Bharat Financial Inclusion Ltd. के अकाउंट के लिये नोट

Mar 31, 2018

Note 1: The overall provision for portfolio loans determined as per the above mentioned provisioning policy is subject to the provision prescribed in the NBFC Master Directions, 2016 for Non-Banking Financial Company - Micro Finance Institutions (NBFC-MFIs). These Directions require the total provision for portfolio loans to be higher of (a) 1% of the outstanding loan portfolio or (b) 50% of the aggregate loan installments which are overdue for more than 90 days and less than 180 days and 100% of the aggregate loan installments which are overdue for 180 days or more.

Such additional provision created in order to comply provisioning policy as applicable to NBFC-MFI is classified and disclosed in the Balance Sheet along with the contingent provision for standard assets

ii. Loans and advances other than portfolio loans are provided for at the higher of management estimates and provision required as per the NBFC Master Directions, 2016.

iii. Provision on securitized / managed portfolio is made as per the Company''s provisioning policy for portfolio loans mentioned in (i) above net of losses, if any and subject to the maximum guarantee given in respect of these arrangements.

iv. All overdue loans including loans where the tenure of the loan is completed and in the opinion of the management any amount is not recoverable, are fully provided for / written off. t. Grants

Grants and subsidies from the government are recognized when there is reasonable assurance that (i) the company will comply with the conditions attached to them, and (ii) the grant/subsidy will be received.

When the grant or subsidy relates to revenue, it is recognized as income on a systematic basis in the statement of profit and loss over the periods necessary to match them with the related costs, which they are intended to compensate. Such grants are either be shown separately under ''other income'' or deducted in reporting the related expense. Where the grant relates to an asset, it is recognized as deferred income and released to income in equal amounts over the expected useful life of the related asset.

Where the company receives non-monetary grants, the asset is accounted for on the basis of its acquisition cost. In case a non-monetary asset is given free of cost, it is recognized at a nominal value.

Government grants of the nature of promoters'' contribution are credited to capital reserve and treated as a part of the shareholders'' funds

(b) Terms/ rights attached to equity shares

The Company has only one class of equity shares having par value of ''10 per share. Each holder of equity shares is entitled to one vote per share. Any dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting. Dividend declared and paid would be in Indian rupees.

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) Aggregate number of shares issued For consideration other than cash during the period of five years immediately preceding the reporting date:

The Company has issued 4,605,383 shares (March 31, 2017: 3,298,526) during the period of five years immediately preceding the reporting date on exercise of options granted under stock option plans wherein part consideration was received in the form of services rendered to the Company.

2. Segment information

The Company operates in a single business segment i.e. financing, which has similar risks and returns for the purpose of Accounting standard 17 on ''Segment Reporting'' specified under section 133 of the Companies Act 2013, read with rule 7 of the Companies (Accounts) Rules, 2014 and Companies (Accounting Standards) Amendment Rules, 2016. The Company 3

3. Related parties

a. Names of the related parties with whom transactions have been entered

Key Management Personnel Mr. M. R. Rao, Managing Director and Chief Executive

Officer

Mr. S. Dilli Raj, President (Resigned w.e.f October 28,

2016)

Mr. K.V. Rao, Chief Operating Officer (Resigned w.e.f January 31, 2018)

Mr. Ashish Damani, Chief Financial Officer Mr. Rajendra Patil, Company Secretary

Note: As the provisions for gratuity, leave benefits and stock option expenditure are made for the Company as a whole, the amounts pertaining to the Key Management Personnel are not specifically identified and included above.

4. Stock option scheme

The Company has provided various share-based payment schemes to its Directors and Employees. The plans in operation are Plan II (Other Independent Directors) and Plan III (Employees). The alphabet a, b,

c, etc. represents different grants made under these plans. During the year ended March 31, 2018, the following series were in operation:

The expected life of the stock option is based on historical data and current expectations and is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility for the one year period ended on the date of grant is indicative of future trends, which also may not necessarily be the actual outcome.

Effect of the share-based payment plans on the statement of profit and loss and on the financial position:

5 Retirement benefits

The Company has a defined benefit gratuity plan. Every employee who has completed five years or more of service is eligible for gratuity on cessation of employment and it is computed at 15 days salary (last drawn salary) for each completed year of service subject to limit of Rs.2,000,000 as per The Payment of Gratuity Act, 1972 as amended from time to time. The scheme is funded with an insurance Company in the form of a qualifying insurance policy.

The following tables summaries the components of net benefit expense recognized in the statement of profit and loss and the funded status and amounts recognized in the Balance Sheet for the gratuity plan.

*Professional fees for the year ended March 31, 2017 includes Rs.13,826,493 towards consultancy services in connection with the Qualified Institutional Placement adjusted to securities premium account as per section 52 of the Companies Act, 2013. The expenditure in foreign currency does not include commission payable to three foreign directors (Previous year: Rs. 10,800,000) as the amount payable to individual directors shall be determined by the Board of Directors, in accordance with the shareholder resolution passed at 12th Annual General Meeting held on September 23, 2015. However, the total amount payable to all directors has been charged to the statement of profit and loss.

6. Leases (operating lease)

Office Premises:

Head office, registered office and branch office premises are obtained on operating lease. The branch office premises are generally rented on cancellable term ranging from twelve months to thirty six months with or without escalation clause, however none of the branch lease agreement carries non-cancellable lease periods. The registered office premise has been obtained on a lease term of thirty six months with an escalation clause of five percent after every twelve months. The rent agreement for head office premise has been renewed on a lease term of nine years with an escalation clause of five percent after every twelve months. There are no restrictions imposed by lease arrangements. There are no subleases. Lease payments during the year are charged to statement of profit and loss.

Vehicles:

The Company has taken certain vehicles on cancellable operating lease. Total lease expense under cancellable operating lease during the year was Rs.34,301,259 (Previous year: Rs.27,686,441).

7. The Company had given interest free collateral free loan to an employee benefit trust under the Employee Stock Purchase Scheme to provide financial assistance to its employees to purchase equity shares of the Company under such scheme. The loan was repayable by the trust under a back to back arrangement by the trust with the employees of the Company. The loan was fully repaid during the year ended March 31, 2018 and the year-end balance for the total loan granted is Rs. Nil (March 31, 2017: Rs.21,362,356 ).

8. In the financial years 2013-14, 2015-16 and 2016-17, the Company has received five demand orders from service tax authorities against the show-cause notices received in earlier years. The orders pertain to applicability of service tax on various items like income from asset assignment transactions, administration charges collected by the Company on distribution of insurance products to its borrowers, reimbursement of certain expenses from an insurance company, etc. The amount of service tax demanded in two orders received in 2013-14 aggregated to Rs.460,522,457 (plus penalty and interest, as applicable). The Company had filed appeals and stay petition against these demand orders with The Customs, Excise and Service Tax Appellate Tribunal (''CESTAT'') and received a stay order in respect of one of the two orders amounting to Rs.118,091,538 (plus penalty and interest, as applicable).

In the financial year 2015-16, the Company received a stay order from CESTAT for the demand raised in the previous year for Rs.342,493,571 (plus penalty and interest, as applicable) against pre-deposit of Rs.30,000,000. Further, the Company has received three orders on similar matters aggregating Rs.276,831,601 (plus penalty and interest, as applicable). The Company has filed an appeal before the CESTAT against these orders.

Based on the merits of the cases, the Company and its tax advisors believe that its position is likely to be upheld in the appellate process for the above matters. Accordingly, no provision has been made for the amounts mentioned above as at March 31, 2018.

9. The Company has provided for minimum alternate tax (''MAT'') liability of Rs.789,174,013 for the year ended March 31, 2018 and recognized a corresponding MAT credit entitlement as an asset on the balance sheet.

10. The Company has certain litigations pending with income tax authorities, service tax authorities and other litigations which have arisen in the ordinary course of business. The Company

has reviewed all such pending litigations having an impact on the financial position, and has adequately provided for where provisions are required and disclosed the contingent liabilities where applicable, in its financial statements. Refer note 36 for further details.

