IDFC Primary Dealership Company Limited BOARD OF DIRECTORS Mr. Vikram Limaye Mr. Sunil Kakar Mr. Sadashiv S. Rao Dr. Rajeev Uberoi Mr. Naval Bir Kumar AUDITORS Deloitte Haskins & Sells Chartered Accountants PRINCIPAL BANKERS HDFC Bank Limited REGISTERED OFFICE Naman Chambers, C-32 G-Block, Bandra-Kurla Complex Bandra (East) Mumbai- 400 051 TEL: +91 22 4222 2000 FAX: +91 22 2654 0354 Website: www.idfc.com
s' Report TO THE MEMBERS Your s have pleasure in presenting the Second Annual Report together with the audited accounts for the year ended. Operational Overview The Company was registered as Non-Banking Financial Company with the Reserve Bank of India (RBI) on September 06, 2012 to carry on principal trading activity in fixed income securities namely Government Securities (G-Secs), Treasury bills (T-bills), State Development Loans, Corporate bonds, Debentures, Commercial Papers and Certificates of Deposits among others. The Company intends to apply for a primary dealership license with RBI in due course. The Company has actively traded in fixed income markets for the 7 of its existence up to the close of FY2013. During this period, The Company has registered a trading volume of approximately INR 14,721 crore in G-Secs and T-bills, and about INR 423 crore in corporate securities. Further, the Company would leverage existing relationships to retail G-Secs, State Development Loans and Corporate Bonds in the mid-market segment such as provident funds, pension funds, gratuity funds, corporate, co-operative banks, etc. In the short span of its existence, the Company has already on-boarded over 200 clients in the mid-market segment and has dealt with over 60 of them. FINANCIAL RESULTS PARTICULARS FOR THE YEAR ENDED MARCH 31, 2013 FOR THE period ENDED MARCH 31, 2012 Total Income 338,377,357 36,507 Less: Total Expenses 177,944,612 1 4,217,895 Profit/(Loss) before Tax 160,432,745 (14,181,388) Less: Provision for Tax 51,785,900 NIL Profit/(Loss) after Tax 108,646,845 (14,181,388) DIVIDEND The s do not recommend any dividend for the year ended. SHAREHOLDERS UPDATES The Company had received the Certificate of Registration from the Reserve Bank of India (RBI) to function as a Non-Banking Financial Company (NBFC). DIRECTORS In accordance with the provisions of the Companies Act, 1956 and Articles of Association of the Company, Mr. Sunil Kakar will retire at the ensuing Annual General Meeting (AGM) and being eligible, offers himself for re-appointment. The Board recommends the re-appointment of Mr. Kakar as at the ensuing AGM. During the year, Mr. Mahendra N. Shah had resigned from the ship of the Company with effect from September 13, 2012. The Board wishes to place on record its sincere appreciation for the guidance and valuable contributions by Mr. Mahendra N Shah to the Company. The Board had appointed Mr. Vikram Limaye, Mr. Sadashiv S. Rao and Mr. Naval Bir Kumar as Additional s with effect from September 13, 2012 who would hold the office up to the date of ensuing AGM. The Company has received notice from a Member of the Company under section 257 of the Companies Act, 1956, proposing the appointment of the above s at the ensuing AGM. AUDIT COMMITTEE The Audit Committee consists of four members, Mr. Sunil Kakar as Chairman, Mr. Sadashiv S. Rao, Dr. Rajeev Uberoi and Mr. Naval Bir Kumar. The functions of the Committee include reviewing the half yearly and annual financial statements, internal control systems and significant accounting policies of the Company and discussing the audit findings and recommendations of the internal and statutory auditors of the Company. STATUTORY AUDITORS M/s. Deloitte Haskins & Sells, Chartered Accountants, Ahmedabad, would be retiring as the Statutory Auditor at the conclusion of the ensuing AGM. The Board of s at it s meeting held on April 22, 2013 has proposed the re-appointment of M/s. Deloitte Haskins & Sells, Chartered Accountants, Ahmedabad, having registration no. 117365W, as Statutory Auditors to audit the financial of the Company for the year ending March 31, 2014. As required under the provisions of Section 224 of the Companies Act, 1956 the Company has obtained a written confirmation from the Auditors proposed to be appointed to the effect that their appointment, if made, would be in conformity with the provisions of Sections 224 and 226 of the Companies Act, 1956. The shareholders are requested to consider their re-appointment. IDFC Primary Dealership Company Limited 205
