt Securities 124,386.13 (39,087.40) – 721.97 – 86,020.70
Borrowings (other than debt 166,885.56 38,858.00 – 343.84 – 206,087.40
securities)
Sub-ordinated Liabilities 1,213.41 (1,213.41) – – – –
Lease Liabilities – (291.28) – – 1,699.41 1,408.13
*Others includes the effect of accrued but not paid interest on borrowing, amortisation of processing fees, decrease in lease liability on
account of termination.
33 Leases
The disclosures as required under Ind AS 116 are as follows;
(i) Measurement of Lease Liabilities
Particulars As at 31 March 2021 As at 31 March 2020
Lease liability recognised 1,127.38 1,408.13
The Company has considered weighted average rate of borrowings for discounting.
The Company has entered into leasing arrangements for premises. ROU has been included after the line ‘Property,
Plant and Equipment’ and Lease liability has been included under ‘Other Financial Liabilities’ in the Balance Sheet.
(ii) Amounts recognised in the Balance sheet
Particulars As at 31 March 2021 As at 31 March 2020
a) Right-of-use assets (net) 985.44 1,324.14
b) Lease liabilities
Current 365.23 395.57
Non-current 762.15 1,012.56
Total Lease liabilities 1,127.38 1,408.13
c) Additions to the Right-of-use assets – 623.28
Note:
On 24th July 2020, the MCA issued a notification as the Companies (Ind AS) Amendment Rules, 2020, which has come into force
as on the data of publication. These amendments provide relief for lessees in the accounting for rent concessions granted as direct
consequences of COVID-19. The Company have received the rent concession for 2 leases during the period June 2020 to September
2020 amounting to INR 35.20 lakhs (disclosed under “other income”).
34 Financial instrument
A Fair value measurement
Valuation principles
Fair value 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, exit price.
This is regardless of whether that price is directly observable or estimated using a valuation technique.
Financial instruments by category
The carrying value and fair value of financial instruments measured at fair value as of March 31, 2021 were as follows
(Also refer note 79)
Carrying
Value
Particulars Level 1 Level 2 Level 3 Total
Amortised
cost
Financial assets not measured at fair value:
Cash and cash equivalents 38,790.21 –
Bank balances other than cash and cash 6,837.98 –
equivalents
Trade receivables 1,558.79 –
Loans 281,364.57 –
Investments 489.80
Other financial assets 851.27 –
Financial liabilities not measured at fair value:
Trade payables
- t otal outstanding dues of micro and small – –
enterprises
- t otal outstanding dues of creditors other than 1,648.35 –
micro and small enterprises
Debt securities 163,956.78 –
Borrowings (Other than debt securities) 229,247.09 –
Other financial liabilities 3,648.97 –
The carrying value and fair value of financial instruments by categories as of March 31, 2020 were as follows:
Carrying
Value
Particulars Level 1 Level 2 Level 3 Total
Amortised
cost
Financial assets not measured at fair value:
Cash and cash equivalents 32,485.12 –
Bank balances other than cash and cash 7,720.21 –
equivalents
Trade receivables 821.57 –
Loans 226,307.73 –
Investments 489.80
Other financial assets 1,173.42 –
Carrying
Value
Particulars Level 1 Level 2 Level 3 Total
Amortised
cost
Financial liabilities not measured at fair value:
Trade payables –
- t otal outstanding dues of micro and small –
enterprises
- t otal outstanding dues of creditors other than 793.17 –
micro and small enterprises
Debt securities 86,020.70 –
Borrowings (Other than debt securities) 206,087.40 –
Other financial liabilities 4,683.04 –
Note:
For all of the financial assets and liabilities which are not carried at fair value, disclosure of fair value is not required as the carrying
amounts approximates the fair values.
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. Also refer note 46.
35 Financial risk management objectives and policies
The Company’s principal financial liabilities comprise borrowings from banks and issue of debentures. 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 loans and advances, investments and 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 and Asset Liability 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.
(i) 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 loans and investments (also refer note 79).
The carrying amounts of financial assets represent the maximum credit risk exposure.
A. Loans
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 Company’s exposure to credit risk for loans by type of counterparty is as follows. All these exposures are with in
India.
Carrying Amount
Particulars
As at March 31, 2021 As at March 31, 2020
Term loans 383,639.88 299,467.80
Less : Impairment loss allowance (7,424.80) (4,870.74)
376,215.08 294,597.06
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 and the type of risk exposures. Each group
is then assessed for impairment using the Expected Credit Loss (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.
Days past dues status Stage Provisions
Current Stage 1 12 Months Provision
1-30 Days Stage 1 12 Months Provision
31-90 Days Stage 2 Lifetime Provision
90+ Days Stage 3 Lifetime Provision
Also refer note 79
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:
- Loans
- Guarantees to pooled issuances
- Other guarantees
- Undrawn exposure
- Second loss credit enhancement
- Investments in pass through securities
- Investments in non convertible debentures
Expected credit loss (“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:
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 the internal data which is calibrated with forward looking macroeconomic factors.
For computation of PD, Pluto Tash Model was used to forecast the PD term structure over lifetime of loans. As per
given long term PD and current macroeconomic conditions, conditional PD corresponding to current macroeconomic
condition is estimated. The Company has worked out on PD based on the last four years historical data.
Marginal probability:
The PDs derived from the ARIMA 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, downside and base. 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. The Company has considered the workout LGD approach by considering historical losses and
recoveries. 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
In addition, the Group has also considered an LGD of 65% as recommended by the Foundation Internal Ratings Based
(FIRB) approach under Basel II guidelines issued by RBI.
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. The Company has modelled EAD based on the contractual
and behavioural cash flows till the lifetime of the loans considering the expected prepayments.
The Company has considered expected cash flows , undrawn exposures and SLCE for all the loans at DPD bucket level
for each of the risk 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 calculation is based on provision matrix which considers actual historical data adjusted appropriately for the
future expectations and probabilities. Proportion of expected credit loss provided for across the stage is summarised
below:
39 Disclosure under Micro, Small and Medium Enterprises Development Act, 2006
Under Micro, Small and Medium Enterprise Development Act, 2006 (‘MSMED’) which came into force from October
2, 2006, certain disclosures are required to be made relating to Micro, Small and Medium enterprises. On the basis of
the information and records available with management and confirmation sought from suppliers on registration with
specified authority under MSMED, principal amount, interest accrued and remaining unpaid and interest paid during
the year to such enterprise is NIL.
Particulars As at March 31, 2021 As at March 31, 2020
a. The principal amount and the interest due thereon (to be shown separately)
remaining unpaid to any supplier as at the end of each accounting period
Principal – –
Interest – –
b. The amount of interest paid by the buyer in terms of section 16 of the Micro, – –
Small and Medium Enterprises Development Act, 2006, along with the amount
of the payment made to the supplier beyond the appointed day during each
accounting year;
40 Employee benefits
Defined contribution plans
The Company makes specified monthly contributions towards employee provident fund to Government administered
provident fund scheme which is a defined contribution plan. The Company’s contribution is recognized as an expenses
in the statement of profit and loss during the period in which the employee renders the related service. The amount
recognised as an expense towards contribution to provident fund for the year aggregated to INR 263.50 lakhs (March
31, 2020: INR 264.00 lakhs).
Defined benefit plans
The Company’s gratuity benefit scheme is a defined plan. The Company’s net obligation in respect of a defined benefit
plan is calculated by estimating the amount of future benefit that employees have earned in return for their services
in the current and prior periods; that benefit is discounted to determine its present value. Any unrecognised past
services and the fair value of any plan assets are deducted. The Calculation of the Company’s obligation under the
plan is performed annually by a qualified actuary using the projected unit credit method.
Details of actuarial valuation of gratuity pursuant to the Ind AS 19
Particulars March 31, 2021 March 31, 2020
A. Change in present value of obligations
Present value of obligations at the beginning of the year 401.24 358.33
Current service cost 88.81 87.67
Interest cost 23.68 24.80
Past service cost – –
Benefits settled (50.67) (15.09)
Actuarial loss (12.38) (54.48)
Present value of obligations at the end of the year 450.68 401.24
B. Change in plan assets
Fair value of plan assets at the beginning of the year – –
Expected return on plan assets – –
Actuarial gains/ (loss) – –
Employer contributions 50.67 15.09
Benefits settled (50.67) (15.09)
Fair value of plan assets at the end of the year – –
C. Actual Return on plan assets
Expected return on plan assets – –
Actuarial gains/ (loss) on plan assets – –
Actual return on plan assets – –
D. Reconciliation of present value of the obligation and the fair value of
the plan assets
Change in projected benefit obligation
Present value of obligations at the end of the year 450.68 401.24
Fair value of plan assets – –
Net liability recognised in balance sheet 450.68 401.24
Notes:
a) The estimates in future salary increases, considered in actuarial valuation, takes account of inflation, seniority
promotion and other relevant factors, such as supply and demand in the employee market.
b) Discount rate is based on the prevailing market yields of Indian Government Bonds as at the balance sheet date for the
estimated term of the obligation.
G. Sensitivity analysis
Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding other
assumptions constant, would have affected the defined benefit obligation by the amounts shown below:
Year ended March 31, 2021 Year ended March 31, 2020
Increase Decrease Increase Decrease
Discount rate (1% movement) 426.58 477.46 378.08 427.13
Future salary growth (1% movement) 478.72 424.95 428.22 376.63
The options were issued on March 01, 2017 and will be exercised at INR 10. The options are vested over a period of 4
years in 40:20:20:20 proportion
Northern Arc Capital Employee Stock Option Plan 2016 – (“Scheme 2”) formerly IFMR Capital Employee Stock
Option Plan 2016 – (“Plan” or “ESOP”) (“Scheme 2”)
The Northern Arc Capital Employee Stock Option Plan 2016 is applicable to all employees including employees of
subsidiaries.
The options were issued in six batches. The first and second batch will be exercised at INR 110, third, fourth and fifth
batch will be exercised at INR 121 and sixth batch will be exercised at INR 188. The options are vested equally over a
period of 5 years.
Northern Arc Capital Employee Stock Option Plan 2016 – “Scheme– III” (“Scheme 3”)
The Northern Arc Capital Employee Stock Option Plan 2016 is applicable to all employees including employees of
subsidiaries.
The options were issued in two batches. The first batch will be exercised at INR 181 and second batch will be exercised
at INR 188. The options are vested over a period of 3 years in 30:30:40 proportion
41.2 Options outstanding under Scheme 1, Scheme 2 and Scheme 3
Particulars As at March 31, 2021 As at March 31, 2020
Plan Scheme 1 Scheme 2 Scheme 3 Scheme 1 Scheme 2 Scheme 3
Grant date Various Various Various Various Various Various
Number of options 397,371 3,489,500 1,147,783 411,371 4,027,500 1,449,712
Exercise price in INR 10 110 to 188 181 to 188 10 110 to 188 181 to 188
Vesting period 1 to 4 years 1 to 5 years 1 to 3 years 1 to 4 years 1 to 5 years 1 to 3 years
Option Price 113.65 31.85 to 117.74 65.57 to 113.65 31.85 to 117.74 65.57 to 73.55
73.55
Weighted average exercise price in INR 10.00 122.05 184.00 10.00 120.50 184.00
Weighted average remaining – 1.71 0.71 1.00 2.56 1.71
contractual life (in years)
Vesting condition Time based vesting
43 The details of the investments held by the Company in the Alternative Investment Funds managed by the
Company’s wholly owned subsidiary
Fund March 31, 2021 March 31, 2020
Purchases Redemption Purchases Redemption
IFMR Fimpact Investment Fund – 1,431.53 – –
IFMR Fimpact Medium Term Microfinance Fund – – – 1,558.76
IFMR Fimpact Long Term Multi Asset Fund – – 1,034.03 –
IFMR Fimpact Medium Term Opportunities Fund – – – 631.51
IFMR Fimpact Income Builder Fund Fund – – 1,079.00 577.21
Northern Arc Money Market Alpha Trust Fund 3,672.62 1,400.00 132.84 400.00
Northern Arc Income Builder (Series II) Fund 85.00 – 401.00 –
45 Segment reporting
Operating segments
The Company’s operations predominantly relate to arranging or facilitating or providing finance either in the form of
loans or investments or guarantees. The information relating to this operating segment is reviewed regularly by the
Company’s Board of Directors (Chief Operating Decision Maker) to make decisions about resources to be allocated
and to assess its performance. The CODM considers the entire business of the Company on a holistic basis to make
operating decisions and thus there are no segregated operating segments. The CODM of the Company reviews the
operating results of the Company as a whole and therefore not more than one reportable segment is required to be
disclosed by the Company as envisaged by Ind AS 108 Operating Segments.
The Company does not have any separate geographic segment other than India. As such there are no separate
reportable segments as per IND AS 108 Operating Segments.
48 Investments
Particulars As at March 31, 2021 As at March 31, 2020
Value of investment
Gross value of investments
- In India 130,187.01 105,493.40
- Outside India – –
Provisions for investments
- In India 4,875.00 665.27
- Outside India – –
Net value investments
- In India 125,312.01 104,828.13
- Outside India – –
Movement of provisions held towards investments
Opening balance 665.27 1,075.78
Add: Provisions made during the year 4,875.00 –
Less: Write off/ write back/ reversal of provision during the year (665.27) (410.51)
Closing balance 4,875.00 665.27
49 Derivatives
a) Forward Rate Agreement (FRA) / Interest Rate Swap (IRS)
S
Particulars March 31, 2021 March 31, 2020
No
i) The notional principal of swap agreements 43,969.98 –
ii) Losses which would be incurred if counterparties failed to fulfil their – –
obligations under the agreement
iii) Collateral required by the Company upon entering into swaps – –
iv) Concentration of credit risk arising from the swaps NA –
v) The fair value of the swap book (Asset / (Liability)) (898.51) –
Liabilities
Borrowings from banks 16,050.76 9,313.78 20,824.10 30,587.52 49,513.28 73,709.21 29,533.79 – 229,532.44
and others
Market Borrowings 416.67 10,500.00 2,428.57 7,666.67 41,486.90 72,397.86 27,651.42 – 162,548.09
Assets
Investments 3,509.83 1,801.35 16,638.32 5,567.66 8,999.80 57,095.06 11,652.43 19,542.87 124,807.32
Note:
- Numbers in brackets represent previous year balances.
- The balances are gross of impairment loss allowance, accrued interest, unamortised borrowing costs and fair valuation gain/loss
- Estimated expected cashflows considering the moratorium / restructuring given to customers and availed from lenders. Also refer note 77 and 79.
Northern Arc Capital Limited
Notes to the Standalone Financial Statements for the year ended March 31, 2021
(All amounts are in Indian Rupees in lakhs, except share data and unless otherwise stated)
51 Disclosure of frauds reported during the year ended March 31, 2021
The frauds detected and reported for the year amounted to INR 7,456 Lakhs (March 31, 2020: Nil)
52 Exposure to Real estate sector
Particulars As at March 31, 2021 As at March 31, 2020
A. Direct Exposure
i. Residential Mortgages (refer note below) 20,240.73 18,464.95
(Lending fully secured by mortgages on residential property that is or will be
occupied by the borrower or that is rented)
ii. Commercial Real Estate –
(Lending secured by mortgages on commercial real estates (office buildings, – -
retail space, multipurpose commercial premises, multi-family residential
buildings, multi-tenanted commercial premises, industrial or warehouse
space, hotels, land acquisition, development and construction, etc.).
Exposure would also include non-fund based (NFB) limits)
iii. Investments in Mortgage Backed Securities (MBS) and other securitised
exposures –
a) Residential (refer note below) 804.98 2,689.70
b) Commercial Real Estate – -
Note:
Represents Loans, investment in pass through certificates and Non convertible debentures extended to housing finance companies.
61 Ratings
The Credit Analysis & Research Limited (CARE), India Ratings & Research and ICRA Limited (ICRA) have assigned
ratings for the various facilities availed by the Company, details of which are given below:
62 Provisions and contingencies (Break up of ‘provisions and contingencies’ shown under the head expenditure)
As at March 31, 2021 As at March 31, 2020
Loss allowance on financial assets (Impairment on financial instruments) 13,602.68 3,523.08
Provision made towards current income taxes 3,939.00 3,370.00
65 Concentration of exposures
As at March 31, 2021 As at March 31, 2020
Total exposure to twenty largest borrowers 191,570.28 153,478.91
Percentage of exposures to twenty largest borrowers to total exposure 32.74% 35.02%
Note : The above disclosure also includes the loss allowance towards undrawn loans.
69 Overseas assets (for those with joint ventures and subsidiaries abroad)
There are no overseas asset owned by the Company
70 Off-balance sheet SPVs sponsored
There are no SPVs which are required to be consolidated as per accounting norms.
71 Customer complaints
As at March 31, 2021 As at March 31, 2020
No. of complaints pending at the beginning of the year – –
No. of complaints received during the year 282 –
No. of complaints redressed during the year 282 –
No. of complaints pending at the end of the year – –
The above details are based on the information available with the Company regarding the complaints received from
the customers which has been relied upon by the auditors.
72 Disclosure pursuant to Reserve Bank of India Circular DOR.No.BP.BC.63/21.04.048/2019-20 dated April 17, 2020
pertaining to Asset Classification and Provisioning in terms of COVID19 Regulatory Package
Particulars As at March 31, 2021 As at March 31, 2020
Respective amounts in SMA/overdue categories, where the moratorium/ 3,318.44 871.92
deferment was extended
Respective amount where asset classification benefits is extended NIL** 871.92
General provision made*** – –
General provision adjusted during the period against slippages and the residual – –
provisions
*The Outstanding as on March 31, 2021 and March 31, 2020 on account of all cases in SMA/overdue categories, where the moratorium
was extended by the Company upto August 31, 2020
**There are NIL accounts where asset classification benefit is extended till March 31, 2021. Post the moratorium period, the movement
of ageing has been at actuals.
*** The Company has made adequate provision for impairment loss allowance (as per ECL model) for the year ended March 31, 2021.
Also refer note 79.
