Exhibit 99.2

 

SMC Global Securities Limited

Index to Condensed Consolidated Financial Statements

 

	Pages
Statements of Incomes	2
Balance Sheets	3-4
Statements of Cash Flows	5-6
Statements of Changes in Shareholders’ Equity	7
Notes to Financial Statements	8-22

 

 

SMC Global Securities Limited

Condensed Consolidated Statements of Income

(Unaudited)

 

For the quarter ended June 30, (` in thousands, except per share data)		2014				2015				2015
										Convenience translation into US$
Revenues:
Commission income			394,000				439,205				6,907
Proprietary trading, net			478,616				351,987				5,535
Distribution income, net			9,683				13,578				214
Interest and dividends			97,333				152,918				2,405
Other income			29,647				10,253				162
Total revenues			1,009,279				967,941				15,222
Expenses:
Exchange, clearing and brokerage fees			311,968				269,984				4,246
Employee compensation and benefits			215,301				245,712				3,864
Information and communication			13,940				19,142				301
Advertisement expenses			50,399				47,827				752
Depreciation and amortization			14,624				11,871				186
Interest expense			27,228				42,865				674
General and administrative expenses			144,901				106,367				1,673
Total expenses			778,361				743,768				11,696
Operating Income			230,918				224,173				3,526
Share in profits of equity investee			-				-				-
Income before income taxes			230,918				224,173				3,526
Income taxes			51,004				77,780				1,224
Net Income			179, 914				146,393				2,302
Net Income attributable to Non-Controlling Interest			204				450				7
Fund Transferred to Statutory Reserve			1,588				3,815				60
Net Income attributable to SMC Global			178,122				142,128				2,235
Net Income			179,914				146,393				2,302
Earnings per share:
Basic Earnings before extraordinary gain (refer note 20)			1.59				1.29				0.02
Basic Extraordinary gain			-				-				-
Basic Net income (refer note 20)			1.59				1.29				0.02
Weighted average number of shares used to compute basic and diluted earnings per share			113,134,450				113,134,450				113,134,450
Diluted Earnings before extraordinary gain (refer note 20)			1.59				1.29				0.02
Diluted Extraordinary gain			-				-				-
Diluted Net income (refer note 20)			1.59				1.29				0.02
Weighted average number of shares used to compute basic and diluted earnings per share			113,134,450				113,134,450				113,134,450

 

The accompanying notes are an integral part of these financial statements

 

 

SMC Global Securities Limited 

Condensed Consolidated Balance Sheets

(Unaudited)

 

As of (` in thousands)		March 31, 2015				June 30, 2015				June 30, 2015
										Convenience translation into US$ (unaudited)
Assets
Current Assets
Cash and cash equivalents			261,445				265,026				4,168
Receivables from clearing organizations (net of allowance for doubtful debts of ` Nil as of March 31, 2015 and ` Nil as of June 30, 2015)			599,557				424,771				6,680
Receivables from customers (net of allowance for doubtful debts of ` Nil in March 31, 2015 and ` Nil in June 30, 2015)			1,301,431				1,331,931				20,946
Due from related parties			45,952				55,551				873
Securities owned:
Equity Shares & Bonds, at market value			1,335,332				886,326				13,938
Commodities, at market value			260,950				686,444				10,795
Derivatives assets held for trading			317,758				595,039				9,357
Investments			339,878				362,635				5,703
Deposits with clearing organizations and others			2,594,530				2,273,861				35,758
Deferred taxes, net			68,803				52,367				823
Other assets			1,572,757				1,379,961				21,701
Non Current Assets
Receivables from customers (net of allowance for doubtful debts of `168,750 in March 31, 2015 and ` 211,398 in June 30, 2015)			33,663				41,024				645
Investments			20,686				20,686				325
Deposits with clearing organizations and others			51,843				354,935				5,582
Property and equipment (net of accumulated depreciation of ` 593,759 in March 31, 2015 and ` 630,653 in June 30, 2015)			159,480				171,100				2,691
Intangible assets (net of accumulated amortization of ` 139,458 in March 31, 2015 and ` 142,875 in June 30, 2015)			123,988				123,781				1,947
Deferred taxes, net			184,603				192,541				3,028
Other assets			432,953				502,185				7,897
Total Assets			9,705,609				9,720,164				152,857
Liabilities and Shareholders’ Equity
Current Liabilities
Payable to broker-dealers and clearing organizations			313,921				643,188				10,115
Payable to customers			2,736,809				3,002,241				47,212
Derivatives held for trading			103,481				43,134				678
Accounts payable, accrued expenses, employee obligations and other liabilities			305,424				323,784				5,092
Overdrafts and debt			769,518				131,935				2,075
Non Current Liabilities
Long Term Debts			7,864				13,784				217
Employee Obligation & other liabilities			79,793				76,200				1,198
Total Liabilities			4,316,810				4,234,266				66,587
Commitments and contingencies (Refer Note 23)