s' Report CONCURRENT AUDITOR During the period, KPMG was appointed as Concurrent Auditor for the FY 14 for systematic examination of all financial transactions of investments in Government securities and corporate bonds as well as borrowings made by the Company and to ensure accuracy and conformity with internal systems and policies of the Company. PUBLIC DEPOSITS During the period under review, your Company has not accepted deposits under Section 58-A of the Companies Act, 1956. PARTICULARS REGARDING CONSERVATION OF ENERGY AND TECHNOLOGY ABSORPTION Since the Company does not own any manufacturing facility, the disclosure of information on other matters required to be disclosed in terms of Section 217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the report of Board of s) Rules, 1988, are not applicable and hence not given. FOREIGN EXCHANGE EARNINGS AND EXPENDITURE There were no foreign exchange earnings and expenditure for the Company during the last financial year. PARTICULARS OF EMPLOYEES AND REMUNERATION As required by the provisions of Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, as amended, names and other particulars of the employees are set out in the annexure to the s Report. DIRECTORS RESPONSIBILITY STATEMENT Pursuant to Section 217(2AA) of the Companies Act, 1956, the s confirm that: in preparation of the annual accounts, the applicable accounting standards have been followed alongwith proper explanation relating to the material departures; they have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company as at and the profit of the Company for the year ended on that date; they have taken proper and sufficient care 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; and they have prepared annual accounts on a going concern basis. ACKNOWLEDGEMENTS The s also express their gratitude for the unstinted support and guidance received from IDFC Limited and other group companies. FOR AND ON BEHALF OF THE BOARD OF DIRECTORS vikram limaye sunil kakar Mumbai, July 1, 2013 206 IDFC ANNUAL REPORT 2012 2013
Independent Auditor's Report TO THE MEMBERS OF IDFC PRIMARY DEALERSHIP COMPANY LIMITED Report on the Financial Statements We have audited the accompanying financial statements of IDFC PRIMARY DEALERSHIP COMPANY LIMITED ( the Company ), which comprise the Balance Sheet as at, the Statement of Profit and Loss and the Cash Flow Statement for the year then ended, and a summary of the significant accounting policies and other explanatory information. Management s Responsibility for the Financial Statements The Company s 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 the Accounting Standards referred to in Section 211(3C) of the Companies Act, 1956 ( the Act ). 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. Auditors 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 the 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 the accounting policies used and the reasonableness of the accounting estimates made by the 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 aforesaid financial statements give the information required by 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 ; (b) in the case of the Statement of Profit and Loss, of the profit of the Company for the year ended on that date; and (c) in the case of the Cash Flow Statement, of the cash flows of the Company 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 in terms of Section 227(4A) 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 purposes of our audit. (b) In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books. (c) The Balance Sheet, the Statement of Profit and Loss, and the 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 referred to in Section 211(3C) of the Act. (e) On the basis of the written representations received from the directors as on taken on record by the Board of s, none of the directors is disqualified as on from being appointed as a director in terms of Section 274(1)(g) of the Act. For DELOITTE HASKINS & SELLS Chartered Accountants (Firm registration number: 117365W) Z.F. Billimoria Partner (Membership No.: 42791) Mumbai, April 22, 2013 IDFC Primary Dealership Company Limited 207
Annexure to the Auditor's Report (Referred to in paragraph 1 under Report on Other Legal and Regulatory Requirements section of our report of even date) (i) Having regard to the nature of the Company s business / activities / results / transactions, etc. clauses i(c) (ii), (vi), (viii), (x), (xii), (xiii), (xv), (xvi), (xviii), (xix) and (xx) of CARO are not applicable. (ii) In respect of its fixed assets: (a) The Company has maintained proper records showing full particulars, including quantitative details and situation of the fixed assets. (b) The fixed assets were physically verified during the year by the Management in accordance with a regular programme of verification which, in our opinion, provides for physical verification of all the fixed assets at reasonable intervals. According to the information and explanation given to us, no material discrepancies were noticed on such verification. (iii) In case of loans, secured or unsecured, taken by the Company from a company listed in the Register maintained under Section 301 of the Companies Act, 1956, according to the information and explanations given to us: (a) The Company has taken loans to 23,000,000,000 during the year from a Company. At the year-end, there is no outstanding balance of such loans and the maximum amount involved during the year was 2,500,000,000. (b) The rate of interest and other terms and conditions of such loans are, in our opinion, prima facie not prejudicial to the interests of the Company. (c) The payments of principal amounts and interest in respect of such loans are regular/ as per stipulations. (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 with regard to purchases of fixed assets and services and the purchase and sale of investments. During the course