Loss Difference
Asset Gross Allowances Provisions between
Asset Classification as per RBI Classification Carrying (Provisions) Net Carrying required as Ind AS 109
norms as per IND amount as as required amount per IRACP provisions
AS 109 per IND AS under Ind AS norms and IRACP
109 norms
(1) (2) (3) (4) (5) =(3)-(4) (6) (7) = (4)-(6)
Performing Assets
Standard Stage 1 364,500.43 5,069.68 359,430.76 1,458.00 3,611.67
Stage 2 13,429.88 995.52 12,434.36 53.72 941.80
Subtotal for Standard 377,930.31 6,065.20 371,865.12 1,511.72 4,553.47
Non Performing Assets (NPA)
Substandard Stage 3 3,969.67 2,202.43 1,767.24 992.42 1,210.01
Doubtful - upto 1 year Stage 3 - - - - -
1 - 3 years Stage 3 - - - - -
More than 3 years Stage 3 - - - - -
Loss Stage 3 - - - - -
Subtotal for NPA 3,969.67 2,202.43 1,767.24 992.42 1,210.01
Loss Difference
Asset Gross Allowances Provisions between
Asset Classification as per RBI Classification Carrying (Provisions) Net Carrying required as Ind AS 109
norms as per IND amount as as required amount per IRACP provisions
AS 109 per IND AS under Ind AS norms and IRACP
109 norms
(1) (2) (3) (4) (5) =(3)-(4) (6) (7) = (4)-(6)
Other items such as guarantees, Stage 1 120,570.22 1,435.85 119,134.37 - 152.26
loan commitment etc., which
Stage 2 1,326.24 172.31 1,153.93 - 155.18
are in the scope of Ind AS 109
but not covered under Income Stage 3 7,925.17 5,151.36 2,773.81 - -
Recognition, Asset Classification
and Provisioning (IRACP) norms
Subtotal 129,821.63 6,759.52 123,062.11 - 307.44
Total Stage 1 485,070.65 6,505.53 478,565.13 1,458.00 3,763.93
Stage 2 14,756.12 1,167.83 13,588.29 53.72 1,096.98
Stage 3 11,894.84 7,353.79 4,541.05 992.42 -
511,721.61 15,027.15 496,694.47 2,504.14 4,860.91
Loss Difference
Asset Gross Allowances Provisions between
Asset Classification as per RBI Classification Carrying (Provisions) Net Carrying required as Ind AS 109
norms as per IND amount as as required amount per IRACP provisions
AS 109 per IND AS under Ind AS norms and IRACP
109 norms
(1) (2) (3) (4) (5) =(3)-(4) (6) (7) = (4)-(6)
Performing Assets
Standard Stage 1 281,878.10 3,509.21 278,368.89 1,180.16 2,329.05
Stage 2 30,978.06 945.41 30,032.66 37.58 907.82
Subtotal for Standard 312,856.16 4,454.62 308,401.54 1,217.74 3,236.87
Non Performing Assets (NPA)
Substandard Stage 3 – – – – –
Doubtful - upto 1 year Stage 3 1,234.95 678.71 556.24 615.34 63.38
1 - 3 years Stage 3 – – – – –
More than 3 years Stage 3 – – – – –
Loss Stage 3 – – – – –
Subtotal for NPA 1,234.95 678.71 556.24 615.34 63.38
Other items such as guarantees, Stage 1 84,081.89 903.94 83,177.95 – 903.94
loan commitment etc., which
Stage 2 15,349.80 938.15 14,411.66 – 938.15
are in the scope of Ind AS 109
but not covered under Income Stage 3 765.50 731.05 34.45 – 731.05
Recognition, Asset Classification
and Provisioning (IRACP) norms
Subtotal 100,197.19 2,573.13 97,624.06 – 2,573.13
Total Stage 1 365,959.99 4,413.15 361,546.84 1,180.16 3,232.99
Stage 2 46,327.87 1,883.55 44,444.31 37.58 1,845.97
Stage 3 2,000.45 1,409.76 590.69 615.34 794.42
414,288.31 7,706.47 406,581.84 1,833.08 5,873.38
In terms of the requirement as per RBI notifications no. RBI/2019-20/170 DOR (NBFC).CC. PD No. 109/22.10.106/2019-
20 dated March 13, 2020 on implementation of Indian accounting standards, Non-Banking Financial Companies
(NBFCs) are required to create an impairment reserve for any shortfall in impairment allowances under Ind AS 109 and
Income recognition, Asset Classification and Provisioning (IRACP) Norms (including provision on standard assets).
The impairment allowances under Ind AS 109 made by the Company exceeds the total provision required under IRACP
(including standard asset provisioning) as at March 31, 2021 and accordingly, no amount is required to be transferred
to impairment reserve. Also refer note 79.
76 Schedule to the Balance Sheet of a non deposit taking Non-Banking Financial Company (Pursuant to paragraph
19 of Master Direction - Non-Banking Financial Company –Systemically Important Non-Deposit taking Company
(Reserve Bank) Directions, 2016):
As at March 31, 2021 As at March 31, 2020
S.
Particulars Amount Amount
N. Amount Overdue Amount Overdue
Outstanding Outstanding
Liabilities side:
1 Loans and Advances availed by the NBFC
inclusive of interest accrued thereon but
not paid:
(a) Debentures
- Secured (net of unamortised borrowing 146,442.78 – 57,110.16 –
cost)
- Unsecured (net of unamortised 2,772.44 – 27,454.75 –
borrowing cost)
(other than falling within the meaning of
public deposits)
(b) Deferred Credits – – – –
(c) Term Loans (net of unamortised borrowing 190,489.98 – 174,054.74 –
cost)
(d) Inter-Corporate Loans and Borrowings – – – –
(e) Commercial Paper 14,741.56 – 1,455.79 –
(f) Public Deposits – – – –
(g) Other Loans (net of unamortised borrowing 38,757.11 – 32,032.66 –
cost)
(Represents Working Capital Demand Loans
and Cash Credit from Banks)
2 Break-up of (1)(f)above (outstanding
public deposits inclusive of interest
accrued thereon but not paid)
(a) In the form of Unsecured debentures – – –
(b) In the form of partly secured debentures i.e – – – –
debentures where there is a shortfall in the
value of security
(c) Other public deposits – – – –
As at As at
Particulars
March 31, 2021 March 31, 2020
Assets side:
3 Break-up of Loans and Advances * including Bills Receivables [other than
those included in (4) below]:
(a) Secured 313,322.36 254,073.34
(b) Unsecured 70,317.52 45,394.46
(Excludes loss allowance and includes unamortised fee)
4 Break up of Leased Assets and Stock on Hire and Other Assets counting
towards AFC activities
(i) Lease Assets including Lease Rentals Accrued and Due:
a) Financial Lease – –
b) Operating Lease – –
(ii) Stock on Hire including Hire Charges under Sundry Debtors:
a) Assets on Hire – –
b) Repossessed Assets – –
As at As at
Particulars
March 31, 2021 March 31, 2020
(iii) Other Loans counting towards AFC Activities
a) Loans where Assets have been Repossessed – –
b) Loans other than (a) above – –
5 Break-up of Investments (net of provision for diminution in value):
Current Investments:
I. Quoted:
i. Shares
a) Equity – –
b) Preference – –
ii. Debentures and bonds 12,719.77 11,398.10
iii. Units of Mutual Funds – –
iv. Government Securities 14,911.03 –
v. Others
a) commercial paper – –
II. Unquoted:
i. Shares – –
a) Equity – –
b) Preference – –
ii. Debentures and Bonds – –
iii. Units of Mutual Funds – –
iv. Government Securities – –
v. Others
a) pass through certificates 8,886.17 13,471.72
b) units of alternative investment fund – 3,588.27
Long Term Investments:
I. Quoted:
i. Shares – –
a) Equity – –
b) Preference – –
ii. Debentures and Bonds 56,105.35 42,669.17
iii. Units of Mutual Funds – –
iv. Government Securities – –
v. Others (please specify) –
II. Unquoted:
i. Shares
a) Equity 489.80 489.80
b) Preference – –
ii. Debentures and Bonds – –
iii. Units of Mutual Funds – –
iv. Government Securities – –
v. Others
a) pass through certificates 7,010.84 9,009.72
b) units of alternative investment fund 30,062.43 24,865.00
c) share warrants 1.62 1.62
7 Investor Group-wise Classification of all Investments (Current and Long Term) in Shares and Securities (both
Quoted and Unquoted)
Market Value / Market Value /
Book Value as Book Value as
Break up Value Break up Value
on March 31, on March 31,
or Fair Value or Fair Value
Category 2021 2020
or Net Asset or Net Asset
(Net of (Net of
Value as on Value as on
provisions) provisions)
March 31, 2021 March 31, 2020
1. Related Parties
(a) Subsidiaries 489.80 489.80 489.80 489.80
(b) Companies in the same Group – – – –
(c) Other related parties – – – –
2. Other than related parties 129,697.21 124,822.21 105,003.60 104,338.33
130,187.01 125,312.01 105,493.40 104,828.13
Note : NPA contracts represents the Stage 3 contracts (net of write offs). Also this excludes the impact of the fair value changes on
the financial assets. Also refer note 79.
77 Disclosure Pursuant to paragraph 8 of Master Direction - Non-Banking Financial Company –Systemically Important Non-Deposit taking Company (Reserve Bank)
Directions, 2016:
Type of Restructuring Other than CDR and SME Debt Restructuring* Total
Sub- Sub-
Asset Classification details Standard Doubtful Loss Total Standard Doubtful Loss Total
standard standard
Restructured assets as on No.of borrowers – – – – – – – – – –
April 01, 2020
Amount Outstanding – – – – – – – – – –
Provision there on – – – – – – – – – –
Fresh restructuring during No.of borrowers 1,596 6 – – 1,602 1,596 6 – – 1,602
the year
Amount Outstanding 2,058.66 230.78 – – 2,289.44 2,058.66 230.78 – – 2,289.44
77A Pursuant to the RBI circular RBI/2020-21/16 DOR.No.BP.BC/3/21.04.048/2020-21 dated August 6, 2020 as a part
of the resolution framework for COVID 19 related stress, eligible loans have been granted resolution in form of
restructuring and the disclosure is as follows:
Additional
Number of
Exposure funding Increase in
accounts where Of (B), aggregate
to accounts sanctioned, if provisions on
resolution amount of
mentioned any, including account of the
plan has been debt that was
Type of borrower at (A) before between implementation
implemented converted into
implementation invocation of of the resolution
under this other securities
of the plan the plan and plan
window
implementation
(A) (B) (C) (D) (E)
Personal Loans 1,325.00 220.11 – – 1.52
Corporate persons 2.00 1,081.78 – – 149.08
Of which, MSMEs – – – – –
Others 100.00 961.94 – – 69.38
Total 1,427.00 2,263.83 – – 219.98
The Company, being NBFC, has complied with Ind-AS and its Expected Credit Loss policy duly approved by the Board
for the purpose of provision on such restructured accounts.
78 Disclosure pursuant to Reserve Bank of India Circular DOR.NBFC (PD) CC. No.102/03.10.001 /2019-20 dated
November 4, 2019 pertaining to Liquidity Risk Management Framework for Non-Banking Financial Companies.
As per the Guidelines on Liquidity Risk Management Framework for NBFCs issued by RBI vide notification no.
RBI/2019-20/88 DOR.NBFC (PD) CC. No.102/03.10.001/2019-20, NBFCs are required to maintain Liquidity Coverage
Ratio (LCR) from December 1, 2020. Under the said guidelines, all non-deposit taking NBFCs with asset size of INR
5,000 crore and above but less than INR 10,000 crore are required to maintains a minimum LCR of 30%.
The total assets of the Company has crossed INR 5,000 crores from March 1, 2021. Accordingly, for the year ended
March 31, 2021, the Company has presented the LCR related disclosures for the month of March 2021 only i.e. the
period for which the guideline became applicable to the Company.
The Company has implemented the guidelines on Liquidity Risk Management Framework prescribed by the Reserve
Bank of India requiring maintenance of Liquidity Coverage Ratio (LCR), which aim to ensure that an NBFC maintains
an adequate level of unencumbered High Quality Liquid Assets (HQLA) that can be converted into cash to meet its
liquidity needs for a 30 calendar day time horizon under a significantly severe liquidity stress scenario. Compliance
with LCR is monitored by Asset Liability Management Committee (ALCO) of the Company.
Qualitative information:
Main drivers to the LCR numbers:
All significant outflows and inflows determined in accordance with RBI guidelines are included in the prescribed LCR
computation.
Composition of HQLA:
The HQLA maintained by the Company comprises Government securities (including Treasury bills) and cash balance
maintained in current account. The details are given below.
- For March 2021, the HQLA of INR 39,118 lakhs comprised of INR 34,243 lakh in cash and INR 4,875 lakh in callable
fixed deposits with scheduled commercial banks.
Concentration of funding sources:
The company maintains diversified sources of funding comprising short/long term loans from banks, NCDs, and sub-
ordinated, ECBs and CPs. The funding pattern is reviewed regularly by the management
Derivative exposures and potential collateral calls:
As on March 31, 2021, the company has fully hedged interest and principal outflows on the foreign currency ECBs.
Hence, derivative exposures are considered NIL.
Currency mismatch in LCR:
There is NIL mismatch to be reported in LCR as on March 31, 2021 since foreign currency ECBs are fully hedged for the
corresponding interest and principal components. For the month of March 2021, the Company has assessed the impact
to be immaterial.
Other inflows and outflows in the LCR calculation that are not captured in the LCR common template but which the
institution considers to be relevant for its liquidity profile
Nil
Quantitative Disclosure on Liquidity Coverage Ratio (LCR) for year ended 31 March 2021 is given below:
for the Month ended March 31, 2021
Particulars Total unweighted Total weighted
value (average) value (average)
High Quality Liquid Assets
1 **Total High Quality Liquid Assets (HQLA) 39,118.00 39,118.00
Cash Outflows
2 Deposits (for deposit taking companies) – –
3 Unsecured wholesale funding 227.00 261.05
4 Secured wholesale funding 23,838.00 27,413.70
5 Additional requirements, of which – –
(i) Outflows related to derivative exposures and other collateral requirements – –
(ii) Outflows related to loss of funding on debt products – –
(iii) Credit and liquidity facilities 22,030.00 25,334.50
6 Other contractual funding obligations – –
7 Other contingent funding obligations 85,687.00 98,540.05
8 Total Cash Outflows 131,782.00 151,549.30
Cash Inflows
9 Secured lending – –
10 Inflows from fully performing exposures 28,677.00 21,507.75
11 Other cash inflows 32,300.00 24,225.00
12 Total Cash Inflows 60,977.00 45,732.75
Total Adjusted Total Adjusted
Value Value
13 Total HQLA 39,118.00 39,118.00
14 Total Net Cash Outflows 70,805.00 105,816.55
15 Liquidity Coverage Ratio (%) 55.25% 36.97%
The above LCR disclosures are based on the data available with the Company which has been relied upon by the
auditors.
79 Impact of COVID-19
The impact of COVID-19 on the economy continues to be uncertain and the extent to which the ongoing COVID-19
pandemic will impact the Company’s financial performance including the Company’s estimates of impairment and
fair valuation of financial instruments, are dependent on such future developments, the severity and duration of the
pandemic, that are highly uncertain.
In accordance with the Board approved moratorium policy read with the Reserve Bank of India (RBI) guidelines
dated March 27, 2020, April 17, 2020 and May 23, 2020 relating to ‘COVID-19 –Regulatory Package’, the Company has
granted moratorium on payment of installments falling due between March 1, 2020 and August 31, 2020 on a case to
case basis to eligible borrowers. Having regard to the guidance provided by the RBI and the Institute of Chartered
Accountants of India, in the assessment of the Company, extension of such moratorium benefit to borrowers as per the
COVID-19 Regulatory Package of the RBI by itself is not considered to result in significant increase in credit risk as per
Ind AS 109 - Financial Instruments. In the absence of other credit risk indicators, the granting of a moratorium period
does not result in accounts becoming past due and automatically triggering Stage 2 or Stage 3 classification criteria.
Accordingly, in respect of accounts where moratorium benefit have been granted, the staging of those accounts as at
March 31, 2021 is based on the days past due status considering the benefit of moratorium period in accordance with
the Reserve Bank of India Covid-19 Regulatory Package.
The Company has used estimation of potential stress on probability of default and exposure at default in the aforesaid
context of the pandemic to develop the estimates and assumptions to assess the impairment of financial instruments.
During the year, the Company has recognized impairment of financial instruments aggregating to INR 13,602.68 lakhs
(including write offs). The impact assessment of COVID-19 is a continuing process. Given its uncertainty in nature
and duration, this may have corresponding impact in the financial position and performance of the Company. The
Company will continue to monitor any material changes to the future economic conditions.
80 The· Government of India, Ministry of Finance. vide its notification dated October 23, 2020, had announced COVID-19
Relief Scheme for grant of ex-gratia payment of difference between compound interest and simple interest for six
months to borrowers in specified loan accounts (“the Scheme”), as per the eligibility criteria and other aspects
specified therein and irrespective of whether RBI moratorium was availed or not. The Company had implemented the
Scheme and credited to the accounts of or remitted amounts to the eligible borrowers as per the Scheme.
81 RBI circular dated April 7, 2021 advised all lending institutions to immediately put in place a Board-approved policy
to refund/ adjust the ‘interest on interest’ charged to the borrowers during the moratorium period, i.e. March 1, 2020
to August 31, 2020. Further, the circular stated that the methodology for calculation of the amount to be refunded/
adjusted for different facilities shall be finalised by the Indian Banks Association (IBA) in consultation with other
industry participants/bodies, which shall be adopted by all lending instutions and also advised all lending institutions
to disclose the aggregate amount to be refunded/adjusted in respect of their borrowers based on the above reliefs
in their financial statements for the year ended March 31, 2021. Based on the guidance provided by IBA vide letter
dated April 19, 2021 and the Company has made an assessment on the impact of the said circular and reversed interest
income amounting to INR 165 lakhs in the standalone financial statements of the Company.
82 Disclosure of Specified Bank Notes (‘SBN’)
The disclosures regarding details of specified bank notes held and transacted during November 8, 2016 to December
30, 2016 has not been made in these financial statements since the requirement does not pertain to financial year
ended March 31, 2021.
83 Previous period’s figures have been regrouped / reclassified wherever necessary, to conform with the current period
presentation.
FINANCIAL
STATEMENTS
Independent Auditors’ Report
To the Members of Northern Arc Capital Limited
Report on the Audit of the Consolidated Financial Statements
Key Audit Matter How the matter was addressed in our audit
Impairment loss allowance – refer notes 3.6, 3.7, 7, 8, 17, 27 and 49 to the consolidated financial statements
The Group has recognized impairment loss allowance of INR In view of the significance of the matter, we applied the following
15,218.94 lakhs as at 31 March 2021 and has recognized an expense key audit procedures, among others to obtain sufficient
for INR 13,540.96 lakhs (including write offs) in its statement of appropriate audit evidence:
profit and loss.
