Shriram Equipment Finance Company Limited I 5th Annual Report

Transcription

1 I 5th Annual Report

2 Contents corporate information 1 DIRECTORS REPORT 2 AUDITORS REPORT 4 Balance sheet 8 Statement of Profit & Loss 9 Cash Flow Statement 10 Notes 12

3 Corporate Information Corporate Identification No. (CIN) U65910TN2009PLC BOARD OF DIRECTORS Mr. M.S. Verma Chairman Mr. R. Sridhar Director Mr. Amol Jain Director (upto March 31, 2014) Mr. G. S. Sundararajan Director Mr. Pratap Paode Chief Executive Officer COMPANY SECRETARY Ms. Reema Desai Auditors M/s. S. V. Ghatalia& Associates LLP Chartered Accountants DEBENTURE TRUSTEE IDBI Trusteeship Services Limited Asian Building, Ground Floor, 17, R. Kamani Marg, Ballard Estate, Mumbai Registered office Mookambika Complex, 3rd Floor, No. 4, Lady Desika Road, Mylapore,Chennai CORPORATE office , Sabari Samriddhi Building, V. N. Purav Marg, Next to Chembur S. T. Stand, Chembur, Mumbai Tel.No.: Fax No.: Annual Report

4 DIRECTORS REPORT To The Members, SHRIRAM EQUIPMENT FINANCE COMPANY LIMITED Your Directors have pleasure in presenting their Fifth Annual Report together with the Audited Statements of Accounts for the year ended March 31, FINANCIAL HIGHLIGHTS Particulars Year ended March 31,2014 Year ended March 31, 2013 Profit / (Loss) Before Depreciation and Taxation , Less: Depreciation and Amortisation Profit /(Loss) Before Tax 13, , Less: Provision for Taxation 4, , Profit / (Loss) After Tax 8, , Add: Balance brought forward from previous year , Balance available for appropriation , Appropriations Statutory Reserve , Dividend on Preference shares Tax on dividend Balance carried to Balance Sheet 18, DIVIDEND: The Company has issued 25,000,000 Compulsorily Convertible Preference Shares (CCPS) of face value of Rs. 100 each carrying coupon rate of 0.01%. The Board has recommended dividend on CCPS aggregating to Rs. 2,50,000 for the Financial Year OPERATIONS: During the year under review, the Company s income from operations was Rs. 54, lacs as against Rs. 40, lacs in the previous year Your Company has earned Net Profit of Rs. 8, lacs as against Net Profit of Rs. 8, lacs for the previous year. The Profit before tax for the year under review is Rs.13, lacs as against Rs. 13, lacs in the previous year. BUSINESS RESPONSIBILITY POLICY: The Company has formulated Business Responsibility Policy as per National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business issued by Ministry of Corporate Affairs (MCA). EMPLOYEE STOCK OPTION SCHEME: To ensure commitment and for retaining and attracting talent, your company has launched Employee Stock Option Scheme for Employees. DIRECTORS: As per Section 152 of the Companies Act, 2013, Mr. G. S. Sundarrajan would retire by rotation at the ensuing Annual General Meeting, and being eligible, offers himselffor re-appointment as Director. The Company has received notice pursuant to Section 160 of the Companies Act, 2013 from the shareholders signifying their intention to propose candidature of Mr. Pratap Paode for his appointment as Director of the Company in the ensuing Annual General Meeting. Accordingly, the necessary resolution is included in the Notice of the 5th Annual General Meeting for appointment of the said person as Director of the Company. THE AUDIT COMMITTEE: The Board of Directors are taking necessary steps for reconstitution of Audit Committee in line with requirement of Sec. 177(3) of the Companies Act, DIRECTORS RESPONSIBILITY STATEMENT: Pursuant to the provisions of Section 217 (2AA) of the Companies Act, 1956, the Directors confirm that, to the best of their knowledge and belief: a) In the preparation of the Annual Accounts, the applicable Accounting Standards have been followed along with proper explanation relating to material departures; 2