of our audit, we have not observed any major weakness in such internal control system. (v) To the best of our knowledge and belief and according to the information and explanations given to us, there were no contracts or arrangements that needed to be entered in the Register maintained under Section 301 of the Companies Act, 1956. (vi) In our opinion, the internal audit functions carried out during the year by a firm of Chartered Accountants appointed by the Management have been commensurate with the size of the Company and the nature of its business. (vii) According to the information and explanations given to us in respect of statutory dues: (a) The Company has generally been regular in depositing undisputed dues, including Provident Fund, Income-tax, Service Tax, Cess and other material statutory dues applicable to it with the appropriate authorities. (b) There were no undisputed amounts payable in respect of Income-tax, Service tax, Cess and other material statutory dues in arrears as at for a period of more than six from the date they became payable. (viii) In our opinion and according to the information and explanation given to us, the Company has not defaulted in the repayment of dues to banks and financial institutions. (ix) Based on our examination of the records and evaluation of the related internal controls, the Company has maintained proper records of the transactions and contracts in respect of its dealing in investments and timely entries have been made therein. The aforesaid securities have been held by the Company in its own name. (x) In our opinion and according to the information and explanations given to us and on an overall examination of the Balance Sheet and the Assets Liabilities Maturity Report, we report that funds raised on short-term basis have not been used during the year for long- term investment. (xi) To the best of our knowledge and according to the information and explanations given to us, no fraud by or on the Company has been noticed or reported during the year. For DELOITTE HASKINS & SELLS Chartered Accountants (Firm registration number: 117365W) Z.F. Billimoria Partner (Membership No.: 42791) Mumbai, April 22, 2013 208 IDFC ANNUAL REPORT 2012 2013
Balance Sheet AS AT MARCH 31, 2013 Equity and liabilities Assets Shareholders funds As at As at As at Notes () () () (a) Share capital 3 2,000,000,000 50,000,000 (b) Reserves and surplus 4 94,465,457 (14,181,388) Non-current liabilities 2,094,465,457 35,818,612 (a) Long-term provisions 5 418,547 - Current liabilities (a) Short-term borrowings 6 5,972,282,864 - (b) Trade payables 7 1,096,271,116 50,562 (c) Other current liabilities 8 9,067,932 14,167,333 (d) Short-term provisions 9 97,992-7,077,719,904 14,217,895 TOTAL 9,172,603,908 50,036,507 Non-current assets (a) Fixed assets Tangible assets 10 22,844 - (b) Deferred tax assets 11 2,816,000 - (c) Long-term loans and advances 12 8,027,113-10,865,957 - Current assets (a) Current investments 13 8,259,086,624 - (b) Trade receivables 14 727,002,619 - (c) Cash and bank balances 15 102,976,278 50,000,000 (d) Short term loans and advances 16 1,540,634 - (e) Other current assets 17 71,131,796 36,507 9,161,737,951 50,036,507 TOTAL 9,172,603,908 50,036,507 See accompanying notes forming part of the financial statements. In terms of our report attached. For Deloitte Haskins & Sells Chartered Accountants For and on behalf of the Board of s of IDFC Primary Dealership Company Limited Z. F. Billimoria Partner Vikram Limaye Sunil Kakar Mumbai April 22, 2013 Nirav Shah Company Secretary IDFC Primary Dealership Company Limited 209
Statement of Profit and Loss FOR THE YEAR ENDED MARCH 31, 2013 For the Year ended For the period ended March 17 to march 31, 2012 Notes I Income Revenue from operations 18 333,529,346 - Other income 19 4,848,011 36,507 Total Income (I) 338,377,357 36,507 II Expenses Employee benefits expense 20 16,128,684 - Finance costs 21 153,505,797 - Provisions and contingencies 22 6,266,593 - Other expenses 23 2,032,192 14,217,895 Depreciation 10 11,346 - Total Expenses (II) 177,944,612 14,217,895 III Profit/(loss) before Tax (I - II) 160,432,745 (14,181,388) IV Tax expense Current tax 54,601,900 - Deferred tax (2,816,000) - Total tax expense (IV) 51,785,900 - V Profit/(loss) for the year from continuing operations (III - IV) 108,646,845 (14,181,388) Earnings per equity share (nominal value of share 10 each) 27 Basic () 1.20 (2.84) Diluted () 1.20 (2.84) See accompanying notes forming part of the financial statements. In terms of our report attached. For Deloitte Haskins & Sells Chartered Accountants For and on behalf of the Board of s of IDFC Primary Dealership Company Limited Z. F. Billimoria Partner Vikram Limaye Sunil Kakar Mumbai April 22, 2013 Nirav Shah Company Secretary 210 IDFC ANNUAL REPORT 2012 2013