• Performed process walkthroughs to identify the controls used
Under Ind AS 109 - Financial Instruments, credit loss assessment in the impairment allowance processes.
is based on expected credit loss (ECL) model. The Group’s
• Assessed the design and implementation of controls in
impairment allowance is derived from estimates including the
respect of the Holding Company’s impairment allowance
historical default, loss ratios etc. Management exercises judgement
process such as the timely recognition of impairment loss, the
in determining the quantum of loss based on a range of factors.
completeness and accuracy of reports used in the impairment
Further, in relation to ongoing COVID-19 pandemic, judgements allowance process and management review processes over the
and assumptions include the extent and duration of the pandemic, calculation of impairment allowance.
the impacts of actions of governments and other authorities, and
• Obtained understanding of management’s revised processes,
the responses of businesses and consumers in different industries,
compliance with the RBI circulars pertaining to impairment
along with the associated impact on the economy.
loss allowance, systems and controls implemented in relation
The determination of impairment loss allowance is inherently to impairment allowance process, specifically in view of
judgmental and relies on managements’ best estimate due to the providing moratorium as per Holding Company’s board
following: approved policy read with RBI COVID-19 regulatory package
including management rationale for determination of criteria of
• Segmentation of loans given to the customer
significant increase in credit risk.
• Criteria selected to identify significant increase in credit risk,
• Evaluated whether the methodology applied by the Group is
specifically in respect of moratorium benefit given to select
compliant with the requirements of the relevant accounting
borrowers, as per the Holding Company’s board approved
standards and confirmed that the calculations are performed
policy, read with the RBI COVID 19 regulatory package
in accordance with the approved methodology, including
checking mathematical accuracy of the workings.
Information other than the Consolidated Financial of the consolidated state of affairs, consolidated profit
Statements and Auditors’ Report Thereon / loss and other comprehensive income, consolidated
The Holding Company’s Management and Board of changes in equity and consolidated cash flows of the
Directors are responsible for the other information. The Group in accordance with the accounting principles
other information comprises the information included in generally accepted in India, including the Indian Accounting
the Holding Company’s annual report but does not include Standards (Ind AS) specified under section 133 of the
the consolidated financial statements and our auditors’ Act. The respective Board of Directors of the Companies
report thereon. The annual report is expected to be made included in the Group are responsible for maintenance
available to us after the date of this auditors’ report. of adequate accounting records in accordance with the
provisions of the Act, for safeguarding of the assets of each
Our opinion on the consolidated financial statements does Company and for preventing and detecting frauds and
not cover the other information and we do not express any other irregularities; selection and application of appropriate
form of assurance conclusion thereon. accounting policies; making judgments and estimates that
In connection with our audit of the consolidated financial are reasonable and prudent; and design, implementation
statements, our responsibility is to read the other and maintenance of adequate internal financial controls
information identified above when it becomes available that were operating effectively for ensuring the accuracy
and, in doing so, consider whether the other information and completeness of the accounting records, relevant
is materially inconsistent with the consolidated financial to the preparation and presentation of the consolidated
statements or our knowledge obtained in the audit or financial statements that give a true and fair view and are
otherwise appears to be materially misstated. free from material misstatement, whether due to fraud or
error, which have been used for the purpose of preparation
When we read the annual report, if we conclude that there of the consolidated financial statements by the Directors of
is a material misstatement therein, we are required to the Holding Company, as aforesaid.
communicate the matter to those charged with governance
and take necessary actions as required under applicable In preparing the consolidated financial statements, the
laws and regulations. respective Management and Board of Directors of the
Companies included in the Group are responsible for
Responsibilities of management and those charged with assessing the ability of each company to continue as a
governance for the Consolidated Financial Statements going concern, disclosing, as applicable, matters related
The Holding Company’s Management and Board of to going concern and using the going concern basis of
Directors are responsible for preparation and presentation accounting unless management either intends to liquidate
of these consolidated financial statements in terms of the the Company or to cease operations, or has no realistic
requirements of the Act, that give a true and fair view alternative but to do so.
S Sethuraman
Partner
Membership No. 213491
UDIN: 21203491AAAACW3033
Place: Chennai
Date: May 6, 2021
Our opinion is not modified in respect of the above matter. Meaning of Internal Financial controls with Reference to
consolidated Financial Statements
Management’s Responsibility for Internal Financial
Controls A company’s internal financial controls with reference to
consolidated financial statements is a process designed
The Holding Company’s Management and the Board of to provide reasonable assurance regarding the reliability
Directors are responsible for establishing and maintaining of financial reporting and the preparation of financial
internal financial controls with reference to consolidated statements for external purposes in accordance with
financial statements criteria established by the respective generally accepted accounting principles. A company’s
Company considering the essential components of internal internal financial controls with reference to consolidated
control stated in the Guidance Note. These responsibilities financial statements include those policies and procedures
include the design, implementation and maintenance of that (1) pertain to the maintenance of records that,
adequate internal financial controls that were operating in reasonable detail, accurately and fairly reflect the
effectively for ensuring the orderly and efficient conduct transactions and dispositions of the assets of the company;
of its business, including adherence to Holding company’s (2) provide reasonable assurance that transactions are
policies, the safeguarding of its assets, the prevention recorded as necessary to permit preparation of financial
and detection of frauds and errors, the accuracy and statements in accordance with generally accepted
completeness of the accounting records, and the timely accounting principles, and that receipts and expenditures
preparation of reliable financial information, as required of the company are being made only in accordance
under the Companies Act, 2013 (hereinafter referred to as with authorisations of management and directors of the
“the Act”). company; and (3) provide reasonable assurance regarding
S Sethuraman
Partner
Membership No. 213491
UDIN: 21203491AAAACW3033
Place: Chennai
Date: May 6, 2021
As at As at
Particulars Note
March 31, 2021 March 31, 2020
ASSETS
Financial assets
Cash and cash equivalents 4 39,810.26 33,321.71
Bank balances other than cash and cash equivalents 5 6,837.98 7,720.21
Trade receivables 6 1,835.42 830.15
Loans 7 374,076.68 292,467.79
Investments 8 138,256.74 117,148.90
Other financial assets 9 473.97 748.72
561,291.05 452,237.48
Non-financial assets
Current tax assets (net) 3,579.18 4,119.03
Deferred tax assets (net) 31 2,071.82 319.08
Property, plant and equipment 10.1 104.89 178.41
Right of use asset 10.2 985.44 1,324.14
Intangible assets under development 10.3 54.02 94.94
Goodwill 174.63 174.63
Intangible assets 10.4 972.77 831.54
Other non- financial assets 11 482.67 469.62
8,425.42 7,511.39
Total assets 569,716.47 459,748.87
LIABILITIES AND EQUITY
LIABILITIES
Financial liabilities
Derivative financial instruments 12 898.51 –
Trade payables 13
Total outstanding dues of micro enterprises and small enterprises – –
Total outstanding dues of creditors other than micro enterprises and small 1,561.87 830.89
enterprises
Debt securities 14 163,956.78 86,020.70
Borrowings (Other than debt securities) 15 229,247.10 206,128.26
Other financial liabilities 16 4,230.33 5,191.61
399,894.59 298,171.46
Non-financial liabilities
Provisions 17 1,763.58 1,402.98
Deferred tax liabilities (net) 31 97.72 –
Other non-financial liabilities 18 668.86 403.31
2,530.16 1,806.29
EQUITY
Equity share capital 19 8,792.15 8,747.79
Other equity 20 149,439.35 141,894.93
Equity attributable to the owners of the Company 158,231.50 150,642.72
Non-controlling interest 21 9,060.22 9,128.40
Total equity 167,291.72 159,771.12
Total liabilities and equity 569,716.47 459,748.87
Significant accounting policies 2 and 3
The notes referred to above form an integral part of consolidated financial statements
As per our report of even date attached
for B S R & Co. LLP for and on behalf of the board of directors of
Chartered Accountants Northern Arc Capital Limited
Firm’s Registration no.: 101248W/W-100022 CIN: U65910TN1989PLC017021
The notes referred to above form an integral part of consolidated financial statements
As per our report of even date attached
for B S R & Co. LLP for and on behalf of the board of directors of
Chartered Accountants Northern Arc Capital Limited
Firm’s Registration no.: 101248W/W-100022 CIN: U65910TN1989PLC017021
As at As at
Particulars Note
March 31, 2021 March 31, 2020
Notes to cash flow statement
1 Components of cash and cash equivalents: 4
Balances with banks
- in current accounts 33,175.57 29,318.99
- in deposit accounts free of lien 6,634.69 4,002.72
39,810.26 33,321.71
2 The above cashflow statement has been prepared under the “indirect
method” as set out in the Ind AS-7 on statement of cashflows specified
under section 133 of the Companies Act, 2013.
Significant accounting policies 2 and 3
The notes referred to above form an integral part of consolidated financial statements
As per our report of even date attached
for B S R & Co. LLP for and on behalf of the board of directors of
Chartered Accountants Northern Arc Capital Limited
Firm’s Registration no.: 101248W/W-100022 CIN: U65910TN1989PLC017021
Equity Share capital of INR 10 each Issued, Subscribed and Fully paid
Balance as at March 31, 2019 7,836.57
Changes in equity share capital during the year 911.22
Balance as at March 31, 2020 8,747.79
Changes in equity share capital during the year 44.36
Balance as at March 31, 2021 8,792.15
B. Other Equity
Other equity
Compulsorily Reserves and surplus Other Comprehensive Income (OCI) Total Total Non-
Other equity
Compulsorily Reserves and surplus Other Comprehensive Income (OCI) Total Total Non-
Convertible Employee Remeasurements attributable Controlling
Capital Financial Cash Flow Total
Preference Statutory Capital Securities Stock Options Retained of Defined to Owners of Interest
Shares (CCPS) Redemption Instruments Hedge the Company (NCI)
Reserve Reserve Premium Outstanding Earnings Benefit
Reserve through OCI Reserve
Account Obligations
Change in equity for the year
ended March 31, 2021
Premium received on shares – – – – 556.61 (386.91) – – – – 169.71 – 169.71
issued during the year
Distribution to the NCI – – – – – – – – – – – (835.88) (835.88)
including dividend distribution
tax
Profit for the year – – – – – – 6,751.43 – – – 6,751.43 907.80 7,659.23
Transfer to statutory reserve – 1,121.00 – – – – (1,121.00) – – – – – –
Employee stock compensation – – – – – 163.02 – – – – 163.02 – 163.02
expense
Remeasurement of net – – – – – – – – – 36.17 36.17 – 36.17
defined benefit liability
Reclassification of – – – – – – 36.17 – – (36.17) – – –
remeasurement of net defined
liability
Fair valuation of financial – – – – – – – 806.32 (382.22) – 424.10 (140.11) 283.99
instruments (net)
Balance as at March 31, 2021 8,264.64 9,890.76 3,467.00 3.57 83,897.43 2,297.82 37,462.25 4,538.08 (382.22) – 149,439.35 9,060.22 158,499.57
157
Northern Arc Capital Limited
Notes to the Consolidated Financial Statements for the year ended March 31, 2021
(All amounts are in Indian Rupees in lakhs, except share data and unless otherwise stated)
1 Reporting entity and NACL have invested. NACL evaluated the existence
Northern Arc Capital Limited (“the Holding Company of control on these AIFs in accordance with Ind AS 110
or “the Company”), was incorporated on March 9, 1989 (Consolidated Financial Statements) and consolidated
and is registered as a non-deposit taking Non-Banking the following AIFs in accordance with Ind AS 110.
Finance Company (NBFC). The Company has received
Name of the AIF Years of consolidation
the Certificate of Registration dated August 8, 2013
in lieu of Certificate of Registration dated June 24, IFMR FImpact Year ended Year ended
1999 from the Reserve Bank of India (“RBI”) to carry Long Term Credit March 31, 2021 March 31, 2020
on the business of Non Banking Financial Institution Fund
without accepting public deposits (“NBFC-ND”). Northern Arc Not applicable Until August 08,
The Company’s registered address is No. 1, Kanagam Money Market 2019#
Village, 10th Floor IITM Research Park, Taramani Alpha Trust Fund
Chennai TN 600113. The Company was formerly known
Northern Arc Capital Limited, Northern Arc Investment
as IFMR Capital Finance Limited. The Company has
Adviser Services Private Limited, Northern Arc
obtained a revised Certificate of Registration from the
Investment Managers Private Limited and the above
RBI dated March 8, 2018 for name change.
mentioned AIFs to the extent consolidated as above
The Company’s objective is to provide liquidity and are together referred to as “Group”.
develop access to debt-capital markets for institutions
#The Group lost control over the Fund and had derecognized
that impact financially excluded households and the assets and liabilities and related Non controlling interest.
enterprises. The investment retained in the Fund has been measured at fair
The Company has 2 wholly owned subsidiaries value.
Northern Arc Investment Adviser Services Private 2 Basis of preparation
Limited which is in the business of facilitating
investments and act as advisors to provide financial/ 2.1 Statement of compliance
investment advice to both Indian and foreign investors These consolidated financial statements have been
and Northern Arc Investment Managers Private Limited prepared in accordance with Indian Accounting
which is carrying on the business of investment Standards (Ind AS) as per the Companies (Indian
company and also to provide portfolio management Accounting Standards) Rules, 2015 as amended from
services to offshore funds and all kinds of Investment time to time, notified under Section 133 of Companies
Funds. Act, 2013 (the ‘Act’) and other relevant provisions of
The Group structure is as follows: the Act.
2.3 Functional and presentation currency recognised in the consolidated financial statements is
These consolidated financial statements are presented included in the following notes:
in Indian Rupees (INR), which is also the Group’s i) Business model assessment
functional currency. All amounts have been rounded-
off to the nearest lakhs(two decimals), unless Classification and measurement of financial assets
otherwise indicated. depends on the results of business model test
and the solely payments of principal and interest
2.4 Basis of measurement (‘SPPI’) test. The Group determines the business
The consolidated financial statements have been model at a level that reflects how groups of
prepared on the historical cost basis except for the financial assets are managed together to achieve
following items: a particular business objective. This assessment
includes judgement reflecting all relevant evidence
Items Measurement basis including how the performance of the assets is
evaluated and their performance measured, the
Certain financial assets and liabilities Fair value risks that affect the performance of the assets and
(including derivatives instruments) how these are managed and how the managers of
Liabilities for equity-settled share- Fair value the assets are compensated. The Group monitors
based payment arrangements financial assets measured at amortised cost or fair
value through other comprehensive income or fair
Net defined benefit (asset)/ liability Fair value of plan value through profit and loss that are derecognised
assets less present
prior to their maturity to understand the reason
value of defined
benefit obligations for their disposal and whether the reasons are
consistent with the objective of the business for
2.5 Use of estimates and judgements which the asset was held. Monitoring is part of the
The preparation of the consolidated financial Group’s continuous assessment of whether the
statements in conformity with Ind AS requires business model for which the remaining financial
management to make estimates, judgments and assets are held continues to be appropriate and
assumptions. These estimates, judgments and if it is not appropriate whether there has been
assumptions affect the application of accounting a change in the business model and if so, a
policies and the reported amounts of assets and prospective change to the classification of those
liabilities, the disclosures of contingent assets and assets.
liabilities at the date of the financial statements and ii) Fair value of financial instruments
reported amounts of revenues and expenses during
the period. Accounting estimates could change from The fair value of financial instruments is the price
period to period. Actual results could differ from those that would be received to sell an asset or paid
estimates. Estimates and underlying assumptions are to transfer a liability in an orderly transaction
reviewed on an ongoing basis. Appropriate changes in in the principal (or most advantageous) market
estimates are made as management becomes aware of at the measurement date under current market
changes in circumstances surrounding the estimates. conditions (i.e. an exit price) regardless of whether
Changes in estimates are reflected in the financial that price is directly observable or estimated using
statements in the period in which changes are made another valuation technique. When the fair values
and, if material, their effects are disclosed in the notes of financial assets and financial liabilities recorded
to the consolidated financial statements. in the balance sheet cannot be derived from active
markets, they are determined using a variety
Estimation of uncertainties relating to the global of valuation techniques that include the use of
health pandemic from novel coronavirus 2019 valuation models. The inputs to these models are
(“COVID-19”): taken from observable markets where possible, but
The Group has considered the possible effects that where this is not feasible, estimation is required in
may result from the pandemic relating to COVID-19 establishing fair values.
on the carrying amounts of loans and investments. In iii) Effective Interest Rate (‘EIR’) method
developing the assumptions relating to the possible
future uncertainties in the global economic conditions The Group’s EIR methodology recognises interest
because of this pandemic, the Group, as at the date income / expense using a rate of return that
of approval of these financial statements has used represents the best estimate of a constant rate
internal and external sources of information including of return over the expected behavioural life of
credit reports and related information, economic loans given / taken and recognises the effect of
forecasts. The impact of COVID-19 on the Group’s potentially different interest rates at various stages
financial statements may differ from that estimated as and other characteristics of the product life cycle
at the date of approval of these consolidated financial (including prepayments and penalty interest and
statements. charges).