 

The accompanying notes are an integral part of these financial statements

 

 

SMC Global Securities Limited 

Condensed Consolidated Balance Sheets

(Unaudited)

 

As of (` in thousands)		March 31, 2015				June 30, 2015				June 30, 2015
										Convenience translation into US$
Shareholders’ Equity
Common Stock			226,269				226,269				3,558
(140,050,000 common stock authorized; 113,134,450 and 113,134,450 equity shares issued and outstanding as of March 31, 2015 and June 30, 2015, par value ` 2)
Preferred Stock			-				-				-
(5,000,000 preferred stock authorized; Nil and Nil preference shares issued outstanding as of March 31,2015 and June 30, 2015, par value ` 10)
Additional paid in capital			3,644,136				3,644,136				57,307
Retained earnings			1,518,874				1,615,946				25,412
Accumulated other comprehensive income / (loss)			(8,155	)			(8,578	)			(135	)
Total Shareholder’s Equity			5,381,124				5,477,773				86,142
Non controlling interest			7,675				8,125				128
Total Liabilities and Shareholder’s Equity			9,705,609				9,720,164				152,857

 

The accompanying notes are an integral part of these financial statements

 

 

SMC Global Securities Limited 

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

For the quarter ended June 30, (` in thousands)		2014				2015				2015
										Convenience translation into US$
Cash flows from operating activities
Net profit			178,122				142,128				2,235
Adjustments to reconcile net profit to net cash provided/ (used) in operating activities:
Depreciation and amortization			14,624				11,871				186
Deferred tax expense / (benefit)			3,010				8,498				134
(Gain)/Loss on sale of property and equipment			(4,949	)			(142	)			(2	)
(Gain) / Loss on sale of investment			26,184				(794	)			(12	)
Fair value (gain) / loss on investment			(83,896	)			9,772				154
Fair value (gain) / loss on trading securities			12,583				26,190				412
Fund transferred to Statutory Reserve			1,588				3,815				60
Minority Interest			204				451				7
Allowance for doubtful debts			26,000				9,229				145
Provision for gratuity & Leave Encashment			5,522				3,916				62
Changes in assets and liabilities:
Receivables from clearing organizations			(890,908	)			174,785				2,749
Receivables from customers			(493,725	)			(47,090	)			(740	)
Dues from related parties			-				(9,599	)			(151	)
Securities owned			(137,290	)			422,815				6,649
Commodities			(126,820	)			(425,494	)			(6,691	)
Derivatives held for trading, net			1,535,105				(337,628	)			(5,309	)
Deposits received from customers			279				-				-
Deposits with clearing organizations and others			20,580				17,577				276
Other assets			(52,667	)			123,564				1,943
Payable to broker-dealers and clearing organizations			(599,568	)			329,268				5,178
Payable to customers			423,071				265,432				4,174
Accrued expenses			187,199				10,850				171
Net cash from operating activities			44,248				739,414				11,630
Cash flows from investing activities
Purchase of property and equipment			(20,725	)			(23,151	)			(364	)
Proceeds from sale of property and equipment			2,105				128				2
Purchase of investments			(11,500	)			(203,005	)			(3,192	)
Proceeds from sale of investments			72,437				17,1269				,2,693
Acquisition of intangible assets			1				(116	)			(2	)
Net cash used in/from investing activities			42,318				(54,875	)			(863	)
Cash flows from financing activities
Net movement in overdrafts and long term debt			(110,772	)			(631,664	)			(9,994	)
Dividend distributed and tax thereon			-				(48,871	)			(769	)
Net cash provided by financing activities			(110,772	)			(680,535	)			(10,703	)
Effect of exchange rate changes on cash and cash equivalents			4,747				(423	)			(7	)
Net Increase / (decrease) in cash and cash equivalents during the period			(19,459	)			3,581				57
Add : Balance as of beginning of the period			147,290				261,445				4,111
Balance as of end of the period			127,831				265,026				4,168

 

The accompanying notes are an integral part of these financial statements

 

 

SMC Global Securities Limited 

Condensed Consolidated Statements of Changes in Shareholders’ Equity

(Unaudited)

 

Three months ended June 30, 2014

  

		Common Stock								Subscription				Additional												Accumulated other				Non
(` in thousands)		Shares				Par value				received in advance				Paid in Capital				Retained earnings				Other reserves				comprehensive income / (loss)				controlling interest				Total
Balance as of March 31, 2014			113,134,450				226,269				-				3,644,136				1,067,815				-				(7,144	)			6,066				4,937,142
Issue of Share Capital			-				-				-				-				-				-				-				-				-
Fund Transferred to Statutory Reserve			-				-				-				-				1,588				-				-				-				1,588
Increase of stake in subsidiaries			-				-				-				-				-				-				-				-				-
Net income for the period			-				-				-				-				178,122				-				4,746				204				183,072
Balance as of June 30, 2014			113,134,450				226,269				-				3,644,136				1,247,525				-				(2,398	)			6,270				5,121,802
Balance as of June 30, 2014 Convenience translation into US$							3,768				-				60,675				20,771				-				(40	)			104				85,278