Cash Flow Statement FOR THE YEAR ENDED MARCH 31, 2013 (A) Cash flow from operating activities For the period ended March 17 to march 31, 2012 NOTES Profit / (loss) before tax 160,432,745 (14,181,388) Adjustment for: Depreciation expense 10 11,346 - Provision for employee benefits 516,539 - Provisions and contingencies 22 6,266,593 - Provision for interest on delayed payment of advance tax 2,028,000-8,822,478 - Operating profit before working capital changes 169,255,223 (14,181,388) Changes in working capital: Adjustments for (increase) / decrease in operating assets Current investments (8,265,353,215) - Trade receivables (727,002,619) - Bank deposits placed (100,000,000) - Long-term loans and advances (100,000) - Short-term loans and advances (1,540,634) - Other current assets (71,095,289) (36,507) Adjustments for increase / (decrease) in operating liabilities Trade payables 1,096,220,554 50,562 Other current liabilities (5,099,401) 14,167,333 (8,073,970,604) 14,181,388 Direct taxes paid (64,557,015) - NET CASH USED IN OPERATING ACTIVITIES (A) (7,969,272,396) - (B) Cash flow from investing activities Purchase of fixed assets (34,190) - NET CASH USED IN INVESTING ACTIVITIES (B) (34,190) - C. Cash flow from financing activities Proceeds from fresh issue of shares 1,950,000,000 50,000,000 Proceeds from borrowings (net of repayments) 5,972,282,864 - Net cash flow from financing activities (C) 7,922,282,864 50,000,000 Net increase / (decrease) in cash and cash equivalents (A+B+C) (47,023,722) 50,000,000 Cash and cash equivalents as at the beginning of the year 50,000,000 - (see note 15) Cash and cash equivalents as at the end of the year 2,976,278 50,000,000 (see note 15) (47,023,722) 50,000,000 See accompanying notes forming part of the financial statements. In terms of our report attached. For Deloitte Haskins & Sells Chartered Accountants For and on behalf of the Board of s of IDFC Primary Dealership Company Limited Z. F. Billimoria Partner Vikram Limaye Sunil Kakar Mumbai April 22, 2013 Nirav Shah Company Secretary IDFC Primary Dealership Company Limited 211
Notes forming part of financial statements as AT AND 01 Background IDFC Primary Dealership Company Limited is a wholly owned subsidiary of IDFC Limited (formerly known as Infrastructure Development Finance Company Limited), incorporated in India and regulated by the Reserve Bank of India ('RBI') as an Non Banking Finance Company. The Company has made application to the RBI for a Primary Dealership license. 02 Significant accounting policies a. Basis of preparation The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in India ('Indian GAAP'). The Company has prepared these financial statements to comply in all material respects with the Accounting Standards notified by the Companies (Accounting Standards) Rules, 2006, (as amended) and the relevant provisions of the Companies Act, 1956. The financial statements have been prepared on the accrual basis under the historical cost convention. Accounting policies adopted in the preparation of financial statement are consistent with those followed in previous year. b. Use of estimates The preparation of the financial statements requires the management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) as of the date of the financial statements and the reported income and expenses during the reporting period. The management believes that the estimates used in preparation of the financial statements are prudent and reasonable. Future results could differ from these estimates. c. Investments Investments which are readily realisable and intended to be held for not more than one year from the date on which such investments are made are classified as current investments in accordance with the RBI guidelines and Accounting Standard 13 on Accounting for Investments as notified by the Companies (Accounting Standards) Rules, 2006. All other investments are classified as long-term investments. All investments are initially recorded at cost. The cost of an investment includes purchase price and directly attributable acquisition charges such as brokerage, fees and duties and reduced by recovery of costs, if any. On disposal of an investment, the difference between its carrying amount and the net disposal proceeds is charged or credited to the Statement of Profit and Loss. Current investments are individually carried at the lower of cost or fair value / market value. Commercial papers, certificate of deposits and Treasury bills are valued at carrying cost. Long-term investments are carried at acquisition cost. A provision is made for diminution other than temporary on an individual basis. Premium paid over the face value of long term investments is amortised over the life of the investment. Inter-class transfer of investments from one category to the other, if any, is done in accordance with RBI guidelines at lower of book value or fair value / market value on the date of transfer. d. Cash and cash equivalents Cash and cash equivalents for the purpose of the Cash Flow Statement comprises cash on hand, cash in bank, fixed deposits and other shortterm highly liquid investments with an original maturity of three or less that are readily convertible into known amount of cash and which are subject to an insignificant risk of change in value. e. Cash flow statement Cash flows are reported using the indirect method, whereby profit / (loss) before tax is adjusted for the effects of transactions of non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from operating, investing and financing activities of the Company are segregated based on