Information about judgements, estimates and This estimation, by nature, requires an element of
assumptions made in applying accounting policies judgement regarding the expected behaviour and
that have the most significant effects on the amounts life-cycle of the instruments, as well as expected
changes to interest rates and other fee income/
expense that are integral parts of the instrument. These estimates and judgements are based
on historical experience and other factors,
iv) Impairment of financial assets
including expectations of future events that
The measurement of impairment losses across all may have a financial impact on the Group and
categories of financial assets requires judgement, that are believed to be reasonable under the
in particular, the estimation of the amount and circumstances. Management believes that the
timing of future cash flows and collateral values estimates used in preparation of the consolidated
when determining impairment losses and the financial statements are prudent and reasonable.
assessment of a significant increase in credit risk.
vi) Other assumptions and estimation uncertainties
These estimates are driven by a number of factors,
changes in which can result in different levels of Information about critical judgements in applying
allowances. accounting policies, as well as estimates and
assumptions that have the most significant effect
The Group’s expected credit loss (‘ECL)
to the carrying amounts of assets and liabilities
calculations are outputs of complex models
within the next financial year are included in the
with a number of underlying assumptions
following notes:
regarding the choice of variable inputs and their
interdependencies. Elements of the ECL models a) Measurement of defined benefit obligations:
that are considered accounting judgements and key actuarial assumptions;
estimates include :
b) Estimated useful life of property, plant and
a) The Group’s criteria for assessing if there has equipment and intangible assets;
been a significant increase in credit risk and
c) Recognition of deferred taxes;
so allowances for financial assets should be
measured on a life time expected credit loss d) Upfront recognition of Excess Interest Spread
(‘LTECL’) basis. (EIS) in relation to assignment transactions.
b) Development of ECL models, including the 2.6 Basis of Consolidation
various formulas and the choice of inputs. i) Subsidiaries
c) Determination of associations between Subsidiaries are entities controlled by the Holding
macroeconomic scenarios and economic Company. Holding Company controls an entity
inputs, such as consumer spending, lending when it is exposed to, or has rights to, variable
interest rates and collateral values, and returns from its involvement with the entity and
the effect on probability of default (‘PD’), has the ability to affect those returns through its
exposure at default (‘EAD’) and loss given power over the entity. The financial statements
default (‘LGD’). of subsidiaries are included in the consolidated
d) Selection of forward-looking macroeconomic financial statements from the date on which
scenarios and their probability weightings, to control commences until the date on which control
derive the economic inputs into ECL models. ceases.
v) Provisions and other contingent liabilities ii) Non-controlling interests (NCI)
The Holding Company operates in a regulatory NCI are measured at their proportionate share of
and legal environment that, by nature, has a the acquiree’s net identifiable assets at the date of
heightened element of litigation risk inherent to acquisition.
its operations. As a result, it is involved in various Changes in the Group’s equity interest in a
litigation, arbitration and regulatory inspections in subsidiary that do not result in a loss of control are
the ordinary course of the Group’s business. accounted for as equity transactions.
When the Group can reliably measure the outflow iii) Loss of control
of economic benefits in relation to a specific case
including commercial/ contractual arrangements When the Group loses control over a subsidiary,
and considers such outflows to be probable, the it derecognises the assets and liabilities of
group records a provision against the case. Where the subsidiary, and any related NCI and other
the outflow is considered to be probable, but a components of equity. Any interest retained in the
reliable estimate cannot be made, a contingent former subsidiary is measured at fair value at the
liability is disclosed. date the control is lost. Any resulting gain or loss is
recognised in profit or loss.
Given the subjectivity and uncertainty of
determining the probability and amount of losses, iv) Transactions eliminated on consolidation
the Group takes into account a number of factors Intra-group balances and transactions, and any
including legal advice, the stage of the matter unrealised income and expenses arising from
and historical evidence from similar incidents. intra-group transactions, are eliminated. Unrealised
Significant judgement is required to conclude on gains arising from transactions with equity
these estimates. accounted investees are eliminated against the
investment to the extent of the Group’s interest in or premium on acquisition, fees and costs that are an
the investee. Unrealised losses are eliminated in integral part of the EIR. The Group recognises interest
the same way as unrealised gains, but only to the income using a rate of return that represents the best
extent that there is no evidence of impairment. estimate of a constant rate of return over the expected
life of the financial instrument.
3 Significant accounting policies
If expectations regarding the cash flows on the
3.1 Revenue Recognition
financial asset are revised for reasons other than credit
Revenue (other than for those items to which Ind AS risk, the adjustment is booked as a positive or negative
109 - Financial Instruments are applicable) is measured adjustment to the carrying amount of the asset in the
at fair value of the consideration received or receivable. balance sheet with an increase or reduction in interest
Ind AS 115 - Revenue from contracts with customers income. The adjustment is subsequently amortised
outlines a single comprehensive model of accounting through interest income in the statement of profit and
for revenue arising from contracts with customers loss.
and supersedes current revenue recognition guidance
found within other Ind ASs. The Group calculates interest income by applying EIR
to the gross carrying amount of financial assets other
The Group recognises revenue from contracts with than credit impaired assets.
customers based on a five step model as set out in Ind
AS 115 : When a financial asset becomes credit impaired and is,
therefore, regarded as ‘stage 3’, the Group calculates
Step 1: Identify contract(s) with a customer: interest income on the net basis. If the financial asset
A contract is defined as an agreement cures and is no longer credit impaired, the Group
between two or more parties that creates reverts to calculating interest income on a gross basis.
enforceable rights and obligations and sets B. Interest income on deposits
out the criteria for every contract that must
be met. Interest income on deposits is recognised on a time
proportionate basis.
Step 2: Identify performance obligations in the
contract: A performance obligation is a C. Fees and commission income
promise in a contract with a customer to Fees and commission income such as guarantee
transfer a good or service to the customer. commission, professional fee, service income etc. are
Step 3: Determine the transaction price: The recognised on point in time or over the period basis, as
transaction price is the amount of applicable.
consideration to which the Group expects D. Dividend income
to be entitled in exchange for transferring
promised goods or services to a customer, Dividend income (including from FVOCI investments)
excluding amounts collected on behalf of is recognised when the Group’s right to receive
third parties. the payment is established, it is probable that the
economic benefits associated with the dividend will
Step 4: Allocate the transaction price to the flow to the Group and the amount of the dividend
performance obligations in the contract: can be measured reliably. This is generally when the
For a contract that has more than one shareholders approve the dividend.
performance obligation, the Group
allocates the transaction price to each E. Other income
performance obligation in an amount that All items of other income is recognized on an accrual
depicts the amount of consideration to basis, when there is no uncertainty in the ultimate
which the Group expects to be entitled in realisation / collection.
exchange for satisfying each performance
obligation. 3.2 Financial instruments - initial recognition
Step 5: Recognise revenue when (or as) the Group A. Date of recognition
satisfies a performance obligation. Debt securities issued are initially recognised when
they are originated. All other financial assets and
A. Effective Interest Rate (‘EIR’) Method financial liabilities are initially recognised when the
Under Ind AS 109, interest income is recorded using Group becomes a party to the contractual provisions of
the effective interest rate method for all financial the instrument.
instruments measured at amortised cost, and financial
instruments measured at Fair value through other B. Initial measurement of financial instruments
comprehensive income (FVOCI) . The EIR is the rate The classification of financial instruments at initial
that exactly discounts estimated future cash receipts recognition depends on their contractual terms and
through the expected life of the financial instrument or, the business model for managing the instruments.
when appropriate, a shorter period, to the net carrying Financial instruments are initially measured at their
amount of the financial asset. fair value, except in the case of financial assets and
financial liabilities recorded at FVTPL, transaction costs
The EIR (and therefore, the amortised cost of the
are added to, or subtracted from this amount.
asset) is calculated by taking into account any discount
C. Measurement categories of financial assets and Accordingly, financial assets are measured as follows:
liabilities
i) Financial assets carried at amortised cost (AC)
The Group classifies all of its financial assets based on
the business model for managing the assets and the A financial asset is measured at amortised cost if
asset’s contractual terms, measured at either: it is held within a business model whose objective
is to hold the asset in order to collect contractual
i) Amortised cost cash flows and the contractual terms of the
ii) Fair value through other comprehensive income financial asset give rise on specified dates to cash
(‘FVOCI’) flows that are solely payments of principal and
interest on the principal amount outstanding.
iii) Fair value through profit and loss (‘FVTPL’)
ii) Financial assets at fair value through other
3.3 Financial assets and liabilities comprehensive income (FVOCI)
A. Financial assets A financial asset is measured at FVOCI if it is
Business model assessment held within a business model whose objective is
achieved by both collecting contractual cash flows
The Group determines its business model at the level and selling financial assets and the contractual
that best reflects how it manages groups of financial terms of the financial asset give rise on specified
assets to achieve its business objective. dates to cash flows that are solely payments of
The Group’s business model is not assessed on an principal and interest on the principal amount
instrument-by-instrument basis, but at a higher level outstanding. Since the loans and advances are held
of aggregated portfolios and is based on observable for sale and collect contractual cash flows, they are
factors such as: measured at FVOCI.
a) How the performance of the business model and iii) Financial assets at fair value through profit or
the financial assets held within that business model loss (FVTPL)
are evaluated and reported to the Group’s key A financial asset which is not classified in any of
management personnel. the above categories are measured at FVTPL.
b) The risks that affect the performance of the Subsequent changes in fair value are recognised in
business model (and the financial assets held the statement of profit and loss. The Group records
within that business model) and, in particular, the investments in alternative investment funds, mutual
way those risks are managed. funds and treasury bills at FVTPL.
c) How managers of the business are compensated iv) Investment in subsidiaries
(for example, whether the compensation is based The Group has accounted for its investments in
on the fair value of the assets managed or on the subsidiaries at cost.
contractual cash flows collected).
B. Financial liabilities
d) The expected frequency, value and timing of
sales are also important aspects of the Group’s i) Initial recognition and measurement
assessment. All financial liabilities are initially recognized at
Sole Payments of Principal and Interest (SPPI) test fair value. Transaction costs that are directly
attributable to the acquisition or issue of financial
As a second step of its classification process, the Group liability, which are not at fair valued through profit
assesses the contractual terms of financial assets to or loss, are adjusted to the fair value on initial
identify whether they meet SPPI test. ‘Principal’ for the recognition.
purpose of this test is defined as the fair value of the
financial asset at initial recognition and may change ii) Subsequent measurement
over the life of financial asset (for example, if there Financial liabilities are carried at amortized cost
are repayments of principal or amortisation of the using the Effective Interest Rate Method.
premium/ discount). The most significant elements of
interest within a lending arrangement are typically the 3.4 Reclassification of financial assets and liabilities
consideration for the time value of money and credit The Group does not reclassify its financial assets
risk. To make the SPPI assessment, the Group applies subsequent to their initial recognition, apart from the
judgement and considers relevant factors such as the exceptional circumstances in which the Group acquires,
period for which the interest rate is set. disposes of, or terminates a business line. Financial
In contrast, contractual terms that introduce a more liabilities are never reclassified.
than de minimis exposure to risks or volatility in the
3.5 Derecognition of financial assets and liabilities
contractual cash flows that are unrelated to a basic
lending arrangement do not give rise to contractual A. Derecognition of financial assets due to substantial
cash flows that are solely payments of principal and modification of terms and conditions
interest on the amount outstanding. In such cases, the The Group derecognises a financial asset when the
financial asset is required to be measured at FVTPL. terms and conditions have been renegotiated to the
extent that, substantially, it becomes a new loan, with Expected credit losses are measured through a loss
the difference recognised as a derecognition gain or allowance at an amount equal to:
loss, to the extent that an impairment loss has not
i) The 12-months expected credit losses (expected
already been recorded. The newly recognised loans are
credit losses that result from those default events
classified as Stage 1 for ECL measurement purposes.
on the financial instrument that are possible within
B. Derecognition of financial instruments other than due 12 months after the reporting date); or
to substantial modification ii) Lifetime expected credit losses (expected credit
i) Financial Assets losses that result from all possible default events
over the life of the financial instrument)
A financial asset (or, where applicable, a part of a
financial asset or part of a group of similar financial Both LTECLs and 12 months ECLs are calculated on
assets) is derecognised when the contractual collective basis.
rights to the cash flows from the financial asset
Based on the above, the Group categorises its financial
expires or it transfers the rights to receive the
assets into Stage 1, Stage 2 and Stage 3, as described
contractual cash flows in a transaction in which
below:
substantially all of the risks and rewards of
ownership of the financial asset are transferred
Stage 1: When financial assets are first recognised,
or in which the Group neither transfers nor
the Group recognises an allowance based
retains substantially all of the risks and rewards
on 12-months ECL. Stage 1 financial assets
of ownership and it does not retain control of the
includes those financial assets where there
financial asset.
is no significant increase in credit risk
On derecognition of a financial asset in its entirety, observed and also includes facilities where
the difference between the carrying amount credit risk has been improved and the
(measured at the date of derecognition) and financial asset has been reclassified from
the consideration received (including any new stage 2 or stage 3.
asset obtained less any new liability assumed) is
Stage 2: When a financial asset has shown a
recognised in the statement of profit and loss.
significant increase in credit risk since
Accordingly, gain on sale or derecognition of initial recognition, the Group records an
assigned portfolio are recorded upfront in the allowance for the life time ECL. Stage 2
statement of profit and loss as per Ind AS 109. financial assets also includes facilities where
Also, the Group recognises servicing income as a the credit risk has improved and the loan
percentage of interest spread over tenure of loan has been reclassified from stage 3.
in cases where it retains the obligation to service Stage 3: Financial assets are considered credit
the transferred financial asset. impaired if they are past due for more than
ii) Financial Liability 90 days. The Group records an allowance
for life time ECL.
A financial liability is derecognised when the
obligation under the liability is discharged, B. Calculation of ECLs
cancelled or expires. Where an existing financial The mechanics of ECL calculations are outlined below
liability is replaced by another from the same and the key elements are, as follows:
lender on substantially different terms, or the
terms of an existing liability are substantially PD:
modified, such an exchange or modification Probability of Default (“PD”) is an estimate of the
is treated as a derecognition of the original likelihood of default over a given time horizon. A
liability and the recognition of a new liability. default may only happen at a certain time over the
The difference between the carrying value of the assessed period, if the facility has not been previously
original financial liability and the consideration derecognised and is still in the portfolio.
paid is recognised in the statement of profit and
loss. EAD:
Exposure at Default (“EAD”) is an estimate of the
3.6 Impairment of financial assets
exposure at a future default date, taking into account
A. Overview of Expected Credit Loss (‘ECL’) principles expected changes in the exposure after the reporting
In accordance with Ind AS 109, the Group uses ECL date, including repayments of principal and interest.
model, for evaluating impairment of financial assets
LGD:
other than those measured at fair value through
profit and loss (FVTPL). When estimating LTECLs for Loss Given Default (“LGD”) is an estimate of the
undrawn loan commitments, the Group estimates the loss arising in the case where a default occurs at a
expected portion of the loan commitment that will given time. It is based on the difference between the
be drawn down over its expected life. The ECL is then contractual cash flows due and those that the lender
based on the present value of the expected shortfalls in would expect to receive, including from the realisation
cash flows if the loan is drawn down. of any collateral. It is usually expressed as a percentage
of the EAD.
The Group has calculated PD, EAD and LGD to 3.8 Determination of fair value
determine impairment loss on the portfolio of financial Fair value is the price that would be received to sell
assets and discounted at an EIR. At every reporting an asset or paid to transfer a liability in an orderly
date, the above calculated PDs, EAD and LGDs are transaction between market participants at the
reviewed and changes in the forward looking estimates measurement date, regardless of whether that price
are analysed. is directly observable or estimated using another
The mechanics of the ECL method are summarised valuation technique. In estimating the fair value of an
below: asset or a liability, the Group has taken into account
the characteristics of the asset or liability as if market
Stage 1: The 12 months ECL is calculated as the participants would take those characteristics into
portion of LTECLs that represent the account when pricing the asset or liability at the
ECLs that result from default events on a measurement date.
financial instrument that are possible within In addition, for financial reporting purposes, fair
the 12 months after the reporting date. value measurements are categorised into Level 1,
The Group calculates the 12 months ECL 2, or 3 based on the degree to which the inputs to
allowance based on the expectation of a the fair value measurements are observable and the
default occurring in the 12 months following significance of the inputs to the fair value measurement
the reporting date. These expected in its entirety, which are described as follows:
12-months default probabilities are applied
to a forecast EAD and multiplied by the Level 1 financial instruments: Those where the inputs
expected LGD and discounted by the used in the valuation are unadjusted quoted prices
original EIR. from active markets for identical assets or liabilities
that the Group has access to at the measurement date.
Stage 2: When a financial asset has shown a The Group considers markets as active only if there are
significant increase in credit risk since sufficient trading activities with regards to the volume
origination, the Group records an allowance and liquidity of the identical assets or liabilities and
for the LTECLs. The mechanics are similar when there are binding and exercisable price quotes
to those explained above, but PDs and available on the balance sheet date;
LGDs are estimated over the lifetime of the
instrument. The expected cash shortfalls Level 2 financial instruments: Those where the
are discounted by the original EIR. inputs that are used for valuation and are significant,
are derived from directly or indirectly observable
Stage 3: For financial assets considered credit-
market data available over the entire period of the
impaired, the Group recognises the lifetime
instrument’s life. Such inputs include quoted prices for
expected credit losses for these loans. The
similar assets or liabilities in active markets, quoted
method is similar to that for Stage 2 assets,
prices for identical instruments in inactive markets and
with the PD set at 100%.
observable inputs other than quoted prices such as
C. Financial assets measured at FVOCI interest rates and yield curves, implied volatilities, and
credit spreads; and
The ECLs for financial assets measured at FVOCI do
not reduce the carrying amount of these financial Level 3 financial instruments : Those that include one
assets in the balance sheet, which remains at fair value. or more unobservable input that is significant to the
Instead, an amount equal to the allowance that would measurement as whole.
arise if the assets were measured at amortised cost
is recognised in OCI as an accumulated impairment 3.9 Foreign currency transactions
amount, with a corresponding charge to profit or loss. Transactions in foreign currencies are translated into
The accumulated loss recognised in OCI is recycled to the functional currency of the Group, at the exchange
the profit and loss upon derecognition of the assets. rates at the dates of the transactions or an average rate
if the average rate approximates the actual rate at the
D. Forward looking information date of the transaction.
In its ECL models, the Group relies on forward looking
Monetary assets and liabilities denominated in foreign
macro parameters such as consumer spending and
currencies are translated into the functional currency at
interest rates to estimate the impact on probability of
the exchange rate at the reporting date. Non-monetary
the default at a given point of time.
assets and liabilities that are measured at fair value in
3.7 Write-offs a foreign currency are translated into the functional
The gross carrying amount of a financial asset is currency at the exchange rate when the fair value was
written-off when there is no reasonable expectation determined. Non-monetary assets and liabilities that
of recovering the asset. If the amount to be written are measured based on historical cost in a foreign
off is greater than the accumulated loss allowance, currency are translated at the exchange rate at the
the difference is first treated as an addition to the date of the transaction. Exchange differences are
allowance that is then applied against the gross recognized in profit or loss.
carrying amount. Any subsequent recoveries are 3.10 Property, plant and equipment
credited to impairment on financial instruments in the
i. Recognition and measurement
statement of profit and loss.