11. Dues to micro, small and medium enterprises

There are no amounts that need to be disclosed in accordance with the Micro Small and Medium Enterprise Development Act, 2006 (the ''MSMED'') pertaining to micro or small enterprises.

For the year ended March 31, 2018, no supplier has intimated the Company about its status as micro or small enterprises or its registration with the appropriate authority under MSMED.

12. There are no transactions in Specified Bank Notes (SBN) during the year ended March 31, 2018.

Notes:

1. Represent collections in Specified Bank Notes made by the Company on behalf of a bank against loan obligations of the bank, pursuant to a Business Correspondent arrangement, of Rs.13.22 crores from November 9, 2016 to November 11, 2016 and Rs.0.03 crores on November 14, 2016. Such collections were remitted to the corresponding bank in the ordinary course of business.

2. In addition to the permitted receipts mentioned in the table above, Rs.95.59 crores was received by the Company in Specified Bank Notes from its loan borrowers from November 9, 2016 to November 11, 2016 and Rs.0.01 crores on November 14, 2016. These amounts were collected against the borrowers'' regular loan obligations which had fallen due in the ordinary course of business and were deposited into bank accounts of the Company.

Such collections were made pending the outcome of the Company''s representation to the Reserve Bank of India (RBI) on November 9, 2016 and November 11, 2016 seeking permission for collecting loan repayments from its borrowers in specified bank notes in view of the difficulties and operational challenges faced by NBFC-MFIs owing to the profile of their borrowers. In absence of any response from the RBI, the Company discontinued further collections in SBNs with effect from November 11, 2016 except Rs.0.01 crores received on November 14, 2016.

b. Amounts received by the Company from November 9, 2016 to November 14, 2016 represents collection towards existing loan obligations of around 28.6 lakh borrowers across 1,220 branches. The maximum amount so collected against the scheduled loan installment from any single borrower is Rs.1,635 (average of Rs.575 per borrower against the scheduled loan installment). Such collections have been made in the ordinary course of business from borrowers, in respect of whom the Company has obtained/maintained adequate record of their KYC documents (comprising identification and address proof) as prescribed by RBI and validated by independent credit bureau. The information mentioned in this note has been certified by the management of the Company and relied upon by the auditors.

k. Unsecured Advances - Refer note 14. l. Registration obtained From other financial sector regulators:

The Company is registered with following other financial sector regulators (Financial regulators as described by Ministry of Finance):

i. Ministry of Corporate Affairs

ii. Ministry of Finance (Financial Intelligence Unit)

m. Disclosure of penalties imposed by RBI and other regulators:

No Penalties were imposed by RBI and other regulators during current and previous year

13. Previous year''s figures have been regrouped where necessary to conform to this year''s classification.

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Mar 31, 2017

1. Corporate information

Bharat Financial Inclusion Limited (Formerly known as ‘SKS Microfinance Limited’) (‘the Company’) is a public company domiciled in India and incorporated under the provision of the Companies Act, 1956. The Company was registered as a non-deposit accepting Non-Banking Financial Company (‘NBFC-ND’) with the Reserve Bank of India (‘RBI’) and has got classified as a Non-Banking Financial Company - Micro Finance Institution (‘NBFC-MFI’) with effect from November 18, 2013. Its shares are listed on two stock exchanges in India.

The Company is engaged primarily in providing micro finance services to women in the rural areas of India who are enrolled as members and organised as Joint Liability Groups (‘JLG’). The Company has its focus operation spread across 16 states.

In addition to the core business of providing micro-credit, the Company uses its distribution channel to provide other financial products and services to the members. Programs in this regard primarily relate to providing of loans to the members for the purchase of certain productivity-enhancing products such as mobile handsets, solar lamps, bicycle, sewing machines etc.

2. 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 under section 133 of the Companies Act, 2013 (‘the Act’), read together with rule 7 of the Companies (Accounts) Rules, 2014, Companies (Accounting Standards) Amendment Rules, 2016 and the provisions of the RBI applicable as per Master Directions - Non-Banking Financial Company -Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016 issued vide Notification No. DNBR. PD. 008/03.10.119/2016-17 dated September 01, 2016, as amended from time to time (‘the NBFC Master Directions, 2016’). The financial statements have been prepared on an accrual basis and under the historical cost convention except as detailed in note 2.1 (b).

The accounting policies adopted in the preparation of financial statements are consistent with those of previous year.

Note 1: The above mentioned provision for standard assets is linked to the Portfolio at Risk (PAR) as shown below:

Provision on standard assets has been made in line with the NBFC Master Directions, 2016.

Note 2: The overall provision for portfolio loans determined as per the above mentioned provisioning policy is subject to the provision prescribed in the NBFC Master Directions, 2016 for Non-Banking Financial Company - Micro Finance Institutions (NBFC-MFIs). These Directions require the total provision for portfolio loans to be higher of (a) 1% of the outstanding loan portfolio or (b) 50% of the aggregate loan installments which are overdue for more than 90 days and less than 180 days and 100% of the aggregate loan installments which are overdue for 180 days or more.

Such additional provision created in order to comply provisioning policy as applicable to NBFC-MFI is classified and disclosed in the Balance Sheet alongwith the contingent provision for standard assets.

i. Loans and advances other than portfolio loans are provided for at the higher of management estimates and provision required as per the NBFC Master Directions, 2016.

ii. Provision on securitised / managed portfolio is made as per the Company’s provisioning policy for portfolio loans mentioned in (i) above net of losses, if any and subject to the maximum guarantee given in respect of these arrangements.

iii. All overdue loans including loans where the tenure of the loan is completed and in the opinion of the management any amount is not recoverable, are fully provided for / written off.

3. Share capital

(a) Reconciliation of the shares outstanding at the beginning and at the end oF the reporting year Equity shares

(b) Terms/ rights attached to equity shares

The Company has only one class of equity shares having par value of Rs.10 per share. Each holder of equity shares is entitled to one vote per share. Any dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting. Dividend declared and paid would be in Indian rupees.

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) Aggregate number of shares issued for consideration other than cash during the period of five years immediately preceding the reporting date:

The Company has issued 3,298,526 shares (March 31, 2016: 2,719,961) during the period of five years immediately preceding the reporting date on exercise of options granted under stock option plans wherein part consideration was received in the form of services rendered to the Company.

(d) Details of shareholders holding more than 5% shares in the Company

No Shareholder hold more than 5% Share in the Comapny as at March 31, 2017.

(e) For details of shares reserved for issue under the employee stock option (ESOP) plan of the Company, refer note 30.

Cash credit from banks is secured by hypothecation of portfolio loans and margin money deposit and is repayable on demand.

Indian rupee loan from banks are term loans secured by hypothecation of portfolio loans and margin money deposit.

Indian rupee loan from non banking financial companies are term loans secured by hypothecation of portfolio loans

4. Segment information

The Company operates in a single business segment i.e. financing, which has similar risks and returns for the purpose of AS 17 on ‘Segment Reporting’ specified under section 133 of the Companies Act 2013, read with rule 7 of the Companies (Accounts) Rules, 2014 and Companies (Accounting Standards) Amendment Rules, 2016. The Company operates in a single geographical segment i.e. domestic.

5. Stock option scheme

The Company has provided various share-based payment schemes to its Directors and Employees. The plans in operation are Plan II (Other Independent Directors) and Plan III (Employees). The alphabet a, b, c, etc. represents different grants made under these plans. During the year ended March 31, 2017, the following series were in operation:

The expected life of the stock option is based on historical data and current expectations and is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility for the one year period ended on the date of grant is indicative of future trends, which also may not necessarily be the actual outcome.

6. Retirement benefits

The Company has a defined benefit gratuity plan. Every employee who has completed five years or more of service is eligible for gratuity on cessation of employment and it is computed at 15 days salary (last drawn salary) for each completed year of service subject to limit of Rs.1,000,000 as per The Payment of Gratuity Act, 1972. The scheme is funded with an insurance Company in the form of a qualifying insurance policy.

The following tables summarise the components of net benefit expense recognised in the statement of profit and loss and the funded status and amounts recognised in the Balance Sheet for the gratuity plan.