 

Three months ended June 30, 2015

 

		Common Stock								Subscription				Additional												Accumulated other				Non
(` in thousands)		Shares				Par value				received in advance				Paid in Capital				Retained earnings				Other reserves				comprehensive income / (loss)				controlling interest				Total
Balance as of March 31, 2015			113,134,450				226,269				-				3,644,136				1,518,874				-				(8,155	)			7,675				5,388,799
Interim Dividend and tax thereon							-				-				-				(48,871	)			-				-				-				(48,871	)
Fund Transferred to Statutory Reserve							-				-				-				3,815				-				-				-				3,815
Net income for the period							-				-				-				142,128				-				(423	)			450				142,155
Balance as of June 30, 2015			113,134,450				226,269				-				3,644,136				1,615,946				-				(8,578	)			8,125				5,485,898
Balance as of June 30, 2015 Convenience translation into US$							3,558				-				57,307				25,412				-				(135	)			128				86,270

 

The accompanying notes are an integral part of these financial statements

 

 

SMC Global Securities Limited

 

Notes to Condensed Financial Statements (Unaudited)

(` in thousands, except per share data)

 

1.

Description of Business

 

SMC Global Securities Limited (the “Company” or “SMC Global”) is a limited liability company incorporated and domiciled in India. The Company is a trading member of the National Stock Exchange of India Limited (“NSE”) in the capital market and trading and clearing member in the futures and options market. Further, the Company is trading and clearing member of NSE, BSE and Metropolitan Stock Exchange of India Limited (mSXI) in currency segment of the Exchange. The Company is also a trading member of the Bombay Stock Exchange Limited (“BSE”) in the capital market, trading and clearing member in the futures and options market and also depository participant of Central Depository Services (India) Limited (CDSL) and National Securities Depository Limited (NSDL).

 

Its wholly owned subsidiary, SMC Comtrade Limited is a trading and clearing member of National Commodity and Derivatives Exchange Limited (“NCDEX”), Multi Commodity Exchange of India (“MCX”), Indian Commodity Exchange Limited (“ICEX”), Ace Derivatives and Commodity Exchange Limited (“ACE”) and National Multi Commodity Exchange of India Limited (“NMCE”) in the commodity market. SMC Comex International, DMCC (“SMC Comex”), a wholly owned subsidiary of SMC Comtrade Limited holds trading and clearing membership for Dubai Gold Commodity Exchange (“DGCX”) and SMC Insurance Brokers Private Limited is also a subsidiary (97.58%) of SMC Comtrade Limited and holds direct broking license from IRDA (Insurance & Regulatory Development Authority of India) in the life and non life insurance.

 

The Company is a holding company of SMC Investments and Advisors Limited (Formerly known as Sanlam Investments and Advisors (India) Limited) which is engaged in the business of portfolio management and wealth management. The Company is also holding company of SMC Capitals Limited, registered as Category I Merchant Banker with SEBI (Securities and Exchange Board of India) and of Moneywise Financial Services Private Limited, registered as Non- Banking financial Company with Reserve Bank of India (“RBI”). The Company has also formed a wholly owned subsidiary, Indunia Realtech Limited (formerly known as SMC ARC Limited). The Company is holding company of SMC Finvest Limited (formerly known as Sanlam Investment Management (India) Limited) and Moneywise Finvest Limited (formerly known as Sanlam Trustee Company (India) Limited) engaged in the business of Financing and Investments. SMC Real Estate Advisors Private Limited (formerly known as SMC Securities Private Limited), a wholly owned subsidiary of SMC Finvest Limited, is engaged in the business of real estate broking and other financial services.

 

SEBI has passed exit order in respect of Ludhiana Stock Exchange (LSE) on 30th December, 2014 and consequently, the company has ceased to be listed on LSE.

 

The Company’s shares are listed on the Delhi Stock Exchange, Ahmedabad Stock Exchange and Calcutta Stock Exchange in India.

 

The Company engages in proprietary transactions and offers a wide range of services to meet client’s needs including brokerage services, clearing member services, distribution of financial products such as mutual funds and initial public offerings.

 

2.

Summary of Significant Accounting Policies

 

Basis of Preparation

 

The consolidated financial statements include the accounts of SMC Global Securities Limited, its subsidiaries (‘Group’) and their equity affiliates. The statement of income includes the results of SMC Comtrade Limited, SMC Investments and Advisors Limited, SMC Capitals Limited, Indunia Realtech Limited (formerly known as SMC ARC Limited), Moneywise Financial Services Private Limited, SMC Real Estate Advisors Private Limited (formerly known as SMC Securities Private Limited ), SMC Comex International DMCC, SMC Insurance Brokers Private Limited, SMC Finvest Limited (formerly known as Sanlam Investment Management (India) Limited) and Moneywise Finvest Limited (formerly known as Sanlam Trustee Company (India) Limited).