Items of property, plant and equipment are
Subsequent expenditure is capitalised only if it Amortisation method, useful lives and residual
is probable that the future economic benefits values are reviewed at the end of each financial
associated with the expenditure will flow to the year and adjusted if appropriate.
Group.
3.12 Employee benefits
iii. Depreciation
i. Post-employment benefits
Depreciation is calculated on cost of items of
property, plant and equipment less their estimated Defined contribution plan
residual values over their estimated useful lives The Group’s contribution to provident fund are
using the written down value method, and is considered as defined contribution plan and are
generally recognised in the statement of profit and charged as an expense as they fall due based
loss. on the amount of contribution required to be
made and when the services are rendered by the
The Group follows estimated useful lives which
employees.
are given under Part C of the Schedule II of the
Companies Act, 2013. The estimated useful lives Defined benefit plans
of items of property, plant and equipment are as
Gratuity
follows:
A defined benefit plan is a post-employment
Asset category Estimated Useful life benefit plan other than a defined contribution plan.
The Group’s net obligation in respect of defined
Plant and machinery 15 years benefit plans is calculated separately for each plan
by estimating the amount of future benefit that
Furniture and fittings 10 years employees have earned in the current and prior
periods, discounting that amount and deducting
Office equipment’s 5 years
the fair value of any plan assets.
Computers and accessories 3 years The calculation of defined benefit obligation
is performed annually by a qualified actuary
Servers 6 years
using the projected unit credit method. When
Leasehold improvements are depreciated over the the calculation results in a potential asset for
remaining period of lease or estimated useful life the Group, the recognised asset is limited to the
of the assets, whichever is lower. present value of economic benefits available in
the form of any future refunds from the plan or
Depreciation on additions (disposals) is provided reductions in future contributions to the plan (‘the
on a pro-rata basis i.e. from (upto) the date on asset ceiling’). In order to calculate the present
which asset is ready for use (disposed of). value of economic benefits, consideration is given
3.11 Intangible assets to any minimum funding requirements.
i. Recognition and measurement Remeasurements of the net defined benefit
liability, which comprise actuarial gains and losses
Intangible assets including those acquired by and the effect of the asset ceiling (if any, excluding
the Group are initially measured at cost. Such interest), are recognised in OCI. The Group
intangible assets are subsequently measured determines the net interest expense (income)
at cost less accumulated amortisation and any on the net defined benefit liability (asset) for
accumulated impairment losses. the period by applying the discount rate used
to measure the defined benefit obligation at
the beginning of the annual period to the then- conditions at the vesting date.
net defined benefit liability (asset), taking into
account any changes in the net defined benefit 3.13 Provisions
liability (asset) during the period as a result of A provision is recognised if, as a result of a past
contributions and benefit payments. Net interest event, the Group has a present legal or constructive
expense and other expenses related to defined obligation that can be estimated reliably, and it is
benefit plans are recognised in profit or loss. probable that an outflow of economic benefits will
be required to settle the obligation. Provisions are
When the benefits of a plan are changed or determined by discounting the expected future
when a plan is curtailed, the resulting change in cash flows (representing the best estimate of the
benefit that relates to past service (‘past service expenditure required to settle the present obligation at
cost’ or ‘past service gain’) or the gain or loss on the balance sheet date) at a pre-tax rate that reflects
curtailment is recognised immediately in profit or current market assessments of the time value of money
loss. The Group recognises gains and losses on and the risks specific to the liability. The unwinding of
the settlement of a defined benefit plan when the the discount is recognised as finance cost. Expected
settlement occurs. future operating losses are not provided for.
ii. Other long-term employee benefits
3.14 Leases
Compensated absences Lease liabilities are measured at the present value
The employees can carry forward a portion of the of the contractual payments due to the lessor over
unutilised accrued compensated absences and the lease term, with the discount rate determined by
utilise it in future service periods or receive cash reference to the rate inherent in the lease unless (as
compensation on termination of employment. is typically the case) this is not readily determinable,
Since the compensated absences do not fall due in which case the Group’s incremental borrowing rate
wholly within twelve months after the end of on commencement of the lease is used. Variable lease
such period, the benefit is classified as a long- payments are only included in the measurement of
term employee benefit. The Group records an the lease liability if they depend on an index or rate. In
obligation for such compensated absences in the such cases, the initial measurement of the lease liability
period in which the employee renders the services assumes the variable element will remain unchanged
that increase this entitlement. The obligation is throughout the lease term. Other variable lease
measured on the basis of independent actuarial payments are expensed in the period to which they
valuation using the projected unit credit method. relate.
iii. Short-term employee benefits On initial recognition, the carrying value of the lease
liability also includes:
The undiscounted amount of short-term employee
benefits expected to be paid in exchange for the - amounts expected to be payable under any
services rendered by employees are recognized residual value guarantee;
during the year when the employees render the - the exercise price of any purchase option granted
service. These benefits include performance in favour of the Group if it is reasonably certain to
incentive and compensated absences which are assess that option;
expected to occur within twelve months after the
end of the year in which the employee renders - any penalties payable for terminating the lease, if
the related service. The cost of such compensated the term of the lease has been estimated on the
absences is accounted as under : basis of termination option being exercised.
(a) in case of accumulated compensated Right-of-use assets are initially measured at the
absences, when employees render the services amount of the lease liability, reduced for any lease
that increase their entitlement of future incentives received, and increased for:
compensated absences; and - lease payments made at or before commencement
(b) in case of non-accumulating compensated of the lease;
absences, when the absences occur.” - initial direct costs incurred; and
iv. Stock based compensation - the amount of any provision recognised where
The grant date fair value of equity settled share the Group is contractually required to dismantle,
based payment awards granted to employees remove or restore the leased asset”
is recognised as an employee expense, with a Subsequent to initial measurement lease liabilities
corresponding increase in equity, over the period increase as a result of interest charged at a constant
that the employees unconditionally become rate on the balance outstanding and are reduced
entitled to the awards. The amount recognised as for lease payments made. Right-of-use assets are
expense is based on the estimate of the number amortised on a straight-line basis over the remaining
of awards for which the related service and non- term of the lease or over the remaining economic life of
market vesting conditions are expected to be met, the asset if, rarely, this is judged to be shorter than the
such that the amount ultimately recognised as an lease term.
expense is based on the number of awards that do
meet the related service and non-market vesting When the Group revises its estimate of the term of
any lease, it adjusts the carrying amount of the lease they will not reverse in the foreseeable future;
liability to reflect the payments to make over the and
revised term, which are discounted using a revised
- taxable temporary differences arising on the
discount rate. The carrying value of lease liabilities is
initial recognition of goodwill.
similarly revised when the variable element of future
lease payments dependent on a rate or index is Deferred tax assets are recognised to the extent
revised, except the discount rate remains unchanged. that it is probable that future taxable profits will
In both cases an equivalent adjustment is made to be available against which they can be used. The
the carrying value of the right-of-use asset, with the existence of unused tax losses is strong evidence
revised carrying amount being amortised over the that future taxable profit may not be available.
remaining (revised) lease term. If the carrying amount Therefore, in case of a history of recent losses,
of the right-of-use asset is adjusted to zero, any further the Group recognises a deferred tax asset only to
reduction is recognised in statement of profit and loss. the extent that it has sufficient taxable temporary
differences or there is convincing other evidence
For contracts that both convey a right to the Group
that sufficient taxable profit will be available
to use an identified asset and require services to be
against which such deferred tax asset can be
provided to the Group by the lessor, the Group has
realised. Deferred tax assets – unrecognised or
elected to account for the entire contract as a lease,
recognised, are reviewed at each reporting date
i.e. it does allocate any amount of the contractual
and are recognised/ reduced to the extent that it is
payments to, and account separately for, any services
probable/ no longer probable respectively that the
provided by the supplier as part of the contract.
related tax benefit will be realised.
3.15 Income tax Deferred tax assets include Minimum Alternate
Income tax comprises current and deferred tax. It is Tax (MAT) paid in accordance with the tax laws
recognised in profit or loss except to the extent that in India, which is likely to give future economic
it relates to a business combination or to an item benefits in the form of availability of set off against
recognised directly in equity or in other comprehensive future income tax liability.
income.
Deferred tax is measured at the tax rates that are
i. Current tax expected to apply to the period when the asset is
realised or the liability is settled, based on the laws
Current tax comprises the expected tax payable
that have been enacted or substantively enacted
or receivable on the taxable income or loss for
by the reporting date.
the year and any adjustment to the tax payable
or receivable in respect of previous years. The The measurement of deferred tax reflects the tax
amount of current tax reflects the best estimate consequences that would follow from the manner
of the tax amount expected to be paid or received in which the Group expects, at the reporting date,
after considering the uncertainty, if any, related to to recover or settle the carrying amount of its
income taxes. It is measured using tax rates (and assets and liabilities.
tax laws) enacted or substantively enacted by the
Deferred tax assets and liabilities are offset if there
reporting date.
is a legally enforceable right to offset current tax
Current tax assets and current tax liabilities are liabilities and assets, and they relate to income
offset only if there is a legally enforceable right to taxes levied by the same tax authority on the same
set off the recognised amounts, and it is intended taxable entity, or on different tax entities, but they
to realise the asset and settle the liability on a net intend to settle current tax liabilities and assets on
basis or simultaneously. a net basis or their tax assets and liabilities will be
realised simultaneously.
ii. Deferred tax
Deferred tax is recognised in respect of temporary 3.16 Borrowing cost
differences between the carrying amounts Borrowing costs are interest and other costs
of assets and liabilities for financial reporting incurred in connection with the borrowings of funds.
purposes and the corresponding amounts used for Borrowing costs directly attributable to acquisition
taxation purposes. Deferred tax is also recognised or construction of an asset which necessarily take
in respect of carried forward tax losses and tax a substantial period of time to get ready for their
credits. Deferred tax is not recognised for: intended use are capitalized as part of the cost of the
asset. Other borrowings costs are recognized as an
- temporary differences arising on the initial
expense in the statement of profit and loss account
recognition of assets or liabilities in a
on an accrual basis using the Effective Interest Rate
transaction that is not a business combination
Method.
and that affects neither accounting nor taxable
profit or loss at the time of the transaction; 3.17 Cash and cash equivalents
- temporary differences related to investments Cash and cash equivalents comprises cash on hand
in subsidiaries, associates and joint and demand deposits with banks. Cash equivalents
arrangements to the extent that the Group is are short-term balances (with an original maturity of
able to control the timing of the reversal of the three months or less from the date of acquisition),
temporary differences and it is probable that highly liquid investments that are readily convertible
into known amounts of cash and which are subject to recognised as a financial asset whereas a derivative
insignificant risk of changes in value. with a negative fair value is recognised as a financial
liability.
3.18 Segment reporting- Identification of segments:
An operating segment is a component of the Group Hedge accounting policy
that engages in business activities from which it may The Group makes use of derivative instruments
earn revenues and incur expenses, whose operating to manage exposures to interest rate and foreign
results are regularly reviewed by the Group’s Chief currency. In order to manage particular risks, the
Operating Decision Maker (CODM) to make decisions Group applies hedge accounting for transactions
for which discrete financial information is available. that meet specific criteria. At the inception of a
Based on the management approach as defined in Ind hedge relationship, the Group formally designates
AS 108, the CODM evaluates the Group’s performance and documents the hedge relationship to which
and allocates resources based on an analysis of various the Group wishes to apply hedge accounting and
performance indicators by business segments and the risk management objective and strategy for
geographic segments. undertaking the hedge. The documentation includes
the Group’s risk management objective and strategy
3.19 Earnings per share for undertaking hedge, the hedging / economic
The Group reports basic and diluted earnings per relationship, the hedged item or transaction, the nature
equity share in accordance with Ind AS 33, Earnings of the risk being hedged, hedge ratio and how the
Per Share. Basic earnings per equity share is computed Group would assess the effectiveness of changes in
by dividing net profit / loss after tax attributable to the hedging instrument’s fair value in offsetting the
the equity share holders for the year by the weighted exposure to changes in the hedged item’s fair value
average number of equity shares outstanding during or cash flows attributable to the hedged risk. Such
the year. Diluted earnings per equity share is computed hedges are expected to be highly effective in achieving
and disclosed by dividing the net profit/ loss after tax offsetting changes in fair value or cash flows and
attributable to the equity share holders for the year are assessed on an on-going basis to determine that
after giving impact of dilutive potential equity shares they actually have been highly effective throughout
for the year by the weighted average number of equity the financial reporting periods for which they were
shares and dilutive potential equity shares outstanding designated.
during the year, except where the results are anti-
dilutive. Cash Flow Hedges
A cash flow hedge is a hedge of the exposure to
3.20 Cash flow statement variability in cash flows that is attributable to a
Cash flows are reported using the indirect method, particular risk associated with a recognised asset or
whereby profit after tax is adjusted for the effects of liability (such as all or some future interest payments
transactions of a non–cash nature and any deferrals or on variable rate debt) or a highly probable forecast
accruals of past or future cash receipts or payments. transaction and could affect profit and loss. For
The cash flows from regular revenue generating, designated and qualifying cash flow hedges, the
financing and investing activities of the Group are effective portion of the cumulative gain or loss on
segregated. Cash flows in foreign currencies are the hedging instrument is initially recognised directly
accounted at the actual rates of exchange prevailing at in OCI within equity (cash flow hedge reserve). The
the dates of the transactions. ineffective portion of the gain or loss on the hedging
instrument is recognised immediately in Finance Cost
3.21 Derivative financial instruments
in the statement of profit and loss. When the hedged
The Group enters into derivative financial instruments cash flow affects the statement of profit and loss, the
to manage its exposure to interest rate risk and foreign effective portion of the gain or loss on the hedging
exchange rate risk. Derivatives held include foreign instrument is recorded in the corresponding income or
exchange forward contracts, interest rate swaps and expense line of the statement of profit and loss. When
cross currency interest rate swaps. a hedging instrument expires, is sold, terminated,
Derivatives are initially recognised at fair value on exercised, or when a hedge no longer meets the criteria
the date when a derivative contract is entered into for hedge accounting, any cumulative gain or loss
and are subsequently remeasured to their fair value that has been recognised in OCI at that time remains
at each balance sheet date. The resulting gain/loss in OCI and is recognised when the hedged forecast
is recognised in the statement of profit and loss transaction is ultimately recognised in the statement
immediately unless the derivative is designated and is of profit and loss. When a forecast transaction is no
effective as a hedging instrument, in which event the longer expected to occur, the cumulative gain or loss
timing of the recognition in the statement of profit and that was reported in OCI is immediately transferred to
loss depends on the nature of the hedge relationship. the statement of profit and loss.
The Group designates certain derivatives as hedges The Group’s hedging policy only allows for effective
of highly probable forecast transactions (cash flow hedging relationships to be considered as hedges
hedges). A derivative with a positive fair value is as per the relevant Ind-AS. Hedge effectiveness
39,810.26 33,321.71
Short-term deposits are made for varying periods of between one day and three months, depending on the immediate
cash requirements of the Group, and earn interest at the respective short-term deposit rates.
5 Bank balances other than cash and cash equivalents
Fixed deposits with bank to the extent held as margin money 2,419.36 2,251.63
6,837.98 7,720.21
Note:
5.1 Fixed deposit with bank includes deposits amounting to INR 1,148.85 lakhs (March 31, 2020 : INR 1,408.63 lakhs)
representing amount received from customers as cash collateral for the loans provided by the Group.
5.2 Fixed deposits amounting to INR 2,419.36 lakhs (March 31, 2020 : INR 2,251.63 lakhs) have been provided as credit
enhancement for securitisation transactions.