5 DIRECTORS REPORT (Contd.) b) That such accounting policies as mentioned in Notes 2.1 of the Accounts have been selected and applied consistently, and judgments and estimates have been made that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at March 31, 2014 and of the profit of the Company for the period ended on that date; c) That proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; d) The Annual Accounts have been prepared on a going concern basis. RBI GUIDELINES: Your Company is registered as Non-Banking Finance Company (Non-Deposit Accepting). The Company had complied with all the requirements prescribed by the Reserve Bank of India applicable to it. ANNEXURES: Vide General Circular 08/2014 dated 04/04/2014, the Ministry of Corporate Affairs (MCA) has clarified that the financial statements(and documents required to be attached thereto), auditors report and Board s report in respect of financial years that commenced earlier than April 1, 2014 shall be governed by the relevant provisions/schedules/rules of the Companies Act,1956. CONSERVATION OF ENERGY, RESEARCH & DEVELOPMENT, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO: Pursuant to the requirement under Section 217(1)(e) of the Companies Act, 1956, read with Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988: a. The Company has no activity involving conservation of energy or technology absorption. b. The Company does not have any Foreign Exchange Earnings & Outgo. PERSONNEL: Information in accordance with the provisions of Section 217(2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975, as amended is furnished bellow: Name of the Employee Designation Gross Remuneration (Rs.) Qualifi-cation Experience in Years Date of Commencement of Employment Age of the Employee Last Employment held before joining the Company Mr. Pratap Paode Chief Executive Officer lacs B. Tech 23 Years 01/06/ years Magma Fincorp Ltd. CORPORATE SOCIAL RESPONSIBILITY COMMITTEE: Pursuant to Section 135 of the Companies Act, 2013 (the new Act), the Board of Directors in its meeting held on April 28, 2014 has constituted Corporate Social Responsibility Committee of three directors. ACKNOWLEDGEMENT: The Board of Directors expresses their deep gratitude for the co-operation and support extended to your Company by its Bankers, Members and various Government agencies. AUDITORS: M/s S. V. Ghatalia & Associates LLP, Chartered Accountants, Mumbai, (Firm Registration Number W) Statutory Auditors of the Company hold office until the conclusion of the ensuing Annual General Meeting. The Shareholders are requested to appoint auditor as per the resolution set out in the Notice of 5th AGM. Place: Mumbai Date: April 28, 2014 For and on behalf of Board, For SHRIRAM EQUIPMENT FINANCE COMPANY LIMITED M.S.Verma Chairman Annual Report

6 INDEPENDENT AUDITOR S REPORT To, The Members of Report on the Financial Statements We have audited the accompanying financial statements of ( the Company ), which comprise the Balance Sheet as at March 31, 2014, and the Statement of Profit and Loss and Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information. Management s Responsibility for the Financial Statements Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with accounting principles generally accepted in India, including the Accounting Standards notified under the Companies Act, 1956 read with General Circular 8/2014 dated 4 April 2014 issued by the Ministry of Corporate Affairs. This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion and to the best of our information and according to the explanations given to us, the financial statements give the information required by the Companies Act, 1956 ( the Act ) in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India. (a) in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2014; (b) in the case of the Statement of Profit and Loss, of the profit for the year ended on that date; and (c) in the case of the Cash Flow Statement, of the cash flows for the year ended on that date. Report on Other Legal and Regulatory Requirements 1. As required by the Companies (Auditor s Report) Order, 2003 ( the Order ) issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Act, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the Order. 2. As required by section 227(3) of the Act, we report that: a. We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit; 4

7 INDEPENDENT AUDITOR S REPORT (Contd.) b. In our opinion proper books of account as required by law have been kept by the Company so far as appears from our examination of those books; c. The Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement dealt with by this Report are in agreement with the books of account; d. In our opinion, the Balance Sheet, the Statement of Profit and Loss, and the Cash Flow Statement comply with the Accounting Standards notified under the Companies Act, 1956 read with General Circular 8/2014 dated 4 April 2014 issued by the Ministry of Corporate Affairs; e. On the basis of written representations received from the directors as on March 31, 2014, and taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2014, from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, For S.V.Ghatalia& Associates LLP Chartered Accountants ICAI Firm Registration Number: W per Manish Gujral Partner Membership Number: Place of Signature: Mumbai Date: April 28, 2014 Annual Report