 

 

All significant intercompany transactions have been eliminated. The Group accounts for investments in entities that are not variable interest entities where the Group owns a voting or economic interest of 20% to 50% and/or for which it has significant influence over operating and financing decisions using the equity method of accounting. The Group’s equity in the profits/(losses) of affiliates is included in the statements of income unless the carrying amount of an investment is reduced to zero and the Group is under no guaranteed obligation or otherwise committed to provide further financial support.

 

The Group consolidates investments in which it holds, directly or indirectly, more than 50% of the voting rights or where it exercises control.

 

Use of Estimates

 

In preparing these financial statements, management makes use of estimates concerning certain assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and certain revenues and expenses during the reporting period. Estimates, by their nature, are based on judgment and available information. Therefore, actual results could differ from those estimates and could have a material impact on the financial statements, and it is possible that such changes could occur in the near term. Significant estimates and assumptions are used when accounting for certain items, such as but not limited to, valuation of securities, allowances for uncollectible accounts receivable, future obligations under employee benefit plans, useful lives of property and equipment, valuation allowances for deferred taxes and contingencies.

 

Foreign Currency and Convenience Translation

 

The accompanying financial statements are reported in Indian rupee (“INR” or “`”). The Indian rupee is the functional currency for the Group and its affiliates, other than SMC Comex. The functional currency of SMC Comex is its local currency (“AED”). Assets and liabilities of SMC Comex are translated at year-end rates of exchange, and income statement accounts are translated at an average rates of exchange for the year. Gains or losses resulting from foreign currency transactions are included in net income.

 

For the convenience of the reader, the financial statements as of and for the period ended June 30, 2015 have been translated into U.S. dollars (US$) at US$1.00 = ` 63.59 based on the spot exchange as on June 30, 2015 declared by the Federal Reserve Board, the United States of America. Such translation should not be construed as representation that the rupee amounts have been or could be converted into U.S. dollars at that or any other rate, or at all. The convenience translation is unaudited.

 

Revenue Recognition

 

a) Proprietary Trading

 

Revenues from proprietary trading consist primarily of net trading income earned by the Group when trading as principal. Net trading income from proprietary trading represents trading gains net of trading losses. Proprietary revenue includes both realized and unrealized gains and losses. The profit and loss arising from all transactions entered into for the account and risk of the Group are recorded on a trade date basis.

 

Derivative financial instruments are used for trading purposes and carried at fair value. Market value for exchange-traded derivatives, principally futures and options is based on quoted market prices. The gains or losses on derivatives used for trading purposes are included in revenues from proprietary trading. Purchases and sales of derivative financial instruments are recorded on trade date. The transactions are recorded on a net basis when the legal right of offset exists.

 

 

b) Commission Income

 

Commission income is recognized on trade date basis as securities transactions occur. Commission income from insurance broking business is recognized on the logging in or placement of policies with the respective insurance company. The Group reports commission income on transactions as revenue on gross basis and reports commissions paid to sub brokers as commission expense.

 

c) Distribution Income

 

The Group earns distribution income on distribution of initial public offerings, mutual funds and other securities on behalf of the lead managers of those offerings, mutual funds and other securities. The Group’s primary obligation is distribution and collection of the subscription forms through its sub-broker network for which it is compensated by the lead managers. It recognizes distribution income net of distribution revenues attributable to sub-brokers when significant obligations have been fulfilled and the right to recognize revenue has been established.

 

d) Portfolio Management and Consultancy Services

 

The Group renders portfolio management services and management consultancy. It recognizes the fee income on an accrual basis in accordance with the terms of agreement and completion of service.

 

Securities Transactions

 

Securities owned consist of securities and derivative instruments used for trading purposes and for managing risk exposure in trading inventory. Proprietary security transactions are recorded on a trade date basis at fair value. Changes in fair value of securities (i.e., unrealized gains and losses) are recognized as proprietary trading revenues in the current period.

 

Marketable securities are valued at market value, based on quoted market prices and securities not readily marketable are valued at fair value as determined by management.

 

Investments

 

Equity securities held for purposes other than trading which do not have a readily determinable fair value, are accounted at cost or equity method of accounting subject to an impairment charge for any other than temporary decline in value. The impairment is charged to income. In order to determine whether a decline in value is other than temporary, the Group evaluates, among other factors, the duration and extent to which the value has been less than the carrying value, the financial condition of and business outlook for the investee, including key operational and cash flow indicators, current market conditions and future trends in the industry and the intent and ability of the Group to retain the investment for a period of time sufficient to allow for any anticipated recovery in value.