6 Trade receivables
Unsecured
1,862.84 901.81
7 Loans
8 Investments
As at March 31, 2021 As at March 31, 2020
Particulars At At
Amortised At FVOCI At FVTPL At Cost Total Amortised At FVOCI At FVTPL At Cost Total
cost cost
Investment in debentures (quoted)
Non-convertible redeemable – 89,086.36 – – 89,086.36 – 74,513.35 – – 74,513.35
debentures
Investment in pass-through
certificates (unquoted)
Investment in pass-through – 15,897.01 – – 15,897.01 – 22,481.44 – – 22,481.44
certificates
Investment in Other approved
securities
Alternative investment funds – – 22,494.45 – 22,494.45 – – 20,406.27 – 20,406.27
(unquoted)
Investment in government securities – – 14,911.03 – 14,911.03 – – – – –
Investment in mutual funds (quoted) – – 740.27 – 740.27 – – 410.49 – 410.49
Investments in subsidiaries, at cost
(Unquoted)
Equity shares of subsidiaries
Northern arc foundation – – – 1.00 1.00 – – – 1.00 1.00
Other investments (Unquoted)
Share warrants – – 1.62 – 1.62 – – 1.62 – 1.62
Sub total – 104,983.37 38,147.37 1.00 143,131.74 – 96,994.79 20,818.38 1.00 117,814.17
Less: Impairment loss allowance for – (4,875.00) – – (4,875.00) – (665.27) – – (665.27)
Investments in India
Total Investments – 100,108.37 38,147.37 1.00 138,256.74 – 96,329.52 20,818.38 1.00 117,148.90
(i) Investments outside India – – – – – – – – – –
(ii) Investments in India – 100,108.37 38,147.37 1.00 138,256.74 – 96,329.52 20,818.38 1.00 117,148.90
Total Investments – 100,108.37 38,147.37 1.00 138,256.74 – 96,329.52 20,818.38 1.00 117,148.90
Gross Balance
Interest
Particulars as at Terms of Redemption Security
rate
March 31, 2021
7500 units (March 31, 2020: nil units) 750.00 Coupon payment frequency: on 10.20% The Debentures are
of 10.2% Redeemable, Market linked maturity secured by way of a
non-convertible debentures of INR Principal repayment frequency: on first ranking, exclusive,
10,000 each, maturing on April 29, maturity and continuing charge
2022 Tenure of security: 1.75 years to the present and
Redemption date: April 29, 2022 future loan receivables
500 units (March 31, 2020: nil 5,000.00 Coupon payment frequency: semi 9.50% The Debentures are
units) of 9.50% Redeemable non- annual secured by way of a
convertible debentures of INR Principal repayment frequency: on first ranking, exclusive,
1,000,000 each, maturing on January maturity and continuing charge
17, 2022 Tenure of security: 1.5 years to the present and
Redemption date: January 17, 2022 future loan receivables
500 units (March 31, 2020: nil 5,000.00 Coupon payment frequency: annually 11.25% The Debentures are
units) of 11.25% Redeemable non- Principal repayment frequency: on secured by way of a
convertible debentures of INR maturity first ranking, exclusive,
1,000,000 each, maturing on June Tenure of security: 3 years and continuing charge
26, 2023 Redemption date: June 26, 2023 to the present and
future loan receivables
500 units (March 31, 2020: nil 4,166.67 Coupon payment frequency: quarterly 10.40% The Debentures are
units) of 10.40% Redeemable Principal repayment frequency: 12 equal secured by way of a
non-convertible debentures of INR quarterly instalment first ranking, exclusive,
833,333 each, maturing on July 13, Tenure of security: 3 years and continuing charge
2023 Redemption date: July 13, 2023 to the present and
future loan receivables
500 units (March 31, 2020: nil 5,000.00 Coupon payment frequency: semi 9.50% The Debentures are
units) of 9.50% Redeemable non- annual secured by way of a
convertible debentures of INR Principal repayment frequency: Maturity first ranking, exclusive,
1,000,000 each, maturing on March Tenure of security: 1.5 years and continuing charge
8, 2022 Redemption date: March 8, 2022 to the present and
future loan receivables
1500 units (March 31, 2020: nil 15,000.00 Coupon payment frequency: semi 9.50% The Debentures are
units) of 9.50% Redeemable non- annual secured by way of a
convertible debentures of INR Principal repayment frequency: Maturity first ranking, exclusive,
1,000,000 each, maturing on March Tenure of security: 1.5 years and continuing charge
14, 2022 Redemption date: March 8, 2022 to the present and
future loan receivables
1000 units (March 31, 2020: nil 10,000.00 Coupon payment frequency: semi 10.45% The Debentures are
units) of 10.45% Redeemable annual secured by way of a
non-convertible debentures of Principal repayment frequency: first ranking, exclusive,
INR 1,000,000 each, maturing on maturity and continuing charge
September 30, 2022 Tenure of security: 2 years to the present and
Redemption date: September 30, 2022 future loan receivables
1500 units (March 31, 2020: nil units) 15,000.00 Coupon payment frequency: semi 9.15% The Debentures are
of 9.15% Redeemable non-convertible annual secured by way of a
debentures of INR 1,000,000 each, Principal repayment frequency: 4 equal first ranking, exclusive,
maturing on May 13, 2022 quarterly instalments and continuing charge
Tenure of security: 1.5 years to the present and
Redemption date: May 13, 2022 future loan receivables
2949 units (March 31, 2020: nil 29,490.00 Coupon payment frequency: semi 9.97% The Debentures are
units) of 9.966% Redeemable annual secured by way of a
non-convertible debentures of Principal repayment frequency: 7 equal first ranking, exclusive,
INR 1,000,000 each, maturing on half-yearly instalments and continuing charge
December 18, 2025 Tenure of security: 5 years to the present and
Redemption date: December 18, 2025 future loan receivables
12500 units (March 31, 2020: nil units) 1,250.00 Coupon payment frequency: on 10.00% The Debentures are
of 10.00% Redeemable, market linked maturity secured by way of a
non-convertible debentures of INR Principal repayment frequency: on first ranking, exclusive,
10,000 each, maturing on March 11, maturity and continuing charge
2022 Tenure of security: 1.25 years to the present and
Redemption date: March 11, 2022 future loan receivables
Gross Balance
Interest
Particulars as at Terms of Redemption Security
rate
March 31, 2021
12500 units (March 31, 2020: nil units) 1,250.00 Coupon payment frequency: on 10.00% The Debentures are
of 10.00% Redeemable, market linked maturity secured by way of a
non-convertible debentures of INR Principal repayment frequency: on first ranking, exclusive,
10,000 each, maturing on June 11, maturity and continuing charge
2022 Tenure of security: 1.5 years to the present and
Redemption date: June 11, 2022 future loan receivables
23200 units (March 31, 2020: nil 2,320.00 Coupon payment frequency: on 9.05% The Debentures are
units) of 9.05% Redeemable, market maturity secured by way of a
linked non-convertible debentures Principal repayment frequency: on first ranking, exclusive,
of INR 10,000 each, maturing on maturity and continuing charge
January 21, 2023 Tenure of security: 2 years to the present and
Redemption date: January 20, 2023 future loan receivables
696 units (March 31, 2020: nil units) 3,480.00 Coupon payment frequency: on 8.95% The Debentures are
of 8.95% Redeemable, market linked maturity secured by way of a
non-convertible debentures of INR Principal repayment frequency: on first ranking, exclusive,
500,000 each, maturing on February maturity and continuing charge
25, 2023 Tenure of security: 2 years to the present and
Redemption date: February 24, 2023 future loan receivables
294 units (March 31, 2020: nil units) 1,470.00 Coupon payment frequency: on 8.90% The Debentures are
of 8.90% Redeemable, market linked maturity secured by way of a
non-convertible debentures of INR Principal repayment frequency: on first ranking, exclusive,
500,000 each, maturing on February maturity and continuing charge
24, 2023 Tenure of security: 2 years to the present and
Redemption date: February 24, 2023 future loan receivables
150 units (March 31, 2020: nil units) 1,500.00 Coupon payment frequency: on 9.30% The Debentures are
of 9.30% Redeemable, market maturity secured by way of a
linked non-convertible debentures Principal repayment frequency: on first ranking, exclusive,
of INR 1,000,000 each, maturing on maturity and continuing charge
September 17, 2022 Tenure of security: 18 Months to the present and
Redemption date: September 16, 2022 future loan receivables
1800 units (March 31, 2020: nil 18,000.00 Coupon payment frequency: semi 9.85% The Debentures are
units) of 9.85% Redeemable non- annually secured by way of a
convertible debentures of INR Principal repayment frequency: on first ranking, exclusive,
1,000,000 each, maturing on March maturity and continuing charge
23, 2026 Tenure of security: 5 Years to the present and
Redemption date: March 23, 2026 future loan receivables
Unsecured, redeemable non-convertible debentures:
28,000,000 units (March 31, 2,800.00 Coupon payment frequency:Monthly 11.60% NA
2020: 30,000,000 units) of 11.6% Principal repayment frequency:Entire
Redeemable non-convertible principal repaid on maturity
debentures of INR 10 each, maturing Tenure of security: 3 years
on Sep 25, 2023 Redemption date:September 25,2023
Unsecured, Commercial Paper:
200 units of 7.99% commercial paper 1,000.00 Tenure of instrument: 181 days 7.99% NA
of INR 500,000 each, maturing on Redemption date: August 9, 2021
Aug 9, 2021
200 units of 7.75% commercial paper 1,000.00 Tenure of instrument: 120 days 7.75% NA
of INR 500,000 each, maturing on Redemption date:June 9, 2021
Jun 9, 2021
400 units of 7.50% commercial paper 2,000.00 Tenure of instrument: 91 days 7.50% NA
of INR 500,000 each, maturing on Redemption date:May 15, 2021
May 15, 2021
200 units of 7.50% commercial paper 1,000.00 Tenure of instrument: 73 days 7.50% NA
of INR 500,000 each, maturing on Redemption date:May 15, 2021
May 15, 2021
500 units of 7.70% commercial paper 2,500.00 Tenure of instrument: 73 days 7.70% NA
of INR 500,000 each, maturing on Redemption date:May 31, 2021
May 31, 2021
500 units of 8.25% commercial paper 2,500.00 Tenure of instrument: 180 days 8.25% NA
of INR 500,000 each, maturing on Redemption date:September 20, 2021
Sep 20, 2021
Gross Balance
Interest
Particulars as at Terms of Redemption Security
rate
March 31, 2021
500 units of 7.7% commercial paper 2,500.00 Tenure of instrument: 62 days 7.70% NA
of INR 500,000 each, maturing on Redemption date:May 31, 2021
May 31, 2021
500 units of 7.7% commercial paper 2,500.00 Tenure of instrument: 61 days 7.70% NA
of INR 500,000 each, maturing on Redemption date:May 31, 2021
May 31, 2021
Note: The balances are net of accrued interest and gross of unamortised processing fees
Note : The Company has not defaulted in the repayment of principal and interest
Gross Balance
Interest
Particulars as at Terms of Redemption Security
rate
March 31, 2021
Term Loan 4 625.00 Repayments terms: Equated 36 month 9.30% Exclusive charge on identified
instalments with no moratorium unencumbered secured standard
Tenor of loan : 3 Years receivables/Book debts (eligible
Redemption date: December 31, 2021 for bank finance as per RBI
guidelines) with an Asset Cover
of at least 1.20 times
Term Loan 5 1,666.67 Repayments terms:12 Equal quarterly 10.55% First and Exclusive charge on
instalments the standard receivables with a
Tenor of loan : 3 Years security cover of 125%.
Redemption date: October 23, 2021
Term Loan 6 833.33 Repayments terms: 12 equal quarterly 10.40% First and Exclusive charge on
instalments the standard receivables with a
Tenor of loan : 3 Years security cover of 115%.
Redemption date: January 9,2022
Term Loan 7 11,666.67 Repayments terms:30 monthly instalments 11.00% First and Exclusive charge on
Tenor of loan : 3 Years the standard receivables with a
Redemption date: May 16, 2022 security cover of 125%.
Term Loan 8 1,818.18 Repayments terms:11 quarterly instalments 11.00% First and Exclusive charge on
Tenor of loan : 3.3 Years the standard receivables with a
Redemption date: March 27, 2022 security cover of 120%.
Term Loan 9 500.00 Repayments terms:24 monthly instalments 11.00% First and Exclusive charge on
Tenor of loan : 2 Years the standard receivables with a
Redemption date: September 24, 2021 security cover of 110%.
Term Loan 10 480.00 Repayments terms:10 quarterly instalments 11.30% First and Exclusive charge on
Tenor of loan : 3 Years the standard receivables with a
Redemption date: September 21, 2022 security cover of 115%.
Term Loan 11 5,000.00 Repayments terms:12 quarterly instalments 10.40% First and Exclusive charge on
Tenor of loan : 2.3 Years the standard receivables with a
Redemption date: March 31, 2023 security cover of 110%.
Term Loan 12 1,125.00 Repayments terms:8 quarterly instalments 11.00% First and Exclusive charge on
Tenor of loan : 2 Years the standard receivables with a
Redemption date: December 31, 2021 security cover of 120%.
Term Loan 13 1,750.00 Repayments terms:36 monthly instalments 9.20% First and Exclusive charge on
Tenor of loan : 3 Years the standard receivables with a
Redemption date: December 31, 2022 security cover of 120%.
Term Loan 14 1,750.00 Repayments terms:36 monthly instalments 11.00% First and Exclusive charge on
Tenor of loan : 3 Years the standard receivables with a
Redemption date: December 31, 2022 security cover of 125%.
Term Loan 15 6,363.91 Repayments terms:11 quarterly installments 10.30% First and Exclusive charge on
Tenor of Security : 2.84 Years the standard receivables with a
Redemption date: December 31, 2022 security cover of 125%.
Term Loan 16 566.67 Repayments terms:35 monthly instalments 11.75% First and Exclusive charge on
Tenor of loan : 3.3 Years the standard receivables with a
Redemption date: January 5, 2023 security cover of 110%.
Term Loan 17 937.50 Repayments terms:8 quarterly instalments 11.25% First and Exclusive charge on
Tenor of loan : 2 Years the standard receivables with a
Redemption date: November 30, 2021 security cover of 115%.
Term Loan 18 2,500.00 Repayments terms:12 quarterly instalments 10.20% First and Exclusive charge on
Tenor of loan : 3 Years the standard receivables with a
Redemption date: December 31, 2022 security cover of 133%.
Term Loan 19 1,000.00 Repayments terms:24 monthly instalments 11.50% First and Exclusive charge on
Tenor of loan : 2 Years the standard receivables with a
Redemption date: March 31, 2022 security cover of 115%.
Term Loan 20 1,666.67 Repayments terms:6 quarterly installments 10.60% First and Exclusive charge on
Tenor of Security : 1.5 Years the standard receivables with a
Redemption date: August 28, 2021 security cover of 120%.
Term Loan 21 3,749.00 Repayments terms:12 quarterly instalments 10.75% First and Exclusive charge on
Tenor of loan : 3 Years the standard receivables with a
Redemption date: April 5, 2023 security cover of 110%.
Gross Balance
Interest
Particulars as at Terms of Redemption Security
rate
March 31, 2021
Term Loan 22 2,916.67 Repayments terms:48 monthly instalments 10.80% First and Exclusive charge on
Tenor of loan : 4 Years the standard receivables with a
Redemption date: March 31, 2024 security cover of 110%.
Term Loan 23 2,906.97 Repayments terms:48 monthly instalments 10.50% First and Exclusive charge on
Tenor of loan : 4 Years the standard receivables with a
Redemption date: March 31, 2024 security cover of 110%.
Term Loan 24 1,992.68 Repayments terms:10 quarterly instalments 11.25% First and Exclusive charge on
Tenor of loan : 3 Years the standard receivables with a
Redemption date: February 2, 2023 security cover of 110%.
Term Loan 25 500.00 Repayments terms:24 monthly instalments 11.25% First and Exclusive charge on
Tenor of loan : 2 Years the standard receivables with a
Redemption date: March 6, 2022 security cover of 110%.
Term Loan 26 6,363.91 Repayments terms:11 quarterly installments 10.30% First and Exclusive charge on
Tenor of Security : 2.84 Years the standard receivables with a
Redemption date: December 31, 2022 security cover of 125%.
Term Loan 27 2,916.67 Repayments terms:12 Monthly instalments 9.30% First and Exclusive charge over
Tenor of loan : 1 Years the loan receivables with a
Redemption date: October 3, 2021 security cover of 115%.
Term Loan 28 500.00 Repayments terms:4 Monthly instalments 6.32% First and Exclusive charge over
Tenor of loan : 5 months the loan receivables with a
Redemption date: April 10, 2021 security cover of 110%.
Term Loan 29 5,000.00 Repayments terms:9 Monthly instalments 9.20% First and Exclusive charge over
Tenor of loan : 1 Years the loan receivables with a
Redemption date: December 31, 2021 security cover of 125%.
Term Loan 30 3,500.00 Repayments terms:12 Quarterly instalments 9.00% First and Exclusive charge over
Tenor of loan : 3.25 Years the loan receivables with a
Redemption date: April 30, 2024 security cover of 110%.
Term Loan 31 20,000.00 Repayments terms:11 Quarterly instalments 8.70% First and Exclusive charge over
Tenor of loan : 2.8 Years the loan receivables with a
Redemption date: December 31, 2023 security cover of 125%.
Term Loan 32 1,437.50 Repayments terms: 24 monthly instalments 9.10% First and Exclusive charge over
Tenor of loan : 2 Years the loan receivables with a
Redemption date: February 28, 2023 security cover of 115%.
Term Loan 33 10,000.00 Repayments terms: 6 quarterly instalments 8.80% First and Exclusive charge over
Tenor of loan : 1.5 Years the loan receivables with a
Redemption date: September 29, 2022 security cover of 120%.
Term Loan 34 2,000.00 Repayments terms: 2 Half Yearly instalments 9.00% First and Exclusive charge over
Tenor of loan : 1 Years the loan receivables with a
Redemption date: March 31, 2022 security cover of 115%.
Term Loan 35 5,000.00 Repayments terms: 18 Monthly instalments 8.95% First and Exclusive charge over
Tenor of loan : 2 Years the loan receivables with a
Redemption date: February 28, 2023 security cover of 120%.
Term Loan 36 3,000.00 Repayments terms: 10 quarterly instalments 9.00% First and Exclusive charge over
Tenor of loan : 33 months the loan receivables with a
Redemption date: October 9, 2023 security cover of 110%.
Term Loan 37 4,000.00 Repayments terms: 36 monthly instalments 8.60% First and Exclusive charge over
Tenor of loan : 3 years the loan receivables with a
Redemption date: March 31, 2024 security cover of 110%.
Term Loan 38 1,500.00 Repayments terms: Repayment on Maturity 10.00% First and Exclusive charge over
Tenor of loan : 30 days the loan receivables with a
Redemption date: May 3, 2021 security cover of 120%.
Term Loan 39 5,000.00 Repayments terms: Repayment on Maturity 9.70% First and Exclusive charge over
Tenor of loan : 180 days the loan receivables with a
Redemption date: May 21, 2021 & June 9,2021 security cover of 120%.
Term Loan 40 3,000.00 Repayments terms: Repayment on Maturity 9.90% First and Exclusive charge over
Tenor of loan : 1 year the loan receivables with a
Redemption date: March 26, 2022 security cover of 110%.
Gross Balance
Interest
Particulars as at Terms of Redemption Security
rate
March 31, 2021
Term Loan 41 2,490.00 Repayments terms: Repayment on Maturity 9.00% First and Exclusive charge over
Tenor of loan : 1 year the loan receivables with a
Redemption date: December 28, 2021 security cover of 110%.
Term Loan 42 4,000.00 Repayments terms: Repayment on Maturity 8.80% First and Exclusive charge over
Tenor of loan : 90 days the loan receivables with a
Redemption date: June 21, 2021 security cover of 110%.
Term Loan 43 5,000.00 Repayments terms: Repayment on Maturity 9.25% First and Exclusive charge over
Tenor of loan : 6 months the loan receivables with a
Redemption date: September 25, 2021 security cover of 120%.
Term Loan 44 3,300.00 Repayments terms: Repayment on Maturity 6.30% Exclusive charge over book debt/
Tenor of loan : 1 year receivables providing security
Redemption date: December 4, 2021 cover of 1.33x.
Term Loan 45 1,500.00 Repayments terms: Repayment on Maturity 8.30% First and Exclusive charge over
Tenor of loan : 3 months the loan receivables with a
Redemption date: June 25, 2021 security cover of 110%.
Term Loan 46 1,500.00 Repayments terms: Repayment on Maturity 9.10% First and Exclusive charge over
Tenor of loan : 3 months the loan receivables with a
Redemption date: June 29, 2021 security cover of 120%.
Gross Balance
Interest
Particulars as at Terms of Redemption Security
rate
March 31, 2021
Term Loan 7 183.52 Repayment Terms: Repayment in 24 monthly 11.85% Exclusive hypothecation charge
instalments over receivables/loan assets/
Tenor: 2 Years book debts with a cover of 1.1
Redemption Date: July 1, 2021 times of the outstanding principal
at any point of time during
currency of the facility.