^Professional fees include an amount of Rs.13,826,493 (Previous year: Rs.NIL) towards consultancy services in connection with the Qualified Institutional Placement adjusted to securities premium account as per section 52 of the Companies Act, 2013. The expenditure in foreign currency does not include commission payable to three foreign directors (Previous year: Rs.12,000,000) as the amount payable to individual directors shall be determined subsequently by the Board of Directors, in accordance with the shareholder resolution passed at 12th Annual General Meeting held on September 23, 2015. However, the total amount payable to all directors has been charged to the statement of profit and loss

7. Leases (operating lease)

Office Premises:

Head office, registered office and branch office premises are obtained on operating lease. The branch office premises are generally rented on cancellable term ranging from twelve months to thirty six months with or without escalation clause, however none of the branch lease agreement carries non-cancellable lease periods. The registered office premise has been obtained on a lease term of thirty six months with an escalation clause of five percent after every twelve months. The rent agreement for head office premise has been renewed on a lease term of nine years with an escalation clause of five percent after every twelve months. There are no restrictions imposed by lease arrangements. There are no subleases. Lease payments during the year are charged to statement of profit and loss.

Vehicles:

The Company has taken certain vehicles on cancellable operating lease. Total lease expense under cancellable operating lease during the year was Rs.27,686,441 (Previous year: Rs.20,334,349)

8. The Company has given interest free collateral free loan to an employee benefit trust under the Employee Stock Purchase Scheme to provide financial assistance to its employees to purchase equity shares of the Company under such scheme. The loan is repayable by the trust under a back to back arrangement by the trust with the employees of the Company. The year-end balance for the total loan granted is Rs.21,362,356 (March 31, 2016: Rs.27,444,750)

9. In the financial years 2013-14, 2015-16 and 2016-17, the Company has received five demand orders from service tax authorities against the show-cause notices received in earlier years. The orders pertain to applicability of service tax on various items like income from asset assignment transactions, administration charges collected by the Company on distribution of insurance products to its borrowers, reimbursement of certain expenses from an insurance company, etc.

The amount of service tax demanded in two orders received in 2013-14 aggregated to Rs.460,522,457 (plus penalty and interest, as applicable). The Company had filed appeals and stay petition against these demand orders with The Customs, Excise and Service Tax Appellate Tribunal (‘CESTAT’) and received a stay order in respect of one of the two orders amounting to Rs.118,091,538 (plus penalty and interest, as applicable).

In the financial year 2015-16, the Company received a stay order from CESTAT for the demand raised in the previous year for Rs.342,493,571 (plus penalty and interest, as applicable) against pre-deposit of Rs.30,000,000. Further, the Company has received three orders on similar matters aggregating Rs.276,831,601 (plus penalty and interest, as applicable). The Company has filed an appeal before the CESTAT against two orders and in process to file appeal in one matter received in financial year 2016-17.

Based on the merits of the cases, the Company and its tax advisors believe that its position is likely to be upheld in the appellate process for the above matters. Accordingly, no provision has been made for the amounts mentioned above as at March 31, 2017.

10. The Company has provided for minimum alternate tax (‘MAT’) liability of Rs.1,094,306,076 for the year ended March 31, 2017 and recognised a corresponding MAT credit entitlement as an asset on the balance sheet. Unrecognised MAT credit of Rs.968,523,711 as at March 31, 2016 has been recognised as an asset on the balance sheet during the quarter ended June 30, 2016.

11. The Company has certain litigations pending with income tax authorities, service tax authorities and other litigations which have arisen in the ordinary course of business. The Company has reviewed all such pending litigations having an impact on the financial position, and has adequately provided for where provisions are required and disclosed the contingent liabilities where applicable, in its financial statements. Refer note 29 and 36 for further details.

12. Dues to micro, small and medium enterprises

There are no amounts that need to be disclosed in accordance with the Micro Small and Medium Enterprise Development Act, 2006 (the ‘MSMED’) pertaining to micro or small enterprises.

For the year ended March 31, 2017, no supplier has intimated the Company about its status as micro or small enterprises or its registration with the appropriate authority under MSMED.

13. Details of Specified Bank Notes (SBN) held and transacted during the period from 8 November, 2016 to 30 December, 2016:

a) Notes:

1. Represent collections in Specified Bank Notes made by the Company on behalf of a bank against loan obligations of the bank, pursuant to a Business Correspondent arrangement, of Rs.13.22 crores from November 9, 2016 to November 11, 2016 and Rs.0.03 crores on November 14, 2016. Such collections were remitted to the corresponding bank in the ordinary course of business.

2. In addition to the permitted receipts mentioned in the table above, Rs.95.59 crores was received by the Company in Specified Bank Notes from its loan borrowers from November 9, 2016 to November 11, 2016 and Rs.0.01 crores on November 14, 2016. These amounts were collected against the borrowers’ regular loan obligations which had fallen due in the ordinary course of business and were deposited into bank accounts of the Company.

Such collections were made pending the outcome of the Company’s representation to the Reserve Bank of India (RBI) on November 9, 2016 and November 11, 2016 seeking permission for collecting loan repayments from its borrowers in specified bank notes in view of the difficulties and operational challenges faced by NBFC-MFIs owing to the profile of their borrowers. In absence of any response from the RBI, the Company discontinued further collections in SBNs with effect from November 11, 2016 except Rs.0.01 crores received on November 14, 2016.

b) Amounts received by the Company from November 9, 2016 to November 14, 2016 represents collection towards existing loan obligations of around 28.6 lakh borrowers across 1,220 branches. The maximum amount so collected against the scheduled loan instalment from any single borrower is Rs.1,635 (average of Rs.575 per borrower against the scheduled loan instalment). Such collections have been made in the ordinary course of business from borrowers, in respect of whom the Company has obtained/maintained adequate record of their KYC documents (comprising identification and address proof) as prescribed by RBI and validated by independent credit bureau. The information mentioned in this note has been certified by the management of the Company and relied upon by the auditors.

c. Derivatives:

The Company has no transactions / exposure in derivatives in the current and previous year. The Company has no unhedged foreign currency exposure as on March 31, 2017 (March 31, 2016: Nil).

d. Disclosures relating to Securitisation:

During the year the Company has sold loans through securitization. The information on securitization activity of the Company as an originator is as shown below:

e. Details of financial assets sold to securitisation / reconstruction company for asset reconstruction:

The Company has not sold financial assets to Securitisation / Reconstruction companies for asset reconstruction in the current and previous year.

f. Details of non-performing financial assets purchased / sold:

The Company has not purchased / sold non-performing financial assets in the current and previous year.

g. Asset Liability Management:

Maturity pattern of certain Assets and Liabilities as on March 31, 2017:

h. Exposures:

The Company has no exposure to the real estate sector and capital market directly or indirectly in the current and previous year.

i. Details of financing of parent company products:

This disclosure is not applicable as the Company does not have any holding / parent company.

j. Unsecured Advances - Refer note 14. l. Registration obtained from other financial sector regulators:

The Company is registered with following other financial sector regulators (Financial regulators as described by Ministry of Finance):

i. Ministry of Corporate Affairs

ii. Ministry of Finance (Financial Intelligence Unit)

k. Disclosure of penalties imposed by RBI and other regulators:

No Penalties were imposed by RBI and other regulators during current and previous year

l. Draw down from Reserves:

There has been no draw down from reserves during the year ended March 31, 2017 (previous year: Nil).

m. Information on instances of fraud

Instances of fraud for the year ended March 31, 2017:

n. Outstanding of loans against security of gold as a percentage to total assets is Nil (March 31, 2016: 0.29%).

14. Previous year’s figures have been regrouped where necessary to conform to this year’s classification.

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Mar 31, 2015

1. Corporate information

SKS Microfinance Limited (''the Company'') is a public company domiciled in India and incorporated under the provision of the Companies Act, 1956. The Company was registered as a non-deposit accepting Non-Banking Financial Company (''NBFC-ND'') with the Reserve Bank of India (''RBI'') and has got classified as a Non-Banking Financial Company – Micro Finance Institution (''NBFC-MFI'') with effect from November 18, 2013. Its shares are listed on two stock exchanges in India.