 

Cash and Cash Equivalents

 

Cash and cash equivalents consist of cash and highly liquid investments with maturities of 90 days or less at the date of acquisition.

 

Property and Equipment

 

Property and equipment are carried at cost less accumulated depreciation. Depreciation is provided over estimated useful life using the straight-line method. The estimated useful lives of assets are as follows:

 

Buildings	50 years
Equipment, vehicles and furniture	5 years
Computer hardware	3 years
Satellite equipment (“VSAT”)	10 years

 

 

Purchased Intangible Assets

 

Purchased intangible assets are amortized over their useful lives unless these lives are determined to be indefinite. Purchased intangible assets are carried at cost, less accumulated amortization. Amortization is computed over the estimated useful lives of three years using the straight-line method.

 

Impairment of Long-Lived Assets

 

Long-lived assets and certain identifiable intangible assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Indefinite lived intangible assets are tested annually for impairment. Determination of recoverability of long-lived assets and certain identifiable intangible assets is based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition. Measurement of an impairment loss for long-lived assets and certain identifiable intangible assets that management expects to hold and use is based on the fair value of the asset. Long-lived assets and certain identifiable intangible assets to be disposed of are reported at the lower of carrying amount or fair value less costs to sell.

 

Receivables and Payables

 

Customer Receivables and Payables

 

Customer securities transactions are recorded on a settlement date basis. Receivables from and payables to customers include amounts due on cash transactions, including derivative contracts transacted on behalf of the Group’s customers. Securities owned by customers, including those that collateralize margin or other similar transactions, are not reflected on the financial statements.

 

Brokers-Dealers and Clearing Organizations Receivables and Payables

 

Amounts due from and due to other broker-dealers and clearing organizations include net receivables or payables arising from unsettled regular-way transactions, failed settlement transactions and commissions.

 

Allowance for Doubtful Accounts

 

Management estimates an allowance for doubtful accounts to reserve for potential losses from unsecured and partially secured customer accounts deemed uncollectible. The facts and circumstances surrounding each receivable from customers and the number of shares, price and volatility of the underlying collateral are considered by management in determining the allowance. Management continually evaluates its receivables from customers for collectability and possible write-off. The Group manages the credit risk associated with its receivables from customers through credit limits and continuous monitoring of collateral.

 

Membership in Exchanges

 

Exchange memberships owned by the Group are originally carried at cost. Adjustments to carrying value are made if the Group determines that an “other-than-temporary” decline in value has occurred. In determining whether the value of the exchange memberships the Group owns are impaired (that is, fair market value is below cost) and whether such impairment is temporary or other-than-temporary, the Group consider many factors, including, but not limited to, information regarding recent sale and lease prices of exchange memberships, historical trends of sales prices of memberships, the current condition of the particular exchange’s market structure, legal and regulatory developments affecting the particular exchange’s market structure, trends in new listings on the particular exchange, general global and national economic factors and the Group’s knowledge and judgment of the securities market as a whole.

 

Advertising Costs

 

All advertising costs are expensed as incurred.

 

 

Employee Benefits

 

i) Provident Fund

 

In accordance with Indian law, employees are entitled to receive benefits under the Provident Fund, which is a defined contribution plan. Both the employee and the employer make monthly contributions to the plan at a predetermined rate (presently 12.0%) of the employees’ basic salary. These contributions are made to the fund administered and managed by the Government of India. The Group’s monthly contributions are charged to income in the period they are incurred. The Group has no further obligations under the plan beyond its monthly contributions.

 

ii) Gratuity Plan

 

The Group has a defined benefit retirement plan (the “Gratuity Plan”) covering all its employees in India. The Gratuity Plan provides a lump sum payment to vested employees at retirement or termination of employment based on the respective employee’s salary and years of employment with the Group.

 

The Group provides for the Gratuity Plan on the basis of actuarial valuation. All actuarial gains or losses are expensed off in the year in which they arise.

 

The funded status of the Group’s retirement related benefit plan is recognized in the balance sheet. The funded status is measured as the difference between the fair value of plan assets and the projected benefit obligation at March 31, the measurement date.

 

iii) Compensated Absence

 

The employees of the Group are entitled to compensated absences based on the unavailed leave balance and the last drawn salary of the respective employees. The Group has provided for the liability on account of compensated absences in accordance with ASC 710-10-25 (SFAS No. 43, “Accounting for Compensated Absences”). The Group records a liability based on actuarial valuations.

 

Income Taxes

 

In accordance with the provisions of SFAS 109, “Accounting for Income Taxes”, income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases and operating loss carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statement of income in the period of enactment. Based on management’s judgment, the measurement of deferred tax assets is reduced, if necessary, by a valuation allowance for any tax benefits for which it is more likely than not that some portion or all of such benefits will not be realized. Due to the intent and the ability of the Group to receive dividends and/or to liquidate investments in a tax-free manner, the Group has not recorded a deferred tax liability on the undistributed earnings of equity accounted associates.