Term Loan 8 1,156.51 Repayment Terms: Repayment in 11 equal 11.75% Exclusive hypothecation charge
quarterly installments over receivables/loan assets/
Tenor: 2.8 Years book debts with a cover of 1.1
Redemption Date:November 30,2022 times of the outstanding principal
at any point of time during
currency of the facility.
Term Loan 9 325.64 Repayment Terms: Repayment in 24 monthly 11.25% Exclusive hypothecation charge
instalments over receivables/loan assets/
Tenor: 2 Years book debts with a cover of 1.1
Redemption Date: September 27, 2021 times of the outstanding principal
at any point of time during
currency of the facility.
Term Loan 10 1,818.20 Repayment Terms: Repayment in 36 monthly 12.25% Exclusive hypothecation charge
installments over receivables/loan assets/
Tenor: 3 Years book debts with a cover of 1.18
Redemption Date:February 22,2023 times of the outstanding principal
at any point of time during
currency of the facility.
Term Loan 11 445.36 Repayment Terms: Repayment in 24 equal 11.85% Exclusive hypothecation charge
monthly instalments over receivables/loan assets/
Tenor: 2 Years book debts with a cover of 1.1
Redemption Date: January 1, 2022 times of the outstanding principal
at any point of time during
currency of the facility.
Term Loan 12 555.55 Repayment Terms: Repayment in 18 equal 10.75% Exclusive hypothecation charge
monthly instalments over receivables/loan assets/
Tenor: 1.5 Years book debts with a cover of 1.15
Redemption Date: July 15, 2021 times of the outstanding principal
at any point of time during
currency of the facility.
Term Loan 14 599.94 Repayment Terms: Repayment in 11 equal 11.25% Exclusive hypothecation charge
quarterly installments over receivables/loan assets/
Tenor: 3 Years book debts with a cover of 1.1
Redemption Date:May 31, 2023 times of the outstanding principal
at any point of time during
currency of the facility.
Term Loan 15 3,333.33 Repayment Terms: Repayment in 36 equal 9.25% Exclusive hypothecation charge
monthly instalments over loan receivables/loan
Tenor: 3 Years assets/ book debts with a cover
Redemption Date: September 21, 2023 of 1.2 times of the outstanding
principal and interest at any point
of time during currency of the
facility.
Gross Balance
Interest
Particulars as at Terms of Redemption Security
rate
March 31, 2021
Term Loan 16 3,827.86 Repayment Terms: Repayment in 24 equal 9.35% Exclusive hypothecation charge
monthly instalments over loan receivables/loan
Tenor: 2 Years assets/ book debts with a cover
Redemption Date: September 22, 2022 of 1.18 times of the outstanding
principal at any point of time
during currency of the facility.
Term Loan 17 18,452.68 Repayment Terms: Repayment in 6 equal half- 9.35% Exclusive hypothecation charge
(Borrowings yearly instalments over loan receivables/loan
outside India) Tenor: 5 Years assets/ book debts with a cover
Redemption Date: November 17, 2025 of 1.25 times of the outstanding
principal at any point of time
during currency of the facility.
Term Loan 18 18,108.75 Repayment Terms: Repayment in 6 equal half- 9.50% Exclusive hypothecation charge
(Borrowings yearly instalments over loan receivables/loan
outside India) Tenor: 4.8 Years assets/ book debts with a cover
Redemption Date: November 15, 2025 of 1.25 times of the outstanding
principal at any point of time
during currency of the facility.
Term Loan 19 7,303.00 Repayment Terms: Repayment in 6 equal half 9.78% Exclusive hypothecation charge
(Borrowings yearly instalments over loan receivables/loan
outside India) Tenor: 5 Years assets/ book debts with a cover
Redemption Date: March 4, 2026 of 1.2 times of the outstanding
principal at any point of time
during currency of the facility.
Term Loan 20 4,000.00 Repayment Terms: Repayment in 36 equal 9.25% Exclusive hypothecation charge
monthly instalments over loan receivables/loan
Tenor: 3 Years assets/ book debts with a cover
Redemption Date: March 30, 2024 of 1.10 times of the outstanding
principal at any point of time
during currency of the facility.
Note: The balances are net of accrued interest and gross of unamortised processing fees
a) Reconciliation of the shares outstanding at the beginning and at the end of the reporting year
As at March 31, 2021 As at March 31, 2020
No. of shares Amount No. of shares Amount
Equity shares
At the commencement of the year 87,477,903 8,747.79 78,365,776 7,836.57
Add: Shares issued during the year 443,647 44.36 3,261,127 326.12
Add: Shares Converted into equity – – 5,851,000 585.10
At the end of the year 87,921,550 8,792.15 87,477,903 8,747.79
0.0001% Compulsorily convertible preference shares
At the commencement of the year 41,323,204 8,264.64 37,784,296 7,556.86
Add: Shares issued during the year – – 9,389,908 1,877.98
Less: Shares Converted into equity – – (5,851,000) (1,170.20)
At the end of the year 41,323,204 8,264.64 41,323,204 8,264.64
Redeemable preference shares
At the commencement of the year – – 1,160,000 1,160.00
Less: Shares Redeemed during the year – – (1,160,000) (1,160.00)
At the end of the year – – – –
Note:
During the year ended March 31, 2020, pursuant to amended share subscription and shareholders agreement, the
Company has issued:
1. Nil 0.0001% Compulsorily convertible preference shares (March 31, 2020: 6,133,793) of INR 20 each to IIFL Special
opportunities fund, IIFL Special opportunities fund Series 2 to 7; Nil 0.0001% Compulsorily convertible preference
shares (March 31, 2020:2,230,797) shares of INR 20 each to Standard Chartered Bank (Singapore Branch); Nil 0.0001%
Compulsorily convertible preference shares (March 31, 2020:1,025,318) shares of INR 20 each to Augusta Investments II
Pte. Ltd and Nil equity shares (March 31, 2019 : 3,197,644) of INR 10 each to Sumitomo Mitsui Banking Corporation.
2. During the year Nil 0.0001% compulsorily convertible preference shares (March 31, 2020: 5,851,000) were converted
into equity share capital.
3. During the year, the Company has issued 443,647 (March 31, 2020 : 63,483) equity shares which were allotted to
employees who exercised their options under ESOP scheme.
4. During the year, the Company has issued Nil (March 31, 2020 - Nil, March 31, 2019: 3) equity shares of INR 10 each
to Kshama Fernandes, Managing Director, Bama Balakrishnan, Chief Financial Officer (until June 30, 2020) and C
Kalyanasundaram, Senior Director and Head, Finance and Operations.
Less: Utilised during the year for writing off share issue expenses – (436.99)
b) Statutory reserve
d) Retained earnings
f) Capital reserve
Remeasurements of net defined benefit asset/ (liability) (refer note (vii) (b) below) (36.17) (6.02)
Less : Fair valuation of financial instruments (refer note (vii) (a) below) 806.32 251.22
Less : Cash flow hedge reserve (refer note (vii) (c ) below) (382.22) –
21 Additional information as required under Schedule III to the Companies Act 2013, of entities consolidated as subsidiaries/ associates/ joint ventures
Net assets (total assets minus Share in other comprehensive Share in total comprehensive
Share in profit or loss
total liabilities) income income
As % of As %
Particulars As % of As % of consolidated consolidated
consolidated Amount consolidated Amount other Amount of total Amount
net assets profit or loss comprehensive comprehensive
income income
As at March 31, 2021
Parent
Northern Arc Capital Limited 93.18% 155,886.02 73.17% 5,604.99 194.29% 622.07 78.03% 6,227.06
Domestic Subsidiaries - (parent’s share)
Northern Arc Investment Adviser 0.21% 348.06 0.56% 42.72 3.20% 10.23 0.66% 52.95
Services Private Limited
Northern Arc Investment Managers 1.76% 2,948.21 11.41% 873.76 5.21% 16.67 11.16% 890.43
Private Limited
IFMR Fimpact Long Term Credit Fund 6.64% 11,106.24 19.61% 1,502.24 -58.94% (188.71) 16.46% 1,313.53
Non-controlling interests in all 5.42% 9,060.22 11.85% 907.80 -43.76% (140.11) 9.62% 767.69
subsidiaries
Eliminations -7.21% (12,057.03) -16.61% (1,272.28) 0.00% – -15.94% (1,272.28)
As at March 31, 2021 100.00% 167,291.72 99.99% 7,659.23 100.00% 320.15 99.99% 7,979.39
As at March 31, 2020
Parent
Northern Arc Capital Limited 93.44% 149,281.88 87.07% 8,961.93 137.14% 322.10 88.19% 9,284.03
Domestic subsidiaries - (parent’s share)
Northern Arc Investment Adviser 0.18% 295.10 0.76% 78.13 -3.53% (8.30) 0.66% 69.83
Services Private Limited
Northern Arc Investment Managers 1.25% 1,992.78 0.69% 71.47 -11.26% (26.44) 0.43% 45.03
Private Limited
IFMR Fimpact Long Term Credit Fund 7.04% 11,242.04 13.94% 1,435.08 -12.82% (30.12) 13.34% 1,404.96
Northern Arc Money Market Alpha 0.00% – 0.81% 83.31 0.00% – 0.79% 83.31
Fund
Non-controlling interests in all 5.71% 9,128.40 9.81% 1,009.67 -9.52% (22.37) 9.38% 987.30
subsidiaries
Eliminations -7.62% (12,169.08) -13.08% (1,346.24) 0.00% – -12.79% (1,346.24)
187
Northern Arc Capital Limited
Notes to the Consolidated Financial Statements for the year ended March 31, 2021
(All amounts are in Indian Rupees in lakhs, except share data and unless otherwise stated)
Year ended March 31, 2021 Year ended March 31, 2020
On financial assets measured at On financial assets measured at
Amortised Total Amortised Total
FVOCI FVTPL FVOCI FVTPL
cost cost
22 Interest income
Interest on loans 10,547.63 35,726.86 – 46,274.49 4,643.58 38,607.49 – 43,251.07
Interest from
investments:
-P
ass through 2,769.82 – – 2,769.82 2,951.58 – – 2,951.58
certificates
- Commercial paper – – – – – 158.70 – 158.70
-N
on-convertible 8,142.65 – – 8,142.65 8,747.33 – – 8,747.33
debentures
Interest on deposits – 799.37 – 799.37 – 536.74 – 536.74
with banks
21,460.10 36,526.23 – 57,986.33 16,342.49 39,302.93 – 55,645.42
31 Income tax
A. The components of income tax expense for the years ended 31 March 2021 and 2020 are:
Effect of difference in tax expenditure due to differential tax rates applicable for (4.97) (39.76)
subsidiaries *
Tax expenses recognised in the statement of profit and loss 2,348.50 4,155.84
Note: The Company and one of its subsidiary (Northern Arc Investment Managers Private Limited) has elected to exercise the option
permitted under section 115BAA of the Income tax Act, 1961, as introduced by the Taxation laws (Amendment) Ordinance, 2019.
Accordingly, the Company has recognised provision for income tax and remeasured its net deferred tax asset at concessional rate for the
year ended 31 March 2021 and 31 March 2020.
C. Deferred tax
The following table shows deferred tax recorded in the balance sheet and changes recorded in the Income tax
expense
As at Statement Other As at
MAT
March 31, of profit and comprehensive March 31,
utilization
2020 loss income 2021
Component of Deferred tax asset / (liability)
Deferred tax asset / (liability) in relation to:
Property plant and equipment (7.59) (9.43) – – (17.02)
Impact of fair value of assets (1,351.85) (38.70) 954.84 – (435.71)
Impairment on financial assets 1,583.42 1,503.57 (1,160.78) – 1,926.21
Provision for employee benefits 178.14 21.47 (12.51) – 187.10
Unamortised component of processing fee (48.87) 356.50 – – 307.63
Minimum alternative tax 17.71 0.02 – (3.93) 13.80
Others (51.88) 43.97 – – (7.91)
Total 319.08 1,877.40 (218.45) (3.93) 1,974.10
As at Statement Other As at
MAT
March 31, of profit and comprehensive March 31,
utilization
2019 loss income 2020
Deferred tax asset / (liability) in relation to:
Property plant and equipment (41.30) 33.71 – – (7.60)
Impact of fair value of assets 30.38 (1,639.62) 257.39 – (1,351.85)
Impairment on financial assets 541.99 792.55 248.88 – 1,583.42
Provision for employee benefits (34.14) 213.90 (1.62) – 178.14
Unamortised component of processing fee 76.86 (125.73) – – (48.87)
Premium accrued on preference shares 22.16 (22.16) – – –
Minimum alternative tax 28.21 – – (10.50) 17.71
Others 5.79 (57.67) – – (51.88)
Total 629.95 (805.04) 504.65 (10.50) 319.08
The Company has considered weighted average rate of borrowings for discounting.
The Company has entered into leasing arrangements for premises. ROU has been included after the line ‘Property,
Plant and Equipment’ and Lease liability has been included under ‘Other Financial Liabilities’ in the Balance Sheet.
(ii) Amounts recognised in the Balance sheet
b) Lease liabilities
Note:
On 24th July 2020, the MCA issued a notification as the Companies (Ind AS) Amendment Rules, 2020, which has come into force
as on the data of publication. These amendments provide relief for lessees in the accounting for rent concessions granted as direct
consequences of COVID-19. The Company have received the rent concession for 2 leases during the period June 2020 to September
2020 amounting to INR 35.20 lakhs (disclosed under “other income”).
Later than one year and not later than five years 933.44 1,271.94
Bank balances other than cash and cash 6,837.98 – 6,837.98 7,720.21 – 7,720.21
equivalents
Liabilities
Trade payables
Borrowings (Other than debt securities) 126,289.44 102,957.66 229,247.10 104,176.60 101,951.66 206,128.26
Subordinated liabilities – – – – – –
As at Exchange As at
Particulars Cash flows Others* New Leases
April 1, 2019 difference March 31, 2020
Debt Securities 124,386.13 (39,087.40) – 721.97 – 86,020.70
Borrowings (other than debt 166,904.76 38,858.00 – 365.50 – 206,128.26
securities)
Sub-ordinated Liabilities 1,213.41 (1,213.41) – – – –
Lease Liabilities – (291.28) – – 1,699.41 1,408.13
* Others includes the effect of accrued but not paid interest on borrowing, amortisation of processing fees, decrease in lease liability
on account of termination.
35 Financial instrument
A Fair value measurement
Valuation principles
Fair value 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., exit price.
This is regardless of whether that price is directly observable or estimated using a valuation technique.
Financial instruments by category
The carrying value and fair value of financial instruments measured at fair value as of March 31, 2021 were as follows
(Also refer note 49)
Carrying
Value
Particulars Level 1 Level 2 Level 3 Total
Amortised
cost
Financial assets not measured at fair value:
Cash and cash equivalents 39,810.26 –
Bank balances other than cash and cash 6,837.98 –
equivalents
Trade receivables 1,835.42 –
Loans 279,226.17 –
Investments in subsidiaries 1.00
Other financial assets 473.97 –
Financial liabilities not measured at fair value:
Trade payables
- t otal outstanding dues of micro and small – –
enterprises
- t otal outstanding dues of creditors other than 1,561.87 –
micro and small enterprises
Debt securities 163,956.78 –
Borrowings (Other than debt securities) 229,247.10 –
Other financial liabilities 4,230.33 –
The carrying value and fair value of financial instruments by categories as of March 31, 2020 were as follows:
Carrying
Value
Particulars Level 1 Level 2 Level 3 Total
Amortised
cost
Financial assets not measured at fair value:
Cash and cash equivalents 33,321.71 –
Bank balances other than cash and cash 7,720.21 –
equivalents
Trade receivables 830.15 –
Loans 224,137.59 –
Investments in subsidiaries 1.00
Other financial assets 748.72 –
Financial liabilities not measured at fair value:
Trade payables
- t otal outstanding dues of micro and small – –
enterprises
- t otal outstanding dues of creditors other than 830.89 –
micro and small enterprises
Debt securities 86,020.70 –
Borrowings (Other than debt securities) 206,128.26 –
Other financial liabilities 5,191.61 –
Note:
For all of the financial assets and liabilities which are not carried at fair value, disclosure of fair value is not required as the carrying
amounts approximates the fair values.
The Group’s exposure to credit risk for loans by type of counterparty is as follows. All these exposures are with in
India.
Carrying Amount
Particulars
As at March 31, 2021 As at March 31, 2020
Term loans 381,501.48 297,297.66
Less : Impairment loss allowance (7,424.80) (4,829.87)
374,076.68 292,467.79
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 and the type of risk exposures. Each group
is then assessed for impairment using the Expected Credit Loss (ECL) model as per the provisions of Ind AS 109 -
Financial Instruments.
Staging:
As per the provision of Ind AS 109 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 Group 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 lifetime of
the instrument.
As per Ind AS 109, Group assesses whether there is a significant increase in credit risk at the reporting date from the
initial recognition. Group has staged the assets based on the days past dues criteria and other market factors which
significantly impacts the portfolio.
Grouping
As per Ind AS 109, the Group is required to group the portfolio based on the shared risk characteristics. The Group has
assessed the risk and its impact on the various portfolios and has divided the portfolio into following groups:
- Loans
- Guarantees to pooled issuances
- Other guarantees
- Undrawn exposure
- Second loss credit enhancement
- Investments in pass through securities
- Investments in non convertible debentures
Expected credit loss (“ECL”):
ECL on financial assets is an unbiased probability weighted amount based out of possible outcomes after considering
risk of credit loss even if probity is low. ECL is calculated based on the following components:
a. Marginal Probability of default (“PD”)
b. Loss given default (“LGD”)
c. Exposure at default (“EAD”)
d. Discount factor (“D”)
The calculation is based on provision matrix which considers actual historical data adjusted appropriately for the
future expectations and probabilities. Proportion of expected credit loss provided for across the stage is summarised
below:
1 day to Over 2
Over one Over 3 Over 6 Over 1 Over 3
30/31 months Over 5
Particulars month to 2 months to months to year to 3 years to 5
days (one up to 3 years
months 6 months 1 year years years
month) months
As at March 31, 2021
Borrowings 16,050.76 9,313.78 20,824.10 30,587.52 49,513.28 73,709.21 29,533.79 –
Debt securities 416.67 10,500.00 2,428.57 7,666.67 41,486.90 72,397.86 27,651.42 –
As at March 31, 2020
Borrowings 12,405.15 2,180.02 19,856.27 21,022.66 48,712.50 94,448.06 7,046.36 –
Debt securities 7,575.00 6,425.00 – 1,500.00 11,928.57 48,964.29 9,607.14 –
Note:
- The balances are gross of accrued interest and unamortised borrowing costs.
interest rate for the Group, 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.