The Company is engaged primarily in providing micro finance services to women in the rural areas of India who are enrolled as members and organized as Joint Liability Groups (''JLG''). The Company has its operation spread across 16 states.

In addition to the core business of providing micro-credit, the Company uses its distribution channel to provide certain other financial products and services to the members. Programs in this regard primarily relate to providing of loans to the members for the purchase of certain productivity-enhancing products such as mobile handsets, solar lamps and loans against gold as collateral.

2. 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 under section 133 of the Companies Act, 2013 (''the Act''), read with Rule 7 of the Companies (Accounts) Rules, 2014 and the provisions of the RBI as applicable to a NBFC-MFI and NBFC-ND-SI. The financial statements have been prepared on an accrual basis and under the historical cost convention except interest on loans which have been classified as non-performing assets and are accounted for on realisation basis.

The accounting policies adopted in the preparation of financial statements are consistent with those of previous year.

Note 1: The overall provision for JLG determined as per the above mentioned provisioning policy is subject to the provision prescribed in the NBFC-MFI Directions. These Directions require the total provision for JLG loans to be higher of (a) 1% of the outstanding loan portfolio or (b) 50% of the aggregate loan installments which are overdue for more than 90 days and less than 180 days and 100% of the aggregate loan installments which are overdue for 180 days or more.

Such additional provision created in order to comply with the NBFC-MFI Directions is classified and disclosed in the Balance Sheet alongwith the contingent provision for standard assets.

ii. Loans and advances other than loans to JLG are provided for at the higher of management estimates and provision required as per the NBFC-ND-SI Prudential Norms.

iii. Provision for losses arising under securitisation / managed arrangements is made as higher of the incurred loss and provision as per the Company''s provisioning policy for JLG loans mentioned in (i) above and subject to the maximum guarantee given in respect of these arrangements.

iv. All overdue loans, where the tenure of the loan is completed and in the opinion of the management any amount is not recoverable, are written off.

2. Change of Estimates

In accordance with the requirements of Schedule II to the Companies Act, 2013, the Company has re-assessed the useful lives and residual values of its fixed assets and:

i. An amount of Rs.10,808,240 has been charged to the opening balance of the retained earnings in respect of assets whose remaining useful life is nil as at April 1, 2014, and;

ii. An amount of Rs.17,342,399 has been charged to the statement of profit and loss for the year ended March 31, 2015 representing the additional depreciation on the carrying value of the assets as at April 1, 2014 due to change in useful life of asset.

4. Segment information

The Company operates in a single reportable segment i.e. financing, which has similar risks and returns for the purpose of AS 17 on ''Segment Reporting'' specified under section 133 of the Companies Act 2013, read with Rule 7 of the Companies (Accounts) Rules, 2014. The Company operates in a single geographical segment i.e. domestic.

5. Capital and other commitments

Estimated amounts of contracts remaining to be executed on capital account (net of capital advances) and not provided:

Particulars March 31, 2015 March 31, 2014

For development of computer software 1,425,424 8,551,012

For purchase of computer and computer peripherals 172,750 1,380,000

6. Contingent liabilities not provided for

Particulars March 31, 2015 March 31, 2014

Credit enhancements provided by the Company towards securitisation 2,216,270,453 2,317,185,220 (including cash collaterals, principal and interest subordination)

Performance security provided by the Company pursuant to business 477,749,783 327,026,873 correspondent / service provider agreement

Tax on items disallowed by the Income Tax department not 5,475,348 9,578,882 acknowledged as debt by the Company *

* Based on the expert opinion obtained by the Company, crystallisation of liability on these items is not considered probable.

7. Retirement benefits

The Company has a defined benefit gratuity plan. Every employee who has completed five years or more of service is eligible for gratuity on cessation of employment and it is computed at 15 days salary (last drawn salary) for each completed year of service. The scheme is funded with an insurance Company in the form of a qualifying insurance policy.

The following tables summarise the components of net benefit expense recognised in the statement of profit and loss and the funded status and amounts recognised in the Balance Sheet for the gratuity plan.

8. Leases (operating lease) Office Premises:

Head office, registered office and branch office premises are obtained on operating lease. The branch office premises are generally rented on cancellable term ranging from twelve months to thirty six months with or without escalation clause, however none of the branch lease agreement carries non-cancellable lease periods. The registered office premise has been obtained on a lease term of thirty six months with an escalation clause of five percent after every twelve months. There are no restrictions imposed by lease arrangements. There are no subleases. Lease payments during the year are charged to statement of profit and loss.

Vehicles:

The Company has taken certain vehicles on cancellable operating lease. Total lease expense under cancellable operating lease during the year was Rs.12,431,034 (Previous year: Rs.8,989,979).

9. The Company has given interest free collateral free loan to an employee benefit trust under the Employee Stock Purchase Scheme to provide financial assistance to its employees to purchase equity shares of the Company under such scheme. The loan is repayable by the trust under a back to back arrangement by the trust with the employees of the Company. The year-end balance for the total loan granted is Rs.48,969,462 (March 31, 2014: Rs. 54,168,606).

10. In the financial year 2013-14, the Company had received two demand orders from service tax authorities against the show- cause notices received in earlier years. The orders pertain to applicability of service tax on various items like income from asset assignment transactions, administration charges collected by the Company on distribution of insurance products to its borrowers, reimbursement of certain expenses from an insurance company, etc. The amount of service tax demanded aggregated to Rs.460,522,457 (plus penalty and interest, as applicable). The Company had filed appeals and stay petition against these demand orders with The Customs, Excise and Service Tax Appellate Tribunal (''CESTAT''). During the year, the CESTAT has issued a stay order against pre-deposit of demand made in one of the aforesaid two demand orders of Rs.118,091,538 (plus penalty and interest, as applicable).

Based on the merits of the case, the Company and its tax advisors believe that its position is likely to be upheld in the appellate process for the above matters. Accordingly, no provision has been made for the amounts mentioned above as at March 31, 2015.

11. The Company has certain litigations pending with income tax authorities, service tax authorities and other litigations which have arisen in the ordinary course of business. The Company has reviewed all such pending litigations having an impact on the financial position, and has adequately provided for where provisions are required and disclosed the contingent liabilities where applicable, in its financial statements. Refer note 30 and 37 for further details.

12. Dues to micro, small and medium enterprises

There are no amounts that need to be disclosed in accordance with the Micro Small and Medium Enterprise Development Act, 2006 (the ''MSMED'') pertaining to micro or small enterprises.

For the year ended March 31, 2015, no supplier has intimated the Company about its status as micro or small enterprises or its registration with the appropriate authority under MSMED.

c. Derivatives:

The Company has no transactions / exposure in derivatives in the current and previous year.

The Company has no unhedged foreign currency exposure as on March 31, 2015 (March 31, 2014: Nil).

e. Details of financial assets sold to securitisation / reconstruction company for asset reconstruction:

The Company has not sold financial assets to Securitisation / Reconstruction companies for asset reconstruction in the current and previous year.

f. Details of assignment transactions undertaken:

The Company has not undertaken assignment transactions in the current and previous year.

g. Details of non-performing financial assets purchased / sold:

The Company has not purchased / sold non-performing financial assets in the current and previous year.

i. Exposures:

The Company has no exposure to the real estate sector and capital market directly or indirectly in the current and previous year. j. Details of financing of parent company products:

This disclosure is not applicable as the Company does not have any holding / parent company. k. Unsecured Advances – Refer note 15.

l. Registration obtained from other financial sector regulators:

The Company is registered with following other financial sector regulators (Financial regulators as described by Ministry of Finance):

i. Ministry of Corporate Affairs

ii. Ministry of Finance (Financial Intelligence Unit)

m. Disclosure of penalties imposed by RBI and other regulators:

No Penalties were imposed by RBI and other regulators during current and previous year.

p. Draw down from Reserves:

There has been no draw down from reserves during the year ended March 31, 2015 (previous year: Nil).

w. Outstanding of loans against security of gold as a percentage to total assets is 1.05% (March 31, 2014: 2.24%).