the available information. f. Tangible fixed assets Fixed assets are stated at cost of acquisition, including any cost attributable for bringing the asset to its working condition, less accumulated depreciation. Profit or loss arising from derecognition of fixed assets are measured as difference between the net disposal proceeds and the cost of the assets less accumulated depreciation upto the date of disposal and are recognised in the Statement of Profit and Loss. g. Depreciation on tangible fixed assets Depreciation on tangible fixed assets, excluding certain electronic items is provided on the written down value method, at the rates prescribed in Schedule XIV to the Companies Act, 1956. Certain electronic items are depreciated over a period of two years on a straight-line method based on the Management s estimate of the useful life of these assets. Depreciation on additions during the year is provided on a pro-rata basis. Assets costing less than 5,000 each are fully depreciated in the year of capitalisation. 212 IDFC ANNUAL REPORT 2012 2013
Notes forming part of financial statements as AT AND h. Impairment of assets The carrying amount of assets at each Balance Sheet date are reviewed for impairment. If any indication of impairment based on internal / external factors exists, the recoverable amount of such assets is estimated and impairment is recognised wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the net selling price and its value in use, which is arrived at by discounting the future cash flows to their present value, based on an appropriate discounting factor. If at the Balance sheet date, there is a indication that previously recognised impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount, subject to a maximum of the depreciable historical cost and reversal of such impairment loss is recognised in the Statement of Profit and Loss, except in case of revalued assets. i. Employee benefits Defined contribution plans The Company's contribution to provident fund is considered as defined contribution plans and are charged to the Statement of Profit and Loss as they fall due, based on the amount of contribution required to be made. Defined benefit plan The net present value of the Company s obligation towards gratuity to employees is unfunded and actuarially determined as at the Balance Sheet date based on the projected unit credit method. Actuarial gains and losses are recognised in the Statement of Profit and Loss for the year. Compensated absences Based on the leave rules of the Company, employees are not permitted to accumulate leave. Any unavailed privilege leave to the extent encashable is paid to the employees and charged to the Statement of Profit and Loss for the year. j. Revenue recognition Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. Interest income is accounted on accrual basis Income on discounted instruments is recognised over the tenure of the instrument on a straight-line method. Profit / loss on sale of investments is recognised on trade date basis. Profit / loss on sale of investments is determined based on the 'first in first out' cost for current investments and weighted average cost for long-term investments. k. Earnings per share Basic earnings per share is computed by dividing the profit / (loss) after tax by the weighted average number of equity shares outstanding during the year. Diluted earnings per share is computed by dividing the profit / (loss) after tax as adjusted for expense or income relating to the dilutive potential equity shares, by the weighted average number of equity shares considered for deriving basic earnings per share and the weighted average number of equity shares which could have been issued on the conversion of all dilutive potential equity shares. l. Taxes on income "Income tax expense comprises of current income tax and deferred tax. Current tax is the amount payable on the taxable income for the year as determined in accordance with the provisions of the Income Tax Act, 1961. The accounting treatment for income-tax in respect of the Company's income is based on the Accounting Standard 22 on 'Accounting for Taxes on Income' as notified by the Companies (Accounting Standards) Rules, 2006. The provision made for income-tax in the accounts comprises both, the current tax and the deferred tax. The deferred tax assets and liabilities for the year, arising on account of timing differences, are recognised in the Statement of Profit & Loss and the cumulative effect thereof is reflected in the Balance Sheet. Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the reporting date. Deferred tax assets are recognised 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 realised. In situations where the Company has unabsorbed depreciation or carried forward losses, deferred tax assets are recognised only if there is virtual certainty supported by convincing evidence that the same can be realised against future taxable profits. m. Provisions and contingencies A provision is recognised when the Company has a present obligation as a result of past events and it is probable that an 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 their present value and are determined based on the 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. Contingent liabilities if any, are disclosed in the notes. n. Service tax input credit Service tax input credit is accounted in the period in which the underlying services are received and when there is no uncertainty in availing / utilising the credit. IDFC Primary Dealership Company Limited 213