Sensitivity analysis - Increase/ decrease of 100 basis points
As at March 31, 2021 As at March 31, 2020
Particulars
Increase Decrease Increase Decrease
Bank deposits 134.73 (134.73) 117.23 (117.23)
Loans 2,852.06 (2,852.06) 2,346.94 (2,346.94)
Borrowings (1,294.64) 1,294.64 (1,778.71) 1,778.71
40 Disclosure under Micro, Small and Medium Enterprises Development Act, 2006
Under Micro, Small and Medium Enterprise Development Act, 2006 (‘MSMED’) which came into force from October
2, 2006, certain disclosures are required to be made relating to Micro, Small and Medium enterprises. On the basis of
the information and records available with management and confirmation sought from suppliers on registration with
specified authority under MSMED, principal amount, interest accrued and remaining unpaid and interest paid during
the year to such enterprise is NIL.
41 Employee benefits
Defined contribution plans
The Group makes specified monthly contributions towards employee provident fund to Government administered
provident fund scheme which is a defined contribution plan. The Group’s contribution is recognized as an expenses
in the statement of profit and loss during the period in which the employee renders the related service. The amount
recognised as an expense towards contribution to provident fund for the year aggregated to INR 290.54 lakhs (March
31, 2020: INR 291.98 lakhs).
Defined benefit plans
The Group’s gratuity benefit scheme is a defined plan. The Group’s net obligation in respect of a defined benefit
plan is calculated by estimating the amount of future benefit that employees have earned in return for their services
in the current and prior periods; that benefit is discounted to determine its present value. Any unrecognised past
services and the fair value of any plan assets are deducted. The Calculation of the Group’s obligation under the plan is
performed annually by a qualified actuary using the projected unit credit method.
Details of actuarial valuation of gratuity pursuant to the Ind AS 19
G. Sensitivity analysis
Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding other
assumptions constant, would have affected the defined benefit obligation by the amounts shown below.
Year ended March 31, 2021 Year ended March 31, 2020
Increase Decrease Increase Decrease
Discount rate (1% movement) 443.68 495.85 420.11 485.45
Future salary growth (1% movement) 497.17 441.98 486.44 418.59
The options were issued in six batches. The first and second batch will be exercised at INR 110, third, fourth and fifth
batch will be exercised at INR 121 and sixth batch will be exercised at INR 188. The options are vested equally over a
period of 5 years.
Northern Arc Capital Employee Stock Option Plan 2016 – “Scheme– III” (“Scheme 3”)
The Northern Arc Capital Employee Stock Option Plan 2016 is applicable to all employees including employees of
subsidiaries.
The options were issued in two batches. The first batch will be exercised at INR 181 and second batch will be exercised
at INR 188. The options are vested over a period of 3 years in 30:30:40 proportion
42.2 Options outstanding under Scheme 1, Scheme 2 and Scheme 3
Particulars As at March 31, 2021 As at March 31, 2020
Plan Scheme 1 Scheme 2 Scheme 3 Scheme 1 Scheme 2 Scheme 3
Grant date Various Various Various Various Various Various
Number of options 397,371 3,489,500 1,147,783 411,371 4,027,500 1,449,712
Exercise price in INR 10 110 to 188 181 to 188 10 110 to 188 181 to 188
Vesting period 1 to 4 years 1 to 5 years 1 to 3 years 1 to 4 years 1 to 5 years 1 to 3 years
Option Price 113.65 31.85 to 117.74 65.57 to 113.65 31.85 to 117.74 65.57 to 73.55
73.55
Weighted average exercise price in INR 10.00 122.05 184.00 10.00 120.50 184.00
Weighted average remaining – 1.71 0.71 1.00 2.56 1.71
contractual life (in years)
Vesting condition Time based vesting
not consolidated in these financial statements. During the year, the Holding Company has invested INR Nil (March 31,
2020 - 1 lakh) in its equity share capital and contributed INR 301.60 lakhs (March 31, 2020 - 197.68 lakhs) towards CSR
activities during the year.
44 The details of the investments held by the group in the Alternative Investment Funds managed by the Company’s
wholly owned subsidiary, Northern Arc Investment Managers Private Limited, as disclosed in the respective
standalone financial statements (aggregate amounts) are as follows:
For the year ended For the year ended
Fund March 31, 2021 March 31, 2020
Purchases Redemption Purchases Redemption
IFMR Fimpact Investment Fund – 1,929.50 – –
IFMR Fimpact Medium Term Microfinance Fund – – – 1,808.76
IFMR Fimpact Long Term Multi Asset Fund – – 1,034.03 –
IFMR Fimpact Medium Term Opportunities Fund – – – 631.51
IFMR Fimpact Income Builder Fund – – 1,079.00 700.00
Northern Arc Money Market Alpha Trust Fund 3,731.87 1,400.00 833.14 400.00
Northern Arc India Impact Fund 100.00 – – –
Northern Arc Income Builder (Series II) Fund 581.00 – 737.90 204.00
Income earned
Fund Year ended Year ended
March 31, 2021 March 31, 2020
IFMR Fimpact Investment Fund 313.63 336.37
IFMR Fimpact Medium Term Microfinance Fund – 149.78
IFMR Fimpact Long Term Multi Asset Fund 823.02 (1,755.42)
IFMR Fimpact Long Term Credit Fund* 1,391.21 1,402.64
IFMR Fimpact Medium Term Opportunities Fund 807.50 303.07
IFMR Fimpact Income Builder Fund Fund 70.07 54.48
Northern Arc Money Market Alpha Trust Fund 356.61 266.17
Northern Arc India Impact Fund 1.36 –
Northern Arc Income Builder (Series II) Fund 29.92 (4.25)
*IFMR Fimpact Long Term Credit Fund has been considered for consolidation in these financial statements. Also refer note 1.
45 Segment reporting
The Group’s operations predominantly relate to arranging or facilitating or providing finance either in the form of loans
or investments or guarantees, providing portfolio management, investment advisory and investment management
services. The information relating to this operating segment is reviewed regularly by the Company’s Board of Directors
(Chief Operating Decision Maker (CODM)) to make decisions about resources to be allocated and to assess their
performance.
The Group has four reportable segments Viz., Financing activity, Investment advisory services, Investment
management services, Portfolio Management services. For each of the business, CODM reviews internal management
reports on periodic basis.
50 The· Government of India, Ministry of Finance. vide its notification dated 23 October 2020, had announced COVID-19
Relief Scheme for grant of ex-gratia payment of difference between compound interest and simple interest for six
months to borrowers in specified loan accounts (“the Scheme”), as per the eligibility criteria and other aspects
specified therein and irrespective of whether RBI moratorium was availed or not. The Company had implemented the
Scheme and credited to the accounts of or remitted amounts to the eligible borrowers as per the Scheme.
51 RBI circular dated 7 April 2021 advised all lending institutions to immediately put in place a Board-approved policy
to refund/ adjust the ‘interest on interest’ charged to the borrowers during the moratorium period, i.e. 1 March 2020
to 31 August 2020. Further, the circular stated that the methodology for calculation of the amount to be refunded/
adjusted for different facilities shall be finalised by the Indian Banks Association (IBA) in consultation with other
industry participants/bodies, which shall be adopted by all lending institutions and also advised all lending insritutions
to disclose the aggregate amount to be refunded/adjusted in respect of their borrowers based on the above reliefs
in their financial statements for the year ended 31 March 2021. Based on the guidance provided by IBA vide letter
dated 19 April 2021 and the Company has made an assessment on the impact of the said circular and reversed interest
income amounting to INR 165 lakhs in the standalone financial statements of the Company.
52 Disclosure of Specified Bank Notes (‘SBN’)
The disclosures regarding details of specified bank notes held and transacted during November 8, 2016 to December
30, 2016 has not been made in these financial statements since the requirement does not pertain to financial year
ended March 31, 2021.
53 Previous period’s figures have been regrouped / reclassified wherever necessary, to conform with the current period
presentation.
ORDINARY BUSINESS:
1. To receive, consider and adopt the audited standalone and consolidated financial statements of the company for the
financial year ended March 31, 2021, and the Reports of the Board of Directors and Auditors thereon.
2. To appoint director in place of Mr. Amit Mehta (DIN: 07089427) who retires by rotation and being eligible offers
himself for reappointment.
3. To appoint director in place of Mr. Michael Jude Fernandes (DIN: 00064088) who retires by rotation and being eligible
offers himself for reappointment
SPECIAL BUSINESS
4. To approve borrowing in excess of paid-up capital, free reserves and securities premium
To consider and if thought fit to pass the following with or without modification as a Special Resolution
“RESOLVED THAT in supersession of the earlier resolution passed by the members in their meeting held on August
26, 2020, and pursuant to Section 180(1)(c) of the Companies Act, 2013 and all other provisions as may be applicable,
if any, the consent of the shareholders be and is hereby accorded to the board or any committee constituted by
the Board to borrow from time to time any sum or sums of money from Banks, financial institutions, non-banking
financial companies, co-operative banks, investment institutions, mutual funds, other bodies corporates, recognised
overseas lenders and such other permissible sources for borrowing in Indian Rupees or equivalent thereof in any
foreign currency(ies) on such terms and conditions as the Board of Directors/Committee may deem fit for such
borrowing, whether by way of advances, loans, external commercial borrowings, inter-corporate deposits issue of
debentures/bonds and/or other instruments, whether convertible into equity / preference shares / other securities,
whether secured or unsecured, whether domestic or international, whether secured by way of mortgage, charge,
hypothecation, pledge or otherwise in any way whatsoever, on, over or in any respect of all, or any of the company’s
assets and/or properties, which together with the monies, already borrowed by the Company (apart from temporary
loans obtained or to be obtained by the Company from its bankers in the ordinary course of business), may exceed
the aggregate of the paid-up capital of the Company, its free reserves and securities premium, provided that the total
amount so borrowed shall not at any time exceed the limit of 12,000 Crore (Rupees Twelve Thousand Crore Only)”.
“RESOLVED FURTHER THAT the Board of Directors or any committee constituted by the Board be and are hereby
severally authorised to do all such acts, deeds and things and to sign all such documents and writings as may be
necessary, expedient and incidental thereto to give effect to this resolution including filing of relevant forms with the
regulators and for such other matters connected therewith or incidental thereto.”
5. To approve creation of security in relation to borrowings of the Company
To consider and if thought fit to pass the following with or without modification as a Special Resolution.
“RESOLVED THAT in supersession of the earlier resolution passed by the members in their meeting held on August
26, 2020 and pursuant to Section 180(1) (a) and other applicable provisions, if any, of the Companies Act, 2013 the
applicable rules prescribed thereunder (including any statutory modification(s) or re-enactment(s) thereof, for the
time being in force) and in suppression of any previous resolutions passed to this effect, consent of the members be
and is hereby accorded to the Board of Directors of the Company to pledge, hypothecate, mortgage and/or charge
in all or any part of the movable or immovable properties of the company and whole of the undertaking of the
company of every nature and kind whatsoever and/or charge in all or any part of the undertaking of the company to
or in favour of banks, financial institutions, debenture trustees or any other lenders/creditors, to secure the amounts
borrowed by the company or any third party, from time to time, for the due payment of the principal together with
any interest, charges, costs, expenses and all other monies payable by the company or any third party in respect of
such borrowings provided that the maximum extent of the indebtedness secured by the properties of the company
does not exceed Rs. 12000 crores (Rupees Twelve Thousand Crores) at any time.
212 NOTICE
1. A MEMBER ENTITLED TO ATTEND AND VOTE AT THE MEETING IS ENTITLED TO APPOIN
TO ATTEND AND VOTE ON A POLL ONLY INSTEAD OF HIMSELF AND THE PROXY NEED
MEMBER.
RESOLVED FURTHER THAT Board of Directors of the of the company or any committee constituted by the Board
be and are hereby authorised to do such acts, deeds, things and execute all such documents, undertaking as may be
necessary for giving effect to the above resolution.”
A proxy form, duly completed and stamped, must reach the Registered Office of the Com
On behalf of the Board,
less than 48 hours before the time for holding the aforesaid meeting.
For Northern Arc Capital Limited
R. Srividhya
2. Attendance slips and proxy form are annexed hereto
Company Secretary
Membership No. A22261
Place: Chennai
3. Corporate Members intending to send their authorized representative to attend the m
Date: November 17, 2021
requested to send to the Company a certified copy of the Board resolution author
NOTES:
1.
representative toONLY
attend andOFvote
INSTEAD onAND
HIMSELF their
THEbehalf at the
PROXY NEED NOT meeting.
A MEMBER ENTITLED TO ATTEND AND VOTE AT THE MEETING IS ENTITLED TO APPOINT A PROXY TO ATTEND
AND VOTE ON A POLL BE A MEMBER.
A proxy form, duly completed and stamped, must reach the Registered Office of the Company not less than 48 hours
4. All the relevant documents referred in this Notice shall remain open for inspecti
before the time for holding the aforesaid meeting.
2. Attendance slips and proxy form are annexed hereto
Members of the Company at the Registered Office from 10:00 AM to 4:00 PM on all wo
3. Corporate Members intending to send their authorized representative to attend the meeting are requested to send
(except Saturday)
to the Company upto
a certified
behalf at the meeting.
the
copy of the date of this authorizing
Board resolution Annual such
General Meeting.
representative to attend and vote on their
4. All the relevant documents referred in this Notice shall remain open for inspection by the Members of the Company at
5. The relevantOffice
the Registered
General Meeting.
Explanatory
from 10:00 AMStatement pursuant
to 4:00 PM on all working daysto Section
(except 102upto
Saturday) ofthethe Companies
date of this Annual Act 201
5. to the
The Special
relevant Business
Explanatory to pursuant
Statement be transacted atofthe
to Section 102 meeting
the Companies Actis annexed
2013, relating tohereto.
the Special
Business to be transacted at the meeting is annexed hereto.
NOTICE
213
Annexure to Notice
EXPLANATORY STATEMENT PURSUANT TO SECTION 102 OF THE COMPANIES ACT 2013
Item No.4: Approval to borrow in excess of paid-up capital, free reserves and securities premium
Keeping in view the Company’s existing and future financial requirements to support its business operations, the Company
is desirous of raising finance from financial institutions, non-banking financial companies, co-operative banks, investment
institutions, banks, mutual funds, and other bodies corporate in Indian Rupees or equivalent thereof in any foreign
currency(ies) on such terms and conditions as the Board may deem fit for such borrowing, whether by way of advances,
loans, inter-corporate deposits issue of debentures/bonds and/or other instruments, whether secured or unsecured,
whether domestic or international, whether secured by way of mortgage, charge, hypothecation, pledge or otherwise
in any way whatsoever, on, over or in any respect of all, or any of the company’s assets and effects or properties. Hence
it is proposed borrow a maximum amount upto Rs. 12,000 Crore Only (Rupees Twelve Thousand Crore outstanding at
any point in time), subject to the capital adequacy requirements prescribed by RBI. Pursuant to Section 180(1)(c) of the
Companies Act, 2013, the Board of Directors cannot borrow more than the aggregate amount of the paid-up capital of
the Company, its free reserves and securities premium at any one time except with the consent of the members of the
Company in a general meeting.
The Board of Directors recommends the resolution set out in Item No. 4 of the notice for approval of the members.
None of the Directors, Key Managerial Personnel of the Company and their relatives are in any way concerned or interested
in this resolution.
Item 5: Creation of security for borrowings of the Company
As per the provisions of section 180(1)(a) of the Companies Act, 2013, a company shall not sell, lease or otherwise dispose
of the whole or substantially whole of the undertaking of the Company or where the Company owns more than one
undertaking, of the whole or substantially the whole of any such undertaking unless approval of members is obtained by
way of special resolution.
In connection with the loan/credit facilities to be availed by the Company, as and when required through various sources
for business purposes, the Company might be required to create charges on its assets by way of hypothecation, mortgage,
lien, pledge etc. in favour of lenders up to the limited approved under Section 180(1)(c) of the Companies Act, 2013, for
securing the loan/credit facilities extended by them to the Company. Further, upon occurrence of default under loan/
facility agreements and other documents as may be executed by the Company with its lenders, the lenders would have
certain rights in respect of the secured assets including right of sale/disposal and the enforcement of assets by lenders
might amount to sale/disposal of whole or substantially whole of the undertaking under section 180(1)(a) of the Act.
In view of the proposed borrowing limit of INR 12,000 Crore, the Board recommends the same limit up to which charge
can be created on the assets of the Company.
The Board of Directors recommends the resolution set out in Item No. 5 of the notice for approval of the members.
None of the Directors, Key Managerial Personnel of the Company and their relatives are in any way concerned or interested
in this resolution.
On behalf of the Board,
For Northern Arc Capital Limited
R. Srividhya
Company Secretary
Membership No. A22261
214 NOTICE
Details of Directors seeking reappointment at the Annual General Meeting
[Pursuant to para 1.2.5 of Secretarial Standard on General Meetings]
Qualification Post-graduate diploma in management from Bachelor’s degree in science from the University
the Indian Institute of Management from IIM of Calcutta and a post-graduate diploma from
Ahmedabad and B.Tech from LIT, Nagpur the Indian Institute of Management Calcutta.
Experience and Expertise Amit Mehta is a Non-Executive Nominee Director He co-leads LeapFrog group’s investments in
of our Company and was appointed to the South and Southeast Asia, with approximately
Board on March 25, 2019. He currently is a senior 20 years of experience in consulting and
executive vice president at IIFL Asset Management investing. He was formerly an executive director
Limited. at Khazanah India Advisors Private Limited, an
entity under the Khazanah Nasional group, the
sovereign fund of Malaysia and served on the
boards of IDFC Limited and Apollo Hospitals
Enterprise Limited in India. He has been an
executive director at Piramal Enterprises
Limited. Previously, Mr. Fernandes was a partner
with McKinsey & Co, focusing on healthcare and
consumer sectors across South and Southeast
Asia.
Number of Meetings of the Attended seven board meetings held during the Attended six board meetings held during the
Board attended during the financial year ended on March 31, 2021. financial year ended on March 31, 2021.
year
NOTICE
215
NOTES
NOTES
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