13. Previous year''s figures have been regrouped where necessary to conform to this year''s classification.

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Mar 31, 2014

1. Corporate information

SKS Microfinance Limited (''the Company'') is a public company domiciled in India and incorporated under the provision of the Companies Act, 1956 (''the Act''). The Company was registered as a non-deposit accepting Non-Banking Financial Company (''NBFC-ND'') with the Reserve Bank of India (''RBI'') and has got classified as a Non-Banking Financial Company - Micro Finance Institution (''NBFC-MFI'') with effect from November 18, 2013. Its shares are listed on two stock exchanges in India.

The Company is engaged primarily in providing micro finance services to women in the rural areas of India who are enrolled as members and organized as Joint Liability Groups (''JLG''). The Company has its operation spread across 15 states.

In addition to the core business of providing micro-credit, the Company uses its distribution channel to provide certain other financial products and services to the members. Programs in this regard primarily relate to providing of loans to the members for the purchase of certain productivity-enhancing products such as mobile handsets, solar lamps and loans against gold as collateral.

2. 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 Companies (Accounting Standards) Rules, 2006, (as amended), the relevant provisions of the Companies Act, 1956 read with general circular 8/ 2014 dated April 4, 2014 issued by the Ministry of Corporate Affairs and the provisions of the RBI as applicable to a NBFC-MFI and NBFC-ND. The financial statements have been prepared on an accrual basis and under the historical cost convention except interest on loans which have been classified as non-performing assets and are accounted for on realisation basis.

The accounting policies adopted in the preparation of financial statements are consistent with those of previous year.

3. Change of Estimates

In current year, the Company has got classified as an NBFC-MFI and accordingly has made an additional provision of Rs. 109,940,626 towards its Joint Liability Group (JLG) loan portfolio to maintain provisioning required by the NBFC-MFI Directions issued by the Reserve Bank of India vide its circular dated December 2, 2011 as amended vide circular dated March 20, 2012. These Directions require the provision to be higher of (i) 1% of the outstanding loan portfolio or (ii) 50% of the aggregate loan installments which are overdue for more than 90 days and less than 180 days and 100% of the aggregate loan installments which are overdue for 180 days or more. The entire additional provision of Rs. 109,940,626 made relates only to standard assets.

(b) Terms/ rights attached to equity shares

The Company has only one class of equity shares having par value of Rs.10 per share. Each holder of equity shares is entitled to one vote per share. Any dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting. Dividend declared and paid would be in Indian rupees.

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.

Share capital includes Nil (March 31, 2013: 21,453,217) equity shares that are locked-in.

As per the records of the Company, including its register of shareholders/ members and other declarations received from shareholders regarding beneficial interest, the above shareholding represents both legal and beneficial ownerships of shares.

Further, SKS Trust Advisors Private Limited, sole trustee for five trusts mentioned below, holds equity shares in the Company on behalf of these five trusts as the registered shareholder. These trusts individually hold less than 5% equity shares in the Company:

Cash credit from banks is secured by hypothecation of portfolio loans and margin money deposit and is repayable on demand.

Indian rupee loan from banks are term loans secured by hypothecation of portfolio loans.

Indian rupee loan from non banking financial companies are term loans secured by hypothecation of portfolio loans and margin money deposits

The deferred tax asset amounting to Rs. 5,578,556,855 as at March 31, 2014 has not been recognized (refer note 2 (l)). The said sum of Rs. 5,578,556,855 will be available to offset tax on future taxable income.

4. Segment information

The Company operates in a single reportable segment i.e. financing, which has similar risks and returns for the purpose of AS 17 on ''Segment Reporting'' notified under the Companies (Accounting Standard) Rules, 2006 (as amended). The Company operates in a single geographical segment i.e. domestic.

5. Related parties

a. Names of the related parties with whom transactions have been entered

Key Management Personnel

Mr. M.R.Rao, Managing Director and Chief Executive Officer

Mr. S. Dilli Raj, President (Chief Financial Officer till February 4, 2014)

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Mar 31, 2013

1. Corporate information

SKS Microfinance Limited (‘the Company'') is a public company domiciled in India and incorporated under the provision of the Companies Act, 1956 (‘the Act''). The Company is a non-deposit accepting non-banking financial company or NBFC-ND registered with the Reserve Bank of India (‘RBI''). The Company has also applied for registration as NBFC-MFI with Reserve Bank of India (‘RBI''). Its shares are listed on two stock exchanges in India.

The Company is engaged primarily in providing microfinance services to women in the rural areas of India who are enrolled as members and organized as Joint Liability Groups (‘JLG''). The Company has its operation spread across 15 states.

In addition to the core business of providing micro-credit, the Company uses its distribution channel to provide certain other financial products and services to the members. Programs in this regard primarily relate to providing of loans to the members for the purchase of certain productivity-enhancing products such as mobile handsets and loans against gold as collateral.

2. 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 Companies (Accounting Standards) Rules, 2006, (as amended), the relevant provisions of the Companies Act, 1956 and the provisions of the RBI as applicable to a non banking financial company. The financial statements have been prepared on an accrual basis and under the historical cost convention except interest on loans which have been classified as non-performing assets and are accounted for on realisation basis.

The accounting policies adopted in the preparation of financial statements are consistent with those of previous year, except for the change in accounting policy explained below.

3. Contingent liabilities not provided for

Particulars March 31, 2013 March 31, 2012

Credit enhancements provided by the Company towards asset assign- 2,050,236,250 2,479,983,502 ment/ securitisation (including cash collaterals, principal and interest subordination)

Performance security provided by the Company pursuant to service 20,000,000 provider agreement

Tax on items disallowed by the Income Tax department not 42,346,628 30,302,298

acknowledged as debt by the Company*

* Based on the expert opinion obtained by the Company, crystallisation of liability on these items is not considered probable.

4. Retirement benefits

The Company has a defined benefit gratuity plan. Every employee who has completed five years or more of service is eligible for gratuity on cessation of employment and it is computed at 15 days salary (last drawn salary) for each completed year of service. The scheme is funded with an insurance Company in the form of a qualifying insurance policy.

The following tables summarise the components of net benefit expense recognised in the statement of profit and loss and the funded status and amounts recognised in the Balance Sheet for the gratuity plan.

5. The Company has given interest free collateral free loan to an employee benefit trust under the Employee Stock Purchase Scheme to provide financial assistance to its employees to purchase equity shares of the Company under such scheme. The loan is repayable by the Trust under a back to back arrangement by the Trust with the employees of the Company. The year-end balance for the total loan granted is Rs. 54,168,606 (March 31, 2012: Rs. 54,168,606).

6. The Company had received a show cause notice (SCN) from service tax authorities on October 23, 2012 to explain as to why the assignment of portfolio loans should not be classified under "recovery agent service” and the related income from asset assignment transactions should not be subjected to service tax. The SCN relates to the period financial year 2007-08 to financial year 2011-12 and indicates an amount of Rs. 342,493,271 as service tax on the income from asset assignment during the said period. The Company has filed its response explaining the position that the income from asset assignments should not be subjected to service tax. Thereafter, the Company has not received any communication from the service tax authorities. However, based on the merits of the case, the management and its tax advisors believe that their position is likely to be upheld in the appellate process. Accordingly, no provision has been made for the amount indicated in the SCN as at March 31, 2013.

7. Dues to micro, small and medium enterprises

There are no amounts that need to be disclosed in accordance with the Micro Small and Medium Enterprise Development Act, 2006 (the ‘MSMED'') pertaining to micro or small enterprises.

For the year ended March 31, 2013, no supplier has intimated the Company about its status as micro or small enterprises or its registration with the appropriate authority under MSMED.