8 Annexure referred to in paragraph 1under the heading Report on other legal and regulatory requirements of our report of even date Re: Shriram Equipment Finance Company Limited ( the Company ) (i) (a) The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets. (b) Fixed assets have been physically verified by the management during the year and no material discrepancies were identified on such verification. (c) There was no disposal of a substantial part of fixed assets during the year. (ii) The Company s business does not involve inventories and, accordingly, the requirements under paragraph 4(ii) of the Order are not applicable to the Company (iii) (a) According to information and explanation given to us, the Company has not granted any loans, secured or unsecured to companies, firms or other parties covered in the registered maintained under section 301 of the Companies Act, Accordingly, the provision of clause 4(iii)(a) to (d) of the Order are not applicable to the Company and hence not commented upon. (b) According to information and explanations given to us, the Company has not taken any loans, secured or unsecured, from companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, Accordingly, the provisions of clause 4(iii)(e) to (g) of the Order are not applicable to the Company and hence not commented upon. (iv) In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business, for the purchase of fixed assets and for rendering of services. The activities of the Company do not involve purchase of inventory and the sale of goods. During the course of our audit, we have not observed any major weakness or continuing failure to correct any major weakness in the internal control system of the Company in respect of these areas. (v) In our opinion, there are no contracts or arrangements that need to be entered in the register maintained under section 301 of the Companies Act, Accordingly, the provision of the clause 4(v)(b) of the Order is not applicable to the Company and hence not commented upon. (vi) The Company has not accepted any deposits from the public. (vii) In our opinion, the Company has an internal audit system commensurate with the size and nature of its business. (viii) To the best of our knowledge and as explained, the Company is not in the business of sale of any goods. Therefore, in our opinion, the provisions of clause 4(viii) of the Order are not applicable to the Company. (ix) (a) The Company is regular in depositing with appropriate authorities undisputed statutory dues including provident fund, employees state insurance, investor education and protection fund, income-tax, service tax, cess and other material statutory dues applicable to it. The provisions relating to sales tax, wealth-tax, customs duty and excise duty are not applicable to the Company. (b) According to the information and explanations given to us, no undisputed amounts payable in respect of provident fund,, employees state insurance, investor education and protection fund, income-tax, service tax, cess and other material undisputed statutory dues were outstanding, at the year end, for a period of more than six months from the date they became payable. The provisions relating to sales-tax, wealth-tax, customs duty and excise duty are not applicable to the Company. (c) According to the records of the Company, the dues outstanding of income-tax, sales-tax, wealth-tax, service tax, customs duty, excise duty and cess on account of any dispute, are as follows: Name of the statute Nature of dues Amount (Rs in lacs) Years to which the amount relates Forum where dispute is pending Income Tax Act, 1961 Income Tax demands 0.70 A.Y CIT (Appeals) 6

9 Annexure referred to in paragraph 1under the heading Report on other legal and regulatory requirements of our report of even date (Contd.) (x) (xi) (xii) (xiii) (xiv) (xv) (xvi) The Company has been registered for a period of less than five years and hence we are not required to comment on whether or not accumulated losses at the end of the financial year is fifty percent or more of its net worth and whether it has incurred cash losses in the current and immediately preceding financial year. Based on our audit procedures and as per the information and explanations given by the management, we are of the opinion that the Company has not defaulted in repayment of dues to a financial institution, bank or debenture holders. According to the information and explanation given to us and based on the documents and records produced before us, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities. In our opinion, the Company is not a chit fund or a nidhi / mutual benefit fund / society. Therefore, the provisions of clause 4(xiii) of the Order, are not applicable to the Company. In our opinion, the Company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provision of clause 4(xiv) of the Companies (Auditor s Report) Order, 2003 (as amended) are not applicable to the Company. According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from bank or financial institutions. To the best of our knowledge and belief and according to the information and explanations given to us, in our opinion, term loans availed by the Company were applied by the Company during the year for the purposes for which the loans were obtained. (xvii) According to the information and explanations given to us and on an overall examination of the balance sheet of the Company, we report that a no funds raised on short term basis have been used for long term investment. (xviii) The Company has not made any preferential allotment of shares to parties or companies covered in the register maintained under section 301 of the Act. (xix) According to information and explanations given to us, the Company had issued 1,070 debentures of Rs.1,000,000 each,during the period covered by our audit report.the Company has created security or charge in respect of debentures issued. The Company also has unsecured debentures outstanding during the year, on which no security or charge is required to be created. (xx) The Company has not raised any money by way of public issues. (xxi) Based upon the audit procedures performed for the purpose of reporting the true and fair view of the financial statements and as per the information and explanations given by the management, we report that no fraud on or by the Company has been noticed or reported during the year. For S.V.Ghatalia& Associates LLP Chartered Accountants ICAI Firm Registration Number: W per Manish Gujral Partner Membership Number: Place of Signature: Mumbai Date: April 28, 2014 Annual Report