Notes forming part of financial statements as AT AND o. Operating cycle Based on the nature of products / activities of the Company and the normal time between acquisition of assets and their realisation in cash or cash equivalents, the Company has determined its operating cycle as 12 for the purpose of classification of its assets and liabilities as current and non-current. 03 Share capital Number Number Authorised shares Equity shares of 10 each 200,000,000 2,000,000,000 200,000,000 2,000,000,000 Issued, subscribed & fully paid up shares Equity shares of 10 each 200,000,000 2,000,000,000 5,000,000 50,000,000 [All of these shares are held by IDFC Limited (formerly known as Infrastructure Development Finance Company Limited), the holding company and its nominees] Total 2,000,000,000 50,000,000 (a) Reconciliation of the number of equity shares outstanding at the beginning and at the end of the year Number Number Outstanding at the beginning of the year 5,000,000 50,000,000 - - Issued during the year 195,000,000 1,950,000,000 5,000,000 50,000,000 Outstanding at the end of the year 200,000,000 2,000,000,000 5,000,000 50,000,000 (b) Terms / rights attached to equity shares The Company has only one class of equity shares having a par value of 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 any of the remaining assets of the Company, after distribution of all preferential amounts. However, no such preferential amounts exists currently. The distribution will be in proportion to the number of equity shares held by the shareholders. (c) Details of shareholders holding more than 5% of the shares in the Company Equity shares IDFC Limited (formerly known as Infrastructure Finance Company Limited) and its nominees Number % of holding Number % of holding 200,000,000 100 5,000,000 100 04 Reserves and surplus (a) Special Reserve u/s. 45-IC of RBI Act, 1934 Opening balance - - Add : Transferred from surplus balance in Statement of Profit and Loss 21,729,400 - Closing balance 21,729,400 - (b) Surplus/deficiet in the statement of profit and loss Opening balance (14,181,388) - Profit / (loss) for the year / period 108,646,845 (14,181,388) Less: Appropriations : Transfer to Special reserve u/s. 45-IC of RBI Act, 1934 21,729,400 - Closing balance 72,736,057 (14,181,388) Total Reserves and Surplus 94,465,457 (14,181,388) 214 IDFC ANNUAL REPORT 2012 2013
Notes forming part of financial statements as AT AND 05 Long term provisions Provision for employees benefits (see note 24) 418,547 - Total 418,547-06 Short term borrowings Collateralised borrowings and lending obligations (CBLO) [see note (a)] 5,972,282,864 - Total 5,972,282,864 - (a) Borrowings under CBLO is secured against investment in Government Securities and Treasury Bills. 07 Trade payables Trade Payables [see note (a)] 11,109,074 50,562 Payables against purchase of investments 1,085,162,042 - Total 1,096,271,116 50,562 (a) No amount is payable to 'Suppliers' registered under the Micro, Small and Medium Enterprises Development Act, 2006. No interest has been paid / payable by the Company during the year to the 'Suppliers' covered under the Micro, Small and Medium Enterprises Development Act, 2006. The above information takes into account only those suppliers who have responded to inquiries made by the Company for this purpose. 08 Other current liabilities Interest accrued but not due on borrowings 7,773,709 - Preliminary expenses payable (see note 26) - 14,156,373 Statutory dues 1,294,223 10,960 Total 9,067,932 14,167,333 09 Short term Provisions Provision for employees benefits (see note 24) 97,992-97,992-10 Tangible assets Gross block Accumulated depreciation Net block Balance as at April 1, 2012 Additions Disposals Balance as at Balance as at April 1, 2012 Depreciation charge for the year On disposals Balance as at Balance as at Balance as at Office Equipment - 21,600-21,600-8,078-8,078 13,522 - Computers - 12,590-12,590-3,268-3,268 9,322 - Total - 34,190-34,190-11,346-11,346 22,844 - Previous Year - - - - - - - - - - IDFC Primary Dealership Company Limited 215