The modifications to the NBFC-MFI directions issued by RBI vide its circular no.RBI/2012-13/161 DNBS (PD) CC.No.300 /03.10. 038/2012-13 dated August 3, 2012 have specified that provision made towards portfolio in the state of Andhra Pradesh should be in accordance with extant NBFC prudential norms and such provision should be added back notionally to the net owned funds for the purpose of calculation of the capital to risk assets ratio (‘CRAR'') and would be progressively reduced by 20% each year, over 5 years i.e. from March 31, 2013 to March 31, 2017. Accordingly, the CRAR as at March 31, 2013, given in the above table, is after adding back the provision towards the portfolio in the state of Andhra Pradesh of Rs. 2,576,351,728 to the net owned funds. Had the amount of provision mentioned above not been added back to the net owned funds, the CRAR as at March 31, 2013 would have been 20.65%. The Company has taken cognizance of the specific dispensation granted by RBI as it has applied for the registration as an NBFC-MFI and the response from RBI is awaited.

b. The Company has no exposure to the real estate sector directly or indirectly in the current and previous year.

c. Outstanding of loans against security of gold as a percentage to total assets is 2.23% (March 31, 2012: 1.58%).

8. Previous year''s figures have been regrouped where necessary to conform to this year''s classification.

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Mar 31, 2012

1. Corporate information

SKS Microfinance Limited ('the Company') is a public company domiciled in India and incorporated under the provision of the Companies Act, 1956 ('the Act'). The Company is a non-deposit accepting non-banking financial company or NBFC-ND registered with the Reserve Bank of India ('RBI'). Its shares are listed on two stock exchanges in India.

The Company is engaged primarily in providing micro finance services to women in the rural areas of India who are enrolled as members and organized as Joint Liability Groups (JLG'). The Company has its operation spread across 18 states.

In addition to the core business of providing micro-credit, the Company uses its distribution channel to provide certain other financial products and services to the members. Programs in this regard primarily relate to providing of loans to the members for the purchase of certain productivity-enhancing products such as mobile handsets, loans for meeting the working capital requirements of small general stores known as 'Sangam' stores and loans against gold as collateral.

2. 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 Companies (Accounting Standards) Rules, 2006, (as amended), the relevant provisions of the Companies Act, 1956 and the provisions of the RBI as applicable to a non banking financial company. The financial statements have been prepared on an accrual basis and under the historical cost convention except interest on loans which have been classified as non-performing assets and are accounted for on realisation basis.

The accounting policies adopted in the preparation of financial statements are consistent with those of previous year, except for the change in accounting policy explained below.

(a) Terms/ rights attached to equity shares

The Company has only one class of equity shares having par value of Rs.10 per share. Each holder of equity shares is entitled to one vote per share. Any dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting. Dividend declared and paid would be in Indian rupees.

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.

Share capital includes 16,096,483 (March 31, 2011: 54,162,963) equity shares that are locked-in.

(c) Aggregate number of shares issued for consideration other than cash during the period of five years immediately preceding the reporting date:

The Company has issued 1,554,777 shares (March 31, 2011: 1,521,792) during the period of five years immediately preceding the reporting date on exercise of options granted under stock option plans wherein part consideration was received in the form of services rendered to the Company.

As per the records of the Company, including its register of shareholders/ members and other declarations received from shareholders regarding beneficial interest, the above shareholding represents both legal and beneficial ownerships of shares.

The share application money represents the amount received towards exercise of options by employees and independent directors. The Company has received application for 906,734 equity shares (March 31, 2011: 25,994) of face value of Rs. 10 each at a total cash premium of Rs.36,060,811 (March 31, 2011: Rs.2,713,180). In addition to the cash premium, the allotment of these shares would also result in a non-cash premium of Rs.6,603,305, by way of stock option expenditure, which will be transferred to securities premium account from stock options outstanding.

The Company has sufficient authorized share capital to cover the share capital amount on allotment of shares out of share application money.

The Company has incurred a loss for the year ended March 31, 2012. The net deferred tax asset amounting to Rs.4,603,632,682 as at March 31, 2012 has not been recognized. The said sum of Rs.4,603,632,682 will be available to offset tax on future taxable income.

* Represents standard assets in accordance with classification of assets as per RBI Prudential norms for NBFCs (refer note 35)

** Represents sub-standard assets in accordance with classification of assets as per RBI Prudential norms for NBFCs (refer note 35)

Note (a): Includes collections amounting to Rs.72,027,445, received towards loans given as collateral which are to be placed as a margin money deposit subsequently, in accordance with assignment agreement.

Note (b): Owing to lower amount of primary security (i.e.portfolio loans) available and the time given to create specific securities, the Company has ear-marked bank balance amounting to Rs.3,047,722,987 as security which will be utilized for creation of portfolio loans subsequently.

Note (c): Represent margin money deposits placed to avail term loans from banks, financial institutions and as cash collateral in connection with asset assignments/ securitization transactions.

*For the period April 1, 2011 to March 31, 2012, since the impact of conversion of potential equity shares is anti-dilutive in nature, the same has not been considered in calculation of diluted EPS.

Under the agreement for the assignment/ securitisation of loans, the Company has transferred all the rights and obligations relating to such loan assets assigned/ securitised as shown above. The credit enhancements given by the Company under these asset assignment/ securitisation transactions have been disclosed in note 31 below.

3. Segment information

The Company operates in a single reportable segment i.e. lending to members, which have similar risks and returns for the purpose of AS 17 on 'Segment Reporting' notified under the Companies (Accounting Standard) Rules, 2006 (as amended). The Company operates in a single geographical segment i.e. domestic.

* Salary, incentives and perquisites for Mr.M.R.Rao and Mr.S.Dilli Raj include amounts of Rs.5,400,000 and Rs. 3,750,000 respectively, which were duly approved as variable pay for the financial year 2010-11. Such variable pay amounts were relinquished by Mr.M R Rao and Mr.S Dilli Raj voluntarily, given the general liquidity concerns post the enactment of the AP MFI Act. However, given the increase in the liquidity in the fourth quarter of financial year 2011-12, Mr.M R Rao and Mr.S Dilli Raj requested the Company for reinstatement of the said variable pay, which was approved by the Compensation Committee and the Board of Directors were notified. Accordingly, the said amounts of variable pay, which were relinquished in financial year 2010-11, have been charged in the current year and paid thereafter. The Company has been advised that a specific approval from the Central Government is not required for such payment to Mr.M R Rao given that it relates to financial year 2010-11, year in which the Company reported profits.

** Represents share application money received by the Company from Dr. Vikram Akula towards 906,734 options out of 2,676,271 stock options held by him. The allotment of options exercised was pending as on March 31, 2012 and the same were subsequently allotted on May 4, 2012.

4. Contingent liabilities not provided for

Particular March 31, 2012 March 31, 2011

Credit enhancements provided by the Company towards asset assignment/ 2,479,983,502 1,952,301,516 securitisation (including cash collaterals, principal and interest subordination)

Tax on items disallowed by the Income Tax department not acknowledged as 30,302,298 48, 549, 551 debt by the Company*

* Based on the expert opinion obtained by the Company, crystallisation of liability on these items is not considered probable.

* 1/3rd of the options can be exercised within first twelve months from grant date; another 1/3rd of the options can be exercised within twenty four months from grant date and the rest being exercised within thirty six months from grant date.

** 1/2 of the options can be exercised within twenty four months from grant date; another 1/2 of the options can be exercised within thirty six months from grant date.

Note 1: Option holders are required to continue to hold the services being provided to the Company at the time of exercise of options.

* Notice of exercise received for 906,734 options; however the allotment is pending as on March 31, 2012. These shares have been subsequently allotted on May 4, 2012. The weighted average share price on the date of receipt of such notice for exercise was Rs.214.66 (Previous year: Rs.Nil).

* Notice of exercise received for 15,000 options; however the allotment of shares was pending as on March 31, 2011. Subsequently, in the current year, the Company refunded the share application money received towards such options, within 180 days of its receipt and the options are outstanding and exercisable as on March 31, 2012. The weighted average share price on the date of receipt of such notice for exercise was Rs.664.94.

** Original exercise period ending on February 1, 2011, extended upto February 1, 2013.

* Includes notice received for exercise of 1,000 options; however allotment was pending as on March 31, 2011. The weighted average share price on the date of receipt of such notice for exercise was Rs.664.94.