10 Balance sheet as at March 31, 2014 Particulars I. EQUITY AND LIABILITIES (1) Shareholders' funds Note No As at March 31, 2014 As at March 31, 2013 (a) Share capital 3 26, , (b) Reserves and surplus 4 22, , (2) Non-current liabilities 48, , (a) Long-term borrowings 5 139, , (b) Other long term liabilities (c) Long-term provisions 7 3, , (3) Current liabilities 142, , (a) Short-term borrowings 8 40, , (b) Trade payables 5, , (c) Other current liabilities 6 108, , (d) Short-term provisions , , Total 346, , II. Assets (1) Non-current assets (a) Fixed assets 9 (i) Tangible assets (ii) Intangible assets (b) Deferred tax assets (net) (c) Long-term loans and advances , , (2) Current assets 181, , (a) Cash and bank balances 12 3, , (b) Short-term loans and advances , , , , Total 346, , Significant Accounting Policies 2.1 The accompanying notes are an integral part of the financial statements. As per our report of even date For S.V. Ghatalia & Associates LLP ICAI Firm Registration No W Chartered Accountants For and on behalf of the Board of Directors of per Manish Gujral Pratap Paode G.S.Sundararajan Partner Director Director Membership No Mumbai Reema P. Desai April 28, 2014 Company Secretary 8

11 Statement of Profit & Loss for the year ended March 31, 2014 Particulars Income Note No Year Ended March 31, 2014 Year Ended March 31, 2013 Revenue from operations 13 54, , Other income Total 54, , Expenditure Employee benefit expenses 15 3, , Finance cost 16 28, , Depreciation and amortisation Other expenses 17 2, , Provisions and write offs 18 6, , Total 41, , Profit before taxation 13, , Provision for taxation Current tax 4, , Deferred tax (57.38) (107.38) Total tax expense / (income) 4, , Profit after tax from operations 8, , Earnings per share 19 Basic (Rs.) Diluted (Rs.) Nominal value of equity share (Rs.) Significant Accounting Policies 2.1 The accompanying notes are an integral part of the financial statements. As per our report of even date For S.V. Ghatalia & Associates LLP ICAI Firm Registration No W Chartered Accountants For and on behalf of the Board of Directors of per Manish Gujral Pratap Paode G.S.Sundararajan Partner Director Director Membership No Mumbai Reema P. Desai April 28, 2014 Company Secretary Annual Report

12 Cash Flow Statement for the year ended March 31, 2014 Particulars Year Ended March 31, 2014 Year Ended March 31, 2013 A. Cash flow from operating activities Profit before tax 13, , Depreciation and amortisation Profit on sale of fixed assets (0.02) (0.14) Provision for standard assets Provision for non performing asset , Bad debts written off 5, Provision for gratuity (33.60) Provision for leave encashment Expense on employee Stock Option Scheme Operating profit before working capital changes 19, , Movements in working capital: Increase / (decrease) in trade payables (11,706.85) 4, Increase / (decrease) in other liabilities (3,814.22) (Increase) / decrease in loans & advances (43,214.11) (112,338.79) (Increase) / decrease in other assets Cash generated from operations (39,122.48) (91,848.15) Direct taxes paid (net of refunds) (4,920.59) (4,906.27) Net cash flow used in operating activities (A) (44,043.07) (96,754.42) B. Cash flows from investing activities Purchase of fixed including intangible assets (48.07) (41.40) Proceeds from sale of fixed assets Net cash used in investing activities (B) (48.05) (41.05) C. Cash Flows from financing activities Proceeds from borrowings 210, , Repayment of borrowings (165,164.84) (368,210.82) Preference dividend paid (2.50) (2.50) Tax on dividend (0.42) (0.41) Net cash from financing activities (C) 45, , Net increase / (decrease) in cash and cash equivalents (A + B + C) 1, Cash and Cash Equivalents at the beginning of the year 1, Cash and Cash Equivalents at the end of the year 3, ,

13 Cash Flow Statement for the year ended March 31, 2014 (Contd.) Particulars Year Ended March 31, 2014 Year Ended March 31, 2013 Components of Cash and Cash Equivalents i) Cash on hand ii) Cheques on hand 2, iii) Balances with scheduled banks in: Current accounts , Total Cash and Cash equivalents (Note 12) 3, , Significant accounting policies ( Note 2.1) The accompanying notes are an integral part of the financial statements. Notes 1) The above cash flow statement has been prepared under the indirect method set out in Accounting Standard (AS)-3, Cash Flow Statement under provisions of the Companies Act, 1956 ( the Act ) read with General Circular 8/2014 dated April 04, 2014, issued by the Ministry of Corporate Affairs. 2) All figures in brackets indicate outflow. 3) Direct Tax paid is treated as arising from operating activities and are not bifurcated between investment and financing activities. As per our report of even date For S.V. Ghatalia & Associates LLP ICAI Firm Registration No W Chartered Accountants For and on behalf of the Board of Directors of per Manish Gujral Pratap Paode G.S.Sundararajan Partner Director Director Membership No Mumbai Reema P. Desai April 28, 2014 Company Secretary Annual Report