 

Comprehensive Earnings

 

Comprehensive earnings for each of the three years in the period ended June 30, 2014, was equal to the Group’s net earnings.

 

Earnings Per Share

 

In accordance with the provisions of SFAS 128, “Earnings Per Share”, basic earnings per share is computed on the basis of the weighted average number of shares outstanding during the period. The Company does not have any dilutive securities and hence the basic and diluted earnings per share are same.

 

Recent Accounting Pronouncements

 

Reclassification Out of Accumulated Other Comprehensive Income

 

In February 2013, the FASB issued Accounting Standards Update (ASU) No. 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, which required new footnote disclosures of items reclassified from Accumulated Other Comprehensive Income (AOCI) to net income. The requirements became effective for the company from April 1, 2013.

 

 

Testing Indefinite-Lived Intangible Assets for Impairment

 

In July 2012, the FASB issued ASU No. 2012-02, Intangibles—Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment. The ASU is intended to simplify the guidance for testing the decline in the realizable value (impairment) of indefinite-lived intangible assets other than goodwill. Some examples of intangible assets subject to the guidance include indefinite live trademarks, licenses and distribution rights. The ASU allows companies to perform a qualitative assessment about the likelihood of impairment of an indefinite-lived intangible asset to determine whether further impairment testing is necessary, similar in approach to the goodwill impairment test. The ASU became effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. In performing the annual impairment analysis for indefinite-lived intangible assets in July 2013, including goodwill, SMC elected to bypass the optional qualitative assessment described above, choosing instead to perform a quantitative analysis.

 

Offsetting

 

In December 2011, the FASB issued ASU No. 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities. The ASU requires new disclosures for derivatives, resale and repurchase agreements, and securities borrowing and lending transactions that are either offset in the balance sheet (presented on a net basis) or subject to an enforceable master netting arrangement or similar arrangement. The standard requires disclosures that provide incremental gross and net information in the current notes to the financial statements for the relevant assets and liabilities. The ASU did not change the existing offsetting eligibility criteria or the permitted balance sheet presentation for those instruments that meet the eligibility criteria. The new incremental disclosure requirements became effective for SMC on April 1, 2013 and was required to be presented retrospectively for prior periods.

 

Presentation of Comprehensive Income

 

In June 2011, the FASB issued ASU No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income. The ASU requires an entity to present the total of comprehensive income, the components of net income, and the components of Other Comprehensive Income (OCI) either in a single continuous statement of comprehensive income or in two separate but consecutive statements. SMC selected the two-statement approach. Under this approach, SMC is required to present components of net income and total net income in the Statement of Income. The Statement of Comprehensive Income follows the Statement of Income and includes the components of OCI and a total for OCI, along with a total for comprehensive income. The ASU removed the option of reporting OCI in the statement of changes in stockholders’ equity. This ASU became effective for SMC on April 1, 2012 and a Statement of Comprehensive Income is included in these Consolidated Financial Statements.

 

Fair Value Measurement

 

In May 2011, the FASB issued ASU No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS. The ASU created a common definition of fair value for GAAP and IFRS and aligned the measurement and disclosure requirements. It required significant additional disclosures both of a qualitative and quantitative nature, particularly for those instruments measured at fair value that are classified in Level 3 of the fair value hierarchy. Additionally, the ASU provided guidance on when it is appropriate to measure fair value on a portfolio basis and expanded the prohibition on valuation adjustments where the size of the Company’s position is a characteristic of the adjustment from Level 1 to all levels of the fair value hierarchy. The ASU became effective for SMC on April 1, 2012 and did not have any material impact of SMC’s consolidated financial position or results of operations.

 

FUTURE APPLICATION OF ACCOUNTING STANDARDS

 

Investment Companies

 

In June 2013, the FASB issued ASU No. 2013-08, Financial Services—Investment Companies (Topic 946): Amendments to the Scope, Measurement, and Disclosure Requirements. This ASU introduces a new approach for assessing whether an entity is an investment company. To determine whether an entity is an investment company for accounting purposes, SMC will now be required to evaluate the fundamental and typical characteristics of the entity including its purpose and design. The amendments in the ASU will be effective for SMC in the first quarter of 2014-15. Earlier application is prohibited. No material impact is anticipated from adopting this ASU.