Notes forming part of financial statements as AT AND 11 Deferred tax asset (a) Provisions 2,306,000 - (b) Others 510,000 - Total 2,816,000-12 Long-term loans and advances (unsecured, considered good) Advance payment of income tax [(net of provision for tax of 56,629,900 (Previous Year Nil)] 7,927,113 - Initial Margin Account - CBLO 100,000 - Total 8,027,113-13 Current investments (Non trade) Face value () Quantity () Quantity () (Valued at lower of cost and market value) Investment in bonds (unquoted) (fully paid) 8.95% National Bank For Agriculture and Rural Development 1,000,000 250 250,000,000 - - 8.94% Power Finance Corporation Limited 1,000,000 250 250,000,000 - - 8.8% Power Grid Corporation of India Limited 1,000,000 250 250,225,000 - - 9.5% Housing Development Finance Corporation Limited 1,000,000 24 24,188,184 - - 9.8% Mahindra and Mahindra Financial Services Limited 1,000,000 50 50,000,000 - - 824,413,184 - Investment in certificate of deposits with scheduled banks 736,128,540 - (unquoted) Investment in government securities (unquoted) [see note (a)] 3,776,766,643 - Investment in treasury bills (unquoted) [see note (b)] 2,928,044,850 - Total current investments 8,265,353,217 - Less: Provision for diminution in value of investments 6,266,593 - Net current investments 8,259,086,624 - (a) Of the total amount 3,422,423,345 (Previous year Nil) is placed as collateral towards CBLO. (b) Of the total amount 2,889,939,685 (Previous year Nil) is placed as collateral towards CBLO. 14 Trade receivables (unsecured, considered good) () () Outstanding for a period less than six from the date they are due for payment Receivable on sale of investments 727,002,619 - Total 727,002,619-216 IDFC ANNUAL REPORT 2012 2013
Notes forming part of financial statements as AT AND 15 Cash and bank balances () () Cash and cash equivalents Balance with bank: In current account [see note (a)] 2,976,278 17,500,000 In deposit account - 32,500,000 Others Balance with bank: In deposit account [see note (b)] 100,000,000 - Total 102,976,278 50,000,000 (a) Includes 539,952 (Previous year Nil) earmarked towards Provident Fund payable pending registration with the prescribed authorities. (b) Includes deposits under lien of 100,000,000 (Previous year Nil ) with HDFC Bank Limited for intra day overdraft facility. 16 Short-term loans and advances (unsecured, considered good) Prepaid expenses 1,297,754 - Balances with government authorities - Cenvat credit available 242,880 - Total 1,540,634-17 Other current assets Interest accrued on bank deposits 306,849 36,507 Interest accrued on investments 70,824,947 - Total 71,131,796 36,507 18 Revenue from operations For the period ended March 17, 2012 to Interest on current investments 198,273,588 - Net profit on sale of current investments 135,255,758 - Total 333,529,346-19 Other income For the period ended March 17, 2012 to Interest on bank deposits 4,848,011 36,507 Total 4,848,011 36,507 IDFC Primary Dealership Company Limited 217
Notes forming part of financial statements as AT AND 20 Employee benefits expense For the period ended March 17, 2012 to Salaries 15,307,807 - Contribution to provident and other funds (see note 24) 786,515 - Staff welfare expenses 34,362 - Total 16,128,684-21 Finance costs For the period ended March 17, 2012 to Interest expense (see note 26) 147,011,781 - Other borrowing costs 4,450,223 - Interest on delayed payment of statutory dues 2,043,793 - Total 153,505,797-22 Provisions and contingencies For the period ended March 17, 2012 to Provision for diminution in value of investments 6,266,593 - Total 6,266,593-23 Other expenses For the period ended March 17, 2012 to Preliminary expenses written off - 14,161,715 Printing and stationary 12,932 - Communication cost 4,986 - Professional fees 534,621 - Brokerage paid 225,540 - Rates and taxes 50,726 - Other expenses 150,164 - Shared cost (see note 26) 676,705 - Auditors' remuneration * 376,518 56,180 Total 2,032,192 14,217,895 * Break up of auditors remuneration: Audit fees 100,000 50,000 Tax audit fees 50,000 - Other services 195,000 - Service tax 42,642 6,180 Less: Service tax set off claimed 11,124 - Total 376,518 56,180 218 IDFC ANNUAL REPORT 2012 2013
Notes forming part of financial statements as AT AND 24 In accordance with Accounting Standard 15 on 'Employee Benefits' as notified under the Companies (Accounting Standards) Rules, 2006 the following disclosures have been made: i. The Company has on a voluntary basis recognised the following amounts in the Statement of Profit and Loss towards contribution to defined contribution plans which are included under contribution to provident and other funds pending registration with the prescribed authorities: Provident fund 269,976 - ii. The details of the Company's unfunded post - retirement benefit plans for gratuity for its employees are given below which are certified by the actuary and relied upon by the auditors: Change in the defined benefit obligations: Liability at the beginning of the year - - Current service cost 516,539 - Interest cost - - Liabilities extinguished on settlement - - Liabilities assumed on acquisition / (settled on divestiture) - - Benefits paid - - Actuarial loss - - Liability at the end of the year 516,539 - Amount recognised in the Balance Sheet: Liability at the end of the year 516,539 - Fair value of plan assets at the end of the year - - Amount recognised in the Balance Sheet under 'Provision for employee benefits' 516,539 - Expense recognised in the Statement of Profit and Loss: Current service cost 516,539 - Interest cost - - Expected return on plan assets - - Net actuarial loss to be recognised - - Liabilities settled on divestiture - - Expense recognised in the Statement of Profit and Loss under 'Employee benefits expense' 516,539 - Reconciliation of the liability recognised in the Balance Sheet: Opening net asset - - Expense recognised 516,539 - Contribution by the Company - - Amount recognised in the Balance Sheet under "Provision for employee benefits" 516,539 - Expected employer's contribution next year 97,992 - Experience adjustments: Defined benefit obligation 516,539 - Plan assets - - Surplus/(deficit) - - Experience adjustments on plan liabilities (516,539) - Experience adjustments on plan assets - - * There were no employees on payroll of Company in the previous year hence the Nil disclosure. IDFC Primary Dealership Company Limited 219