14 1.1 Corporate Information ( The Company ) is a public Company domiciled in India and incorporated under the provisions of the Companies Act, 1956 ( the Act ). The Company is registered with the Reserve Bank of India as a non-deposit taking, non-banking financial company. The Company is engaged in the equipment finance business. 2. Basis of preparation The financial statements have been prepared in conformity with generally accepted accounting principles to comply in all material respects with the notified Accounting Standards ( AS ) under provisions of the Companies Act, 1956 ( the Act ) read with General Circular 8/2014 dated April 04, 2014, issued by the Ministry of Corporate Affairs and the guidelines issued by the Reserve Bank of India ( RBI ) as applicable to a Non Banking Finance Company ( NBFC ). The financial statements have been prepared under the historical cost convention on an accrual basis. The accounting policies have been consistently applied by the company and are consistent with those used in the previous year. The complete financial statements have been prepared along with all disclosures. 2.1 Significant Accounting POLICIES a. Current / Non-current classification of assets / liabilities Pursuant to applicability of Revised Schedule VI on presentation of financial statements, the Company has classified all its assets / liabilities into current / non-current portion based on the time frame of 12 months from the date of financial statements. Accordingly, assets/liabilities expected to be realised /settled within 12 months from the date of financial statements are classified as current and other assets/ liabilities are classified as non current. b. Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the results of operations during the reporting year end. Although these estimates are based upon management s best knowledge of current events and actions, actual results could differ from these estimates. Any revisions to the accounting estimates are recognized prospectively in the current and future years. c. Fixed Assets, Depreciation/Amortisation and Impairment Fixed assets Fixed assets are stated at cost less accumulated depreciation and impairment losses, if any. Cost comprises the purchase price and any attributable cost of bringing the asset to its working condition for its intended use. Borrowing costs relating to acquisition of fixed assets which takes substantial period of time to get ready for its intended use are also included to the extent they relate to the year till such assets are ready to be put to use. Depreciation on tangible fixed assets Depreciation is provided on Straight Line Method ( SLM ), which reflect the management s estimate of the useful lives of the respective fixed assets and are greater than the corresponding rates prescribed in Schedule XIV of the Act. Particulars Rates (SLM) Schedule XIV rates (SLM) Plant and Machinery 10% 4.75% Furniture and Fixtures 10% 6.33% Office Equipments 10% 4.75% Computers 20% 16.21% Leasehold improvement is amortised on SLM over the lease term subject to a maximum of 60 months. All fixed assets individually costing Rs. 5,000/- or less are fully depreciated in the year of installation. Depreciation on assets acquired/sold during the year is recognised on a pro-rata basis in the Statement of profit and loss till the date of sale. 12

15 Intangible assets Intangible assets are stated at cost less accumulated amortisation and impairment losses, if any. Cost comprises the purchase price and any attributable cost of bringing the asset to its working condition for its intended use. Amortisation is provided on Straight Line Method ( SLM ), which reflect the management s estimate of the useful life of the intangible asset. Particulars Rates (SLM) Computer software 33.33% Amortisation on assets acquired/sold during the year is recognised on a pro-rata basis in the Statement of profit and loss till the date of sale. Impairment of assets The carrying amount of assets is reviewed at each balance sheet date if there is any indication of impairment based on internal/external factors. An impairment loss is recognised wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the asset s net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and risks specific to the asset. After impairment, depreciation is provided on the revised carrying amount of the asset over its remaining useful life. A previously recognised impairment loss is increased or reversed depending on changes in circumstances. However, the carrying value after reversal is not increased beyond the carrying value that would have prevailed by charging usual depreciation if there was no impairment. d. Provisioning of assets Non performing hypothecation loans are provided for as per management estimates, subject to the minimum provision required as per Non- Banking Financial (Non-deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, Provision on standard assets is made as per the notification DNBS.PD.CC. No.207/ / issued by Reserve Bank of India. e. Loans Loans are stated at the amount advanced including finance charges accrued and expenses recoverable, as reduced by the amounts received up to the balance sheet date. f. Leases Where the Company is the lessee Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased item, are classified as operating leases. Operating lease payments are recognized as an expense in the Statement of profit and loss on a straight-line basis over the lease term. g. Revenue recognition Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. i ii. iii. iv. Income from financing activities is recognised on the basis of internal rate of return on time proportionate basis. Income recognised and remaining unrealised after instalments become overdue for six months or more in case of secured loans are reversed and are accounted as income when these are actually realised Additional finance charges / additional interest are treated to accrue only on realisation, due to uncertainty of realisation and are accounted accordingly. Interest income on fixed deposits is recognized on a time proportion basis taking into account the amount outstanding and the rate applicable. v. Subvention Income is accounted as and when it became due on contractual terms with parties. vi. Pre-mature dealer payment discount is recognized as per the contractual terms with dealers. Annual Report