 

Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carry-forward, a Similar Tax Loss, or a Tax Credit Carry-forward Exists

 

In July 2013, the FASB issued ASU No. 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carry-forward, a Similar Tax Loss, or a Tax Credit Carry-forward Exists (a consensus of the FASB Emerging Issues Task Force). As a result of applying this ASU, an unrecognized tax benefit should be presented as a reduction of a deferred tax asset for a net operating loss (NOL) or other tax credit carry-forward when settlement in this manner is available under the tax law. The assessment of whether settlement is available under the tax law would be based on facts and circumstances as of the balance sheet reporting date and would not consider future events (e.g., upcoming expiration of related NOL carry-forwards). This classification should not affect an entity’s analysis of the realization of its deferred tax assets. Gross presentation in the roll forward of unrecognized tax positions in the notes to the financial statements would still be required. This ASU is effective for SMC in its 2014-15 fiscal year, and may be applied on a prospective basis to all unrecognized tax benefits that exist at the effective date. SMC has the option to apply the ASU retrospectively. Early adoption is also permitted. The impact of adopting this ASU is not expected to be material to SMC.

 

 

Accounting for Financial Instruments—Credit Losses

 

In December 2012, the FASB issued a proposed ASU, Financial Instruments-Credit Losses. This proposed ASU, or exposure draft, was issued for public comment in order to allow stakeholders the opportunity to review the proposal and provide comments to the FASB and does not constitute accounting guidance until a final ASU is issued. The exposure draft contains proposed guidance developed by the FASB with the goal of improving financial reporting about expected credit losses on loans, securities and other financial assets held by banks, financial institutions, and other public and private organizations. The exposure draft proposes a new accounting model intended to require earlier recognition of credit losses, while also providing additional transparency about credit risk. The FASB’s proposed model would utilize a single “expected credit loss” measurement objective for the recognition of credit losses for loans and other receivables at the time the financial asset is originated or acquired and for securities where fair value is less than cost, replacing the multiple existing impairment models in GAAP, which generally require that a loss be “incurred” before it is recognized. The FASB’s proposed model represents a significant departure from existing GAAP, and may result in material changes to the Company’s accounting for financial instruments. The impact of the FASB’s final ASU on the Company’s financial statements will be assessed when it is issued. The exposure draft does not contain a proposed effective date; this would be included in the final ASU, when issued.

 

Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carry-forward, a Similar Tax Loss, or a Tax Credit Carry-forward Exists

 

In July 2013, the FASB issued ASU No. 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carry-forward, a Similar Tax Loss, or a Tax Credit Carry-forward Exists (a consensus of the FASB Emerging Issues Task Force). As a result of applying this ASU, an unrecognized tax benefit is presented as a reduction of a deferred tax asset for a net operating loss (NOL) or other tax credit carry-forward when settlement in this manner is available under the tax law. The assessment of whether settlement is available under the tax law is based on facts and circumstances as of the balance sheet reporting date and does not consider future events (e.g., upcoming expiration of related NOL carry-forwards). This classification does not affect an entity’s analysis of the realization of its deferred tax assets. Gross presentation in the roll forward of unrecognized tax positions in the notes to the financial statements is still required. This ASU will be effective for SMC on April 1, 2014. The impact of adopting this ASU will not be material to SMC.

 

Discontinued Operations

 

In April 2014, the FASB issued ASU No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. The ASU changes the criteria for reporting discontinued operations while enhancing disclosures. Under the ASU, only disposals representing a strategic shift in operations, such as a disposal of a major geographic area, a major line of business or a major equity method investment, may be presented as discontinued operations. Additionally, the ASU requires expanded disclosures about discontinued operations that will provide more information about the assets, liabilities, income, and expenses of discontinued operations. The ASU also requires disclosure of the pretax income attributable to a disposal of a significant part of an organization that does not qualify for discontinued operations reporting. The ASU will be effective prospectively for all disposals (or classifications as held for sale) of components of an entity that occur within annual periods beginning on or after December 15, 2014 and for interim periods within those years. The ASU does not permit an entity to apply the amended definition of discontinued operations to a component of an entity that was classified as held-for-sale before the effective date. Early adoption is permitted, but only for disposals (or classifications as held for sale) that have not been reported in financial statements previously issued or available for issuance. The ASU will result in fewer disposals being reported as discontinued operations. SMC does not expect adoption of the ASU to have a material effect on SMC’s financial statements.

 

Other Potential Amendments to Current Accounting Standards

 

The FASB and International Accounting Standards Board, either jointly or separately, are currently working on several major projects, including amendments to existing accounting standards governing financial instruments discussed above, revenue recognition and consolidation. The FASB is also working on a joint project that would require substantially all leases to be capitalized on the balance sheet. Additionally, the FASB has issued a proposal on principal-agent considerations that would change the way the Company needs to evaluate whether to consolidate VIEs and non-VIE partnerships. The principal-agent consolidation proposal would require all VIEs, including those that are investment companies, to be evaluated for consolidation under the same requirements. All of these projects may have significant impacts for the Company. Upon completion of the standards, the Company will need to re-evaluate its accounting and disclosures. However, due to ongoing deliberations of the standard setters, the Company is currently unable to determine the effect of future amendments or proposals.