** Original exercise period ending on November 10, 2011, extended upto February 1, 2013.

The weighted average share price on the date of exercise of other 1,000 stock options was Rs.1,166.54.

* Notice of exercise received for 15,000 options; however the allotment of shares was pending as on March 31, 2011. Subsequently, in the current year, the Company refunded the share application money received towards such options, within 180 days of its receipt and the options are outstanding and exercisable as on March 31, 2012. The weighted average share price on the date of receipt of such notice for exercise was Rs.664.94.

5. Retirement benefits

The Company has a defined benefit gratuity plan. Every employee who has completed five years or more of service is eligible for gratuity on cessation of employment and it is computed at 15 days salary (last drawn salary) for each completed year of service. The scheme is funded with an insurance Company in the form of a qualifying insurance policy.

The following tables summarise the components of net benefit expense recognised in the statement of profit and loss and the funded status and amounts recognised in the Balance Sheet for the gratuity plan.

Operating Lease Office Premises:

Head office and the branch office premises are obtained on operating lease. The branch office premises are generally rented on cancellable term for less than twelve months with no escalation clause and renewable at the option of the both the parties. However, the head office prem- ise was obtained on a non-cancelable lease term of twenty four months with an escalation clause of five percent after every twelve months. There are no restrictions imposed by lease arrangements. There are no subleases. Lease payments during the year are charged to statement of profit and loss.

Vehicles:

The Company has taken certain vehicles on cancellable operating lease. Total lease expense under cancellable operating lease during the year was Rs. 10,439,969 (Previous year: Rs.8,276,680).

6. The Company has given interest free collateral free loan to an employee benefit trust under the Employee Stock Purchase Scheme to provide financial assistance to its employees to purchase equity shares of the Company under such scheme. The loan is repayable by the Trust under a back to back arrangement by the Trust with the employees of the Company. The year-end balance for the total loan granted is Rs.54,168,606 (March 31, 2011: Rs. 60,906,186).

7. Dues to micro, small and medium enterprises

There are no amounts that need to be disclosed in accordance with the Micro Small and Medium Enterprise Development Act, 2006 (the 'MSMED') pertaining to micro or small enterprises.

For the year ended March 31, 2012, no supplier has intimated the Company about its status as micro or small enterprises or its registration with the appropriate authority under MSMED.

b. The Company has no exposure to the real estate sector directly or indirectly in the current and previous year.

c. Outstanding of loans against security of gold as a percentage to total assets is 1.58% (March 31, 2011: 0.01%).

d. Information on instances of fraud:

8. Till the year ended March 31, 2011, the Company was using pre-revised Schedule VI to the Companies Act 1956, for preparation and presentation of its financial statements. During the year ended March 31, 2012, the revised Schedule VI notified under the Companies Act 1956, has become applicable to the Company. The Company has reclassified previous year figures to conform to this year's classification.

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Mar 31, 2011

1. Nature of operations

SKS Microfinance Limited (the Company) is a non-deposit accepting non-banking financial company or NBFC-ND registered with the Reserve Bank of India (RBI). It is engaged in providing microfinance services to poor women in the rural areas of India who are organized as Joint Liability Groups (JLG).

The Company provides individual loans to the existing members as a loan against property for a tenure ranging from three to five years.

The Company has also tied up with insurance companies to act as Group Insurance Manager for providing life insurance to its members.

2. Change of Estimates

In the current year, pursuant to the regulatory changes in the state of Andhra Pradesh, the Company changed its estimate of provision for loan portfolio in Andhra Pradesh as described in Note 2(s) above. Had the Company applied the provisioning estimates applicable to monthly repayment schedule loans, the provision for loan portfolio would have been higher by Rs.1,186,872,885.

3. Pursuant to the regulatory changes in the state of Andhra Pradesh, the Company has not recognized interest income on portfolio loans in the state of Andhra Pradesh amounting to Rs.815,318,396 and has written off loans aggregating Rs. 373,816,693 where the tenure was completed and which were outstanding at the balance sheet date.

4. Assignment/ Securitization of loans

Under the agreement for the assignment/ securitisation of loans the Company has transferred all the rights and obligations relating to such loan assets assigned/ securitised as shown above. The guarantees given by the Company under the asset assignment/ securitisation has been disclosed in note 9 below.

5. Segment information

The Company operates in a single reportable segment i.e. lending to members, who have similar risks and returns for the purpose of AS 17 on Segment Reporting notified under the Companies (Accounting Standard) Rules, 2006 (as amended). The Company operates in a single geographical segment i.e. domestic.

6. Related parties

a. Names of the related parties

Entities holding Significant Influence Current year - N/A

Previous Year - The entities mentioned, in aggregate, exercise significant influence over the Company:

a. Sequoia Capital India Growth Investment I

b. Sequoia Capital India II, LLC

c. Tejas Ventures

Key Management Personnel Mr. Suresh Gurumani, Managing Director and Chief Executive Officer (till 03.10.2010)

Dr. Vikram Akula, Chairman

Mr. M R Rao, Managing Director and Chief Executive Officer from 04.10.2010 (Chief Operating Officer till 03.10.2010)

Mr. S Dilli Raj, Chief Financial Officer

7. contingent liabilities not provided for

Particulars March 31, 2011 March 31, 2010

Guarantees given and outstanding by the Company 1,952,301,516 2,409,375,527 for the loans assigned (including cash collaterals and receivables placed with banks)

Claims against the Company not acknowledged as debts* 48,549,551 24,088,137

*Represents the tax on items disallowed by the Income Tax department not acknowledged by the company.

Stock options granted:

Expected Volatility - Since SKS Microfinance Limited was not a listed Company on the date of grant, a 33.86% Standard Deviation is assumed based on the volatility of the Bank Nifty Index over the last year preceding the grant date.

Plan III (e)

Expected Volatility - Since SKS Microfinance Limited was not a listed Company on the date of grant, a 33.86% Standard Deviation is assumed based on the volatility of the Bank Nifty Index over the last year preceding the grant date.

8. Retirement benefits

The Company has a defined benefit gratuity plan. Every employee who has completed five years or more of service is eligible for gratuity on cessation of employment and it is computed at 15 days salary (last drawn salary) for each completed year of service. The scheme is funded with an insurance company in the form of a qualifying insurance policy.

The following tables summarize the components of net benefit expense recognized in the Profit and Loss Account and the funded status and amounts recognized in the Balance Sheet for the gratuity plan.

9. leases

Finance lease

Computers are obtained on finance lease. The lease term is for three years, there is no escalation clause in the lease agreement. There are no restrictions imposed by lease arrangements. There are no subleases.

Operating lease

Office Premises

Head office and the Branch office premises are obtained on operating lease. The Branch office premises are generally rented on cancellable term for less than twelve months with no escalation clause and renewable at the option of the Company. How ever, the Head office premise has been obtained on the non-cancelable lease term of twenty four months with an escalation clause of five percent for every twelve months. There are no restrictions imposed by lease arrangements. There are no sub leases. Lease payments during the year are charged to Profit and Loss Account.

Vehicles

The Company has taken certain vehicles on cancellable operating leases. Total lease expense under cancellable operating lease during the year was Rs. 8,276,680/-(Previous year Rs. 4,834,164).

10. The Company has given Interest free collateral free loan to an employee welfare trust under the Employee Stock Purchase Scheme to provide financial assistance to its employees to purchase equity shares of the Company under such scheme. The loan is repayable by the Trust under a back to back arrangement by the Trust with the employees of the Company. The year end balance for the total loan granted is Rs. 60,906,186 (Previous Year Rs. 87,285,811).

11. dues to micro and Small enterprises

There are no amounts that need to be disclosed pertaining to Micro Small and Medium Enterprise Development Act, 2006 (the MSMED).

As at March 31, 2011, no supplier has intimated the Company about its status as Micro or Small Enterprises or its registration with the appropriate authority under MSMED.