16 h. Employee benefits Provident Fund All the employees of the Company are entitled to receive benefits under the Provident Fund, a defined contribution plan in which both the employee and the Company contribute monthly at a stipulated rate. The Company has no liability for future Provident Fund benefits other than its annual contribution and recognizes such contributions as an expense in the period in which service is received. Gratuity The Company provides for the gratuity, a defined benefit retirement plan covering all employees. The plan provides for lump sum payments to employees upon death during employment or on separation from employment after serving for the stipulated period mentioned under The Payment of Gratuity Act, The costs of providing such benefit under the plans are determined on the basis of actuarial valuation at each reporting date. Separate actuarial valuation is carried out for plan using the projected unit credit method. Actuarial gains and losses for defined benefit plan is recognized in full in the period in which it occur in the statement of profit and loss. Leave Encashment Accumulated leave, which is expected to be utilized within the next twelve months, is treated as short-term employee benefit.the Company measures the expected cost of such absences as the additional amount that it expects to pay as a result of the unused entitlement that has accumulated at the reporting date. The Company treats accumulated leave expected to be carried forward beyond twelve months, as long-term employee benefit for measurement purposes. Such long-term compensated absences are provided for based on the actuarial valuation using the projected unit credit method at the reporting date. Actuarial gains/losses are immediately taken to the statement of profit and loss and are not deferred. The Company presents the entire leave as a current liability in the balance sheet, since it does not have an unconditional right to defer its settlement for twelve months after the reporting date. i. Income tax Tax expense comprises of current and deferred tax. Current income tax is measured at the amount expected to be paid to the tax authorities in accordance with the Indian Income Tax Act, Deferred income taxes reflects the impact of current year timing differences between taxable income and accounting income for the year and reversal of timing differences of earlier years. In situations where the Company has unabsorbed depreciation or carry forward losses, all deferred tax assets are recognized only if there is virtual certainty supported by convincing evidence that they can be realized against the future taxable profits. Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the balance sheet date. Deferred tax assets are recognized only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized. The un-recognized deferred tax assets are re-assessed by the Company at each balance sheet date and are recognized to the extent that it has become reasonably certain or virtually certain, as the case may be that sufficient future taxable income will be available against which such deferred tax assets can be realized. The carrying cost of the deferred tax assets are reviewed at each balance sheet date. The Company writes down the carrying amount of a deferred tax asset to the extent that it is no longer reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which deferred tax asset can be realized. Any such write down is reversed to the extent that it becomes reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available. j. Earnings per share Basic earnings per share is calculated by dividing the net profit or loss for the year attributable to equity shareholders (after deducting attributable taxes) by the weighted average number of equity shares outstanding during the year. For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares. 14

17 k. Provisions A provision is recognised when the Company has a present obligation as a result of past event; it is probable that outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not discounted to its present value and are determined based on best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates. l. Cash and cash equivalents Cash and cash equivalents in the cash flow statement comprise cash at bank and in hand and cheques on hand,remittance in transit and short term investments with an original maturity of three months or less. m. Borrowing costs Borrowing cost includes interest, discount / premium amortised over the tenure of securities and exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost. Ancillary and other borrowing costs are charged to statement of profit and loss in the year in which they are incurred. n. Employee stock compensation costs In accordance with the Guidance Note on Accounting for Employee Share-based Payments, issued by The Institute of Chartered Accountants of India,the compensation cost relating to employee stock options is measured and recognised using intrinsic value method. Compensation expense is amortised over the vesting period of the option on a straight line basis. o. Contingent liabilities A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Company or a present obligation that is not recognized because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognized because it cannot be measured reliably. The Company does not recognize a contingent liability but discloses its existence in the financial statements. Annual Report