Notes forming part of financial statements as AT AND 25 The Company s primary operations fall under single business segment of securities trading. Further, all the transactions and the assets of the Company are recorded/located in India. Since the Company s business activity primarily falls within a single business and geographical segment, no additional disclosure is to be provided under AS 17, other than those already provided in the financial statements. 26 As per Accounting Standard 18 on 'Related Party Disclosures' as notified by the Companies (Accounting Standards) Rules, 2006, the related parties of the Company are as follows: Relationship: I. Holding Company : IDFC Limited (formerly known as Infrastructure Development Finance Company Limited) II. Key Management Personnel : Mr. Nirav Shah - Company Secretary and Manager The nature and volume of transactions carried out with the above related parties in the ordinary course of business are as follows: Nature of related party and nature of relationship Holding Company: IDFC Limited (formerly known as Infrastructure Development Finance Company Limited) * Net of service tax as at as at Issuance of equity shares 1,950,000,000 50,000,000 Inter corporate deposits taken and repaid 23,000,000,000 - Interest paid on Inter corporate deposits 53,290,411 - Shared services costs* 637,318 - Amount payable - balance outstanding - 14,108,454 27 In accordance with Accounting Standard 20 on 'Earnings Per Share' as notified by the Companies (Accounting Standards) Rules, 2006: Net profit after tax 108,646,845 (14,181,388) Weighted average number of equity shares (Nos.) 90,479,452 5,000,000 Basic & Diluted Earnings Per Share () 1.20 (2.84) Nominal Value Per Share () 10 10 28 The following additional information is disclosed in terms of the RBI circular (Ref. No. DNBS (PD) CC No.279 / 03.02.001 / 2012-13 dated July 2, 2012): a. Capital to risk assets ratio (CRAR): CRAR (%) 73.83% NA CRAR - Tier I Capital (%) 73.83% NA CRAR - Tier II Capital (%) - NA b. Exposures to real estate sector*: Direct exposure (i) Commercial Real Estate - NA Lending fully secured by mortgage (including securities in the process of being created) on commercial real estates (office building, 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. (ii) Investments in Mortgage Backed Securities (MBS) and other securitised exposures a. Residential - NA b. Commercial Real Estate - NA Indirect exposure Fund based and non-fund based exposures on National Housing Bank (NHB) and Housing Finance Companies (HFCs). - NA 220 IDFC ANNUAL REPORT 2012 2013
Notes forming part of financial statements as AT AND C. Maturity pattern of certain items of assets and liabilities Liabilities 1 day to 30/31 days (one month) Over one month to two Over two to three Over three to six Over six to one year Over one year to three years Over three years to five years Over five years Total Borrowing from Banks - - - - - - - - - Market Borrowing 5,972,282,864 - - - - - - - 5,972,282,864 Assets Investments 7,440,940,033 - - - - 250,000,000 24,188,184 550,225,000 8,265,353,217 Previous Year* Liabilities 1 day to 30/31 days (one month) Over one month to two Over two to three Over three to six Over six to one year Over one year to three years Over three years to five years Over five years Total Borrowing from Banks NA NA NA NA NA NA NA NA NA Market Borrowing NA NA NA NA NA NA NA NA NA Assets Advances NA NA NA NA NA NA NA NA NA Investments NA NA NA NA NA NA NA NA NA The above classification is in accordance with the RBI circular (Ref DNBS (PD).CC.No.15 /02.01 / 2000-2001 dated June 27, 2001) *The Company has received the NBFC Licence with effect from September 6, 2012 and hence previous years numbers are not applicable. D. Investor group wise classification of all investments (Current and Long Term) in shares and securities (both Quoted and Unquoted): Market Value/ Breakup Value / Fair Value / NAV Book Value net of provision Market Value/ Breakup Value / Fair Value / NAV Book Value net of provision () () () () 1. Related Parties - - NA NA 2. Other than related Parties 8,260,476,809 8,259,086,624 NA NA E. Other information: 1 Gross non - performing assets (a) Related parties - NA (b) Other than related parties - NA 2 Net non - performing assets (a) Related parties - NA (b) Other than related parties - NA IDFC Primary Dealership Company Limited 221
Notes forming part of financial statements as AT AND 29 Previous year figures Previous year's figures have been regrouped / reclassified wherever necessary to correspond with the current year's classification / disclosure. For and on behalf of the Board of s of IDFC Primary Dealership Company Limited Vikram Limaye Sunil Kakar Mumbai April 22, 2013 Nirav Shah Company Secretary 222 IDFC ANNUAL REPORT 2012 2013