12. Details of utilization of proceeds raised through public issue during the year

Pursuant to the approval of the shareholders of the Company in the Extra General Meeting held on January 8, 2010 the Company made a public issue of 16,791,579 equity shares of Rs. 10 each for cash consisting of a fresh issue of 7,445,323 equity shares at a premium of Rs. 975 each to Qualified Institutional Bidders and Non Institutional Bidders and at a premium of Rs. 925 each to Retail Individual Bidders and an offer for sale of 9,346,256 equity shares at a premium of Rs.975 each to Qualified Institutional Bidders and Non Institutional Bidders and at a premium of Rs.925 each to Retail Individual Bidders. The issue has been made in accordance with the terms of the Companys prospectus dated August 5, 2010.

13. Previous years figures have been regrouped where necessary to confirm to this years classification.

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Mar 31, 2010

1. Nature of operations

SKS Microfinance Limited (the Company) is engaged in micro finance lending activities for providing financial services to poor women (referred as members) in the rural areas of India who are organized as Joint Liability Groups (JLG). The Company provides small value collateral free loans up to Rs. 25,000 for tenure of fifty weeks for income generation to poor women in groups.

All financial transactions are conducted in the group meetings organized near the habitats of these women. The operations, in the initial stages of group formation, involves efforts on development training on financial discipline, and constant monitoring through weekly meetings, and providing financial and support services at the doorsteps of the borrowers to ensure high rates of recovery. In case of loans given to JLG, the Company follows weekly collection for recovery of loans and the interest accrued thereon.

The Company has provided individual loans to the existing members ranging between Rs. 25,000 to Rs. 50,000 for income generation activities for a tenure ranging from twelve months to twenty four months. These loans are generally given to members who have completed a minimum of one cycle of loan under JLG. In case of individual loans, the Company follows monthly collection for recovery of loans and the interest accrued thereon.

The Company has also provided individual loan to the existing members ranging between Rs. 50,000 to Rs. 150,000 as loan against property for a tenure ranging from three to five years.

The Company has also tied up with Insurance Companies to act as Group Insurance Manager for providing life insurance to its members.

Further the Company has also entered into an arrangement with a mobile phone manufacturer and a service provider as well as a consumer goods wholesaler to facilitate the distribution of their products to its members.

2. Segment information

The Company operates in a single reportable segment i.e. lending to members, who have similar risks and returns for the purpose of AS 17 on Segment Reporting notified under the Companies (Accounting Standard) Rules, 2006 (as amended). The Company operates in a single geo graphical segment i.e. domestic.

3. Related parties

a. Names of the related parties

Entities holding Significant Influence

The entities mentioned, in aggregate, exercise significant influence over the Company:

a. Sequoia Capital India Growth Investments

b. Sequoia Capital India II LLC

c. Tejas Ventures

Key Management Personnel

Mr. Suresh Gurumani, Managing Director and Chief Executive Officer

Dr. Vikram Akula, (CY- Chairman, PY- Managing director till October 13, 2008)

Mr. M.R.Rao, Chief Operating Officer

Mr. S. Dilli Raj, Chief Financial Officer



4. Contingent liabilities not provided for

Amount in Rs.

Particulars March 31, 2010 March 31, 2009

Guarantees given and outstanding for the assigned 2,409,375,527 1,958,157,926

loans (including cash collaterals and receivable placed with banks)

Claims against the Company not acknowledged as 24,088,137 -

debts*

*Represents the tax on amortization of goodwill disallowed by the Income Tax department not acknowledged by the company.

5. Retirement benefits

The Company has a defined contribution gratuity plan. Every employee who has completed five years or more of service is eligible for gratuity on departure and it is computed at 15 days salary (last drawn salary) for each completed year of service. The scheme is funded with an insurance company in the form of a qualifying insurance policy.

6. The Company has given Interest free collateral free loan to an employee welfare trust under the Employee Stock Purchase Scheme to provide financial assistance to its employees to purchase equity shares of the Company under such scheme. The loan is repayable by the Trust under a back to back arrangement by the Trust with the employees of the Company. The yearend balance for the total loan granted is Rs. 87,285,811 (Previous Year Rs. 69,813,060).

7. The Company has initiated the process of identification of suppliers registered under the Micro Small and Medium Enterprise Development Act, 2006 (the MSMED) by obtaining confirmation from all the suppliers. Based on the information currently available with the Company no amount is payable to the Micro, Small and Medium Enterprises as per the MSMED Act, 2006 as at March 31, 2010.

8. The Company has incurred Rs. 77,146,808 in connection with the proposed public offer of equity shares. This amount shall be adjusted against securities premium arising from the proposed issue of equity shares, as permitted under section 78 of the Companies Act, 1956. This amount has been carried forward and disclosed under the head Miscellaneous Expenditure" in the Balance Sheet.

9. Previous years figures have been regrouped / recast wherever necessary to conform to current years classification.

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Mar 31, 2009

1. Nature of operations

SKS Microfinance Private Limited (the Company) is engaged in micro finance lending activities for providing financial services to poor women in the rural areas of India who are organized as Joint Liability Groups (JLGs). The Company provides small value collateral free loans up to Rs.25,000/- for tenure of fifty weeks for income generation to poor women in groups.

All financial transactions are conducted in the group meetings organized near the habitats of these women. The operations, in the initial stages of group formation, involves efforts, on development training on financial discipline, and later constant monitoring through weekly meetings, and providing financial and support services at the doorsteps of the borrowers to ensure high rates of recovery. In case of loans given to JLGs, the Company follows weekly collection for recovery of loans and the interest accrued thereon.

The Company also provides individual loans to the existing members ranging between Rs.25,000 to Rs.50,000 for income generation activities for a tenure ranging from twelve months to twenty four months. These loans are generally given to members who have completed a minimum of one cycle of loan under JLG. In case of individual loans, the Company follows monthly collection for recovery of loans and the interest accrued thereon.

The Company has also tied up with insurance companies to acts as Group Insurance Manager and Micro-Insurance agent for providing group health and life insurance to its members. The Company collects nominal charges from its members to meet the administrative cost incurred.

2. Segment information

The Company operates in a single reportable segment i.e. lending to members, which have similar risks and returns for the purpose of AS 17 on "Segment Reporting" issued by the ICAI. The Company does not have any reportable geographical segment.

3. Related parties a. Names of the related parties

Entities holding Substantial Interest The entities mentioned in aggregate hold substantial interest in the Company:

a. Sequoia Capital India Growth Investment I

b. Sequoia Capital India II, LLC

c. Tejas Ventures

Key Management Personnel Mr. Suresh Gurumani, (Managing Director and CEO from Dec 8, 2008)

Mr. Vikram Akula, (Managing Director and CEO till October 13, 2008)

Relatives of Key Management Personnel Mr. Krishna Akula - Father of Mr. Vikram Akula (Related Party till October 13, 2008)



4. Contingent liabilities not provided for

Particulars 31-Mar-2009 31-Mar-2008

Guarantees given by the Company for the loans assigned to 1,958,157,926 276,091,810 various banks (including cash collaterals and receivable placed with banks)

5. Retirement benefits

The Company has a defined benefit gratuity plan. Every employee who has completed five years or more of service is eligible for gratuity on departure and it is computed at 15 days salary (last drawn salary) for each completed year of service. The scheme is funded with an insurance company in the form of a qualifying insurance policy.

The following tables summarizes the components of net benefit expense recognized in the Profit and Loss Account and the funded status and amounts recognized in the Balance Sheet for the respective plans.

6. The Company has given Interest free collateral free loan to an employee benefit trust under the Employee Stock Purchase Scheme to provide financial assistance to its employees to purchase equity shares of the Company under such scheme. The loan is repayable by the trust under a back to back arrangement by the trust with the employees of the Company. The year end balance for the total loan granted is Rs. 69,813,060 (Previous Year Rs. 33,826,023).

7. The Company has initiated the process of identification of suppliers registered under the Micro Small and Medium Enterprise Development Act, 2006 (the MSMED) by obtaining confirmation from all the suppliers. Based on the information currently available with the Company no amount is payable to the Micro, Small and Medium Enterprises as per the MSMED Act, 2006 as at March 31, 2009.

8. Previous years figures have been regrouped where necessary to conform to this years classification.