18 As at March 31, 2014 As at March 31, Share Capital Authorised 250,000,000 (March 31, 2013 : 250,000,000) Equity shares of Rs.10 each 25, , ,000,000 (March 31, 2013 : 75,000,000) Preference shares of Rs.100 each 75, , Issued and Subscribed share capital 100, , Equity Shares 1, , ,000,000 (March 31, 2013 : 10,000,000) equity shares of Rs. 10 each fully paid up (Held by the Holding Company, Shriram Transport Finance Company Limited and its nominees) Preference shares 25,000,000 (March 31, 2013 : 25,000,000) 0.01% compulsorily convertible Preference shares of Rs. 100 each fully paid up. (Held by the Holding Company, ShriramTransport Finance Company Limited) 25, , Total 26, , As at March 31, 2014 As at March 31, 2013 a) Reconciliation of the equity shares outstanding at the beginning and at end of reporting period. Numbers of shares Rs. in lacs Numbers of shares Rs. in lacs Equity shares Shares outstanding at the beginning of the year 10,000,000 1, ,000,000 1, Shares outstanding at the end of the year 10,000,000 1, ,000,000 1, Preference shares Shares outstanding at the beginning of the year 25,000,000 25, ,000,000 25, Shares outstanding at the end of the year 25,000,000 25, ,000,000 25, b) Terms/rights attached to equity shares The Company has only one class of equity shares having a par value of Rs 10 per share. Each holder of equity shares is entitled to one vote per share. In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders. c) The Company has issued Compulsory Convertible Preference share ( CCPS ) to its holding Company Shriram Transport Finance Company Limited (STFC),carrying a cumulative preference dividend of 0.01%.Terms and conditions for redemption of these CCPS have been outlined under Note 3(e). 16

19 d) Shares reserved for issue under options The Company has reserved 170,000 equity shares ( March NIL) for issue under the employee stock option scheme 2013, which are unvested as of March 31, The vesting date for unvested 34,000 equity shares is January 28, 2015, for 51,000 unvested equity shares is January 28, 2016 and for 85,000 unvested equity shares is January 28, For details of shares reserved for issue on conversion of CCPS, please refer note 3 (e) regarding terms of conversion/ redemption of preference shares. e) Terms of issue/conversion/redemption of CCPS: Issued, Subscribed and Paid up capital include 25,000,000 (March 2013:-25,000,000), 0.01% Compulsory Convertible Preference share ( CCPS ) of Rs.100/-each, fully paid up, which, by virtue of put / call option with the holding Company / Company, are convertible at any time commencing from the end of the third year and up to the end of the ninth year from the allotment of the CCPS, during the period from 1st April to 30th April of every year, at a price to be determined by the merchant banker. At the end of the tenth year from the allotment of the CCPS, the outstanding CCPS on which no put option or call option are exercised by the holding Company or the Company as the case may be, shall be automatically and compulsorily converted into equity shares. The price at which the CCPS shall be converted into equity shares shall be fixed by a merchant banker to be appointed for this purpose with the mutual consent of the Company and the holding Company. In the event of liquidation of the Company before conversion / redemption of CCPS, the holders of CCPS will have priority over equity shares in the payment of dividend and repayment of capital. No preference shares are redeemed till date. f) Details of shareholders holding more than 5% shares in the Company Details of shareholding As at March 31, 2014 As at March 31, 2013 Name of the Shareholder Numbers of shares % holding in the class Numbers of shares % holding in the class Equity shares of Rs. 10 each fully paid Holding Company, Shriram Transport Finance Company Limited and its nominees CCPS of Rs. 100 each fully paid Holding Company, Shriram Transport Finance Company Limited 10,000, % 10,000, % 25,000, % 25,000, % As per records of the Company, including its register of shareholders/members, the above shareholding represents legal ownerships of shares. Annual Report

20 As at March 31, 2014 As at March 31, Reserves and surplus Stock Option oustanding Balance as per last account - - Add :Employee stock option Granted Less : Deferred employee compensation Oustanding (76.15) - Closing balance Other reserves Statutory reserve pursuant to Section 45-IC of The RBI Act,1934 Balance as per last account 2, , Add: Transferred from surplus balance in the statement 1, , of profit and loss Closing balance 4, , Surplus in statement of Profit and Loss Balance as per last account 11, , Add:Profit for the current year 8, , Less:Appropriations Dividend on Preference shares (March 31, 2013 : Rs.0.01 per preference share of Rs 100 each ) (2.50) (2.50) Tax on Preference dividend (0.42) (0.42) Transfer to statutory reserve as per section 45-1C of the RBI Act,1934 (1,800.00) (1,800.00) Total appropriations (1,802.92) (1,802.92) Net surplus in statement of Profit and Loss 18, , Total 22, ,

21 5. long term borrowings Subordinated debts (Unsecured) As at March 31, 2014 As at March 31, 2013 Non-current portion Current maturities* Non-current portion Current maturities* i) From banks 9, , ii) From other than banks 11, , Redeemable non convertible debentures (secured) 3, , , , Less: Unamortised discount - (611.87) (1,539.73) (165.41) 3, , , , Term loans from banks (secured) 101, , , , Loans & advances from Holding Company (unsecured) 14, Total 139, , , , * Amount disclosed under Note 6 -Other liabilities A) Subordinated Debt - Unsecured i) Privately placed Subordinated debts of Rs. 1000,000/- each Terms of repayment as on March 31, 2014 Long term borrowing Rate of interest Redeemable at par >=10% <12% >=12% <14% Total (from the date of the Balance Sheet) Amount Amount Amount Over 60 Months 10, , , Months - 1, , Months Months - 2, , Total 11, , , Terms of repayment as on March 31, 2013 Long term borrowing Rate of interest >=10% <12% >=12% <14% Total Redeemable at par (from the date of the Balance Sheet) Amount Amount Amount Over 60 Months 5, , , Months Months - 2, , Total 5, , , Annual Report

22 5. long term borrowings (Contd.) B) NCD-Secured i) Privately Placed Redeemable Non-Convertible Debenture of Rs. 1,000,000/- each Terms of repayment as on March 31, 2014 Long term borrowing (Non current) Redeemable at par / premium (from the date of the Balance Sheet) Rate of interest >= 10% < 12% ^ Amount Total Amount months^ 3, , Total 3, , ^NCDs amounting to Rs lacs issued at zero coupon rates and redeemable at premium are included in above on the basis of IRR. Current maturity Redeemable at par / premium (from the date of the Balance Sheet) Rate of interest < 10% Rate of interest >= 10% < 12%^ Total Amount Amount Amount upto 12 months # 5, , , Total 5, , , NCDs amounting to Rs lacs issued at zero coupon rates and redeemable at premium are included in above on the basis of IRR. ^NCDs amounting to Rs lacs issued at zero coupon rates and redeemable at par are included in above on the basis of IRR. # Out of the above NCDs having put option are as under Sr No Rate of Interest Amount Option Option Date % 2, Put 25-Apr % 15, Put 6-Aug-14 Total 17,

23 5. long term borrowings (Contd.) Terms of repayment as on March 31, 2013 Long term borrowing(non current) Redeemable at par / premium (from the date of the Balance Sheet) Rate of interest >= 10% < 12% ^ Amount Total Amount months^ 16, , Total 16, , ^NCDs amounting to Rs lacs issued at zero coupon rates and redeemable at premium are included in above on the basis of IRR. Current maturity Redeemable at par / premium (from the date of the Balance Sheet) Rate of interest >= 10% < 12% ^ Amount Total Amount 1-12 Months 61, , Total 61, , ^NCDs amounting to Rs lacs issued at zero coupon rates and redeemable at premium are included in above on the basis of IRR. Out of the above NCDs having put option are as under Sr No Rate of Interest Amount Option Option Date % 15, Put 25-Apr % 18, Put 6-Aug % 20, Call 27-Mar-14 Total 53, Nature of security Secured by an exclusive charge by way of hypothecation of specific movable assets being fixed / current assets relating to hypothecation loans and mortgage of immovable property. As at March 31, 2014 As at March 31, 2013 Noncurrencurrent Non- Current Short Current Short maturities Term maturities Term Particulars portion portion Total nonconvertible debenture (secured ) 3, , , , , , Less: issued to related parties Total 3, , , , , , Annual Report

24 5. long term borrowings (Contd.) C) Term loans from Banks -Secured As at March 31, 2014 Terms of repayment Long term borrowing Tenure (from the date of the Balance Sheet) Above Months Months Months Months Months Months Months upto 12 Months upto 12 Months Rate of interest 10.25% to 11.75% 10.25% to 11.75% 10.25% to 11.75% 10.25% to 11.75% 10.25% to 11.75% 10.25% to 11.75% 10.25% to 11.75% 10.25% to 11.75% 10.25% to 11.75% 10.25% to 11.75% Repayment Details Non-Current portion Current Maturities 1 to 16 installments quarterly 7, , to 16 installments quarterly 14, , to 16 installments quarterly 28, , to 12 installments quarterly 38, , to 16 installments quarterly , to 12 installments quarterly 8, , to 30 installments monthly 1, , to 20 installments monthly 2, , to 16 installments quarterly - 3, to 3 installments Annually - 5, Total 101, , As at March 31, 2013 Terms of repayment Long term borrowing Tenure (from the date of the Balance Sheet) Months Months Rate of interest 10.50% to 11.75% 10.50% to 11.75% Repayment details Non-current portion Current maturities 1 to 16 installments quarterly 42, , to 3 installments Annually 5, , Months 10.50% to 11.75% 1 to 36 installments monthly frequency 5, , Months 10.50% to 11.75% 1 to12 installments quarterly frequency 16, , Total 69, ,