 

 

3.

Business Combination

 

The excess purchase price over those fair values is recorded as goodwill. Any negative goodwill being the excess of fair value of the acquired net assets over cost is initially adjusted in accordance with SFAS 141R “Business Combinations” against the values assigned to specified assets and the unadjusted balance is recognized as an extraordinary gain. The fair value assigned to assets acquired is based on valuations using management’s estimates and assumptions.

 

The Group allocates the purchase price of its acquisitions to the tangible assets, liabilities and intangible assets acquired, based on their estimated fair values. The excess purchase price over those fair values is recorded as goodwill. Any negative goodwill being the excess of fair value of the acquired net assets over cost is initially adjusted in accordance with SFAS 141R“Business Combinations” against the values assigned to specified assets and the unadjusted balance is recognized as an extraordinary gain. The fair value assigned to assets acquired is based on valuations using management’s estimates and assumptions.

 

4.

Deposits with Clearing Organizations and Others

 

SMC Global is a member of the clearing organization at which it maintains cash on deposits required for the conduct of its day-to-day clearance activities. The Group also maintains deposits with its bankers as margin for credit facilities availed.

 

5.

Receivables from Exchange and Clearing Organizations

 

As of		March 31, 2015				June 30, 2015				June 30, 2015
										US $
Receivable from clearing organizations			599,557				424,771				6,680
Total			599,557				424,771				6,680

 

6.

Securities Owned

 

Securities consist of trading securities at market values, as follows:

 

As of		March 31, 2015				June 30, 2015				June 30, 2015
										US $
Equity shares			1,335,332				886,326				13,938
Commodities			260,950				686,444				10,795
Total			1,596,282				1,572,770				24,733

 

7.

Derivatives assets held for trading

 

These consist of exchange traded futures and options at market values, as follows:

 

As of		March 31, 2015				June 30, 2015				June 30, 2015
										US $
Exchange traded derivatives held for trading			317,758				595,039				9,357
Total			317,758				595,039				9,357

 

 

8.

Other Assets

 

Other assets consist of:

 

As of		March 31, 2015				June 30, 2015				June 30, 2015
Current Assets
Advance to BCCL			143,818				132,943				2,091
Prepaid expenses			30,324				57,163				899
Others			1,398,615				1,189,855				18,711
Sub Total (A)			1,572,757				1,379,961				21,701
Non Current Assets
Security deposits			37,617				35,703				561
Advance tax, net			11,365				3,766				60
Others			383,971				462,716				7276
Sub Total (B)			432,953				502,185				7,897
Total (A+B)			2,005,710				1,882,146				29,598

 

Advances to BCCL reflect the amount paid as advance against advertisement expenses to Bennett Coleman & Co. Limited (BCCL) for the period of eight years ending on April 14, 2016.

 

Prepaid expenses primarily include the un-expired portion of annual rentals paid for use of leased telecommunication lines, insurance premiums and bank guarantee charges.

 

Security deposits primarily include deposits for telecommunications, VSAT and assets taken on operating lease.

 

Advance tax primarily includes taxes paid to Indian taxation authorities for income tax, net off amount of provision for income tax.

 

Others primarily include accrued interest on FDR, connectivity, advertisement and legal expenses as current assets and advances paid for property being taken on lease, income tax refundable and Minimum Alternate Tax(“MAT”) credit entitlement as non current assets.

 

9.

Property and Equipment

 

Property and equipment consist of:

 

As of		March 31, 2015				June 30, 2015				June 30, 2015
											US $
Land			-				-				-
Building			59,358				59,358				934
Equipment			96,920				98,179				1,544
Furniture and Fixture			213,156				214,708				3,376
Computer Hardware			325,645				334,096				5,254
Vehicle			48,448				58,590				921
Satellite Equipment			36,822				36,822				579
Total property and equipment			780,349				801,753				12,608
Less: Accumulated depreciation			620,869				630,653				9,917
Total property and equipment, net			159,480				171,100				2,691

 

Depreciation expense amounted to ` 13,919 and ` 11,401 for the quarter ended June 30, 2014 and 2015 respectively.

 

 

Property and equipment includes following assets under capital lease:

 

As of		March 31, 2015				June 30, 2015				June 30, 2015
										US $
Vehicle			18,451				28,648				451
Total leased property and equipment			18,451				28,648				451
Less: Accumulated depreciation			2,760				4,023				63
Total leased property and equipment, net			15,691				24,625				388

 

10.

Intangible Assets

 

Intangible assets consist of:

 

As of		March 31, 2015				June 30, 2015				June 30, 2015
										US $
Intangible assets subject to amortization
Software			131,554				131,569				2,069
Customer relationship/Customer Database			10,271				10,271				162
Intangible assets not subject to amortization
Goodwill			119,058				119,058				1,872
Membership in exchanges			5,642				5,758				91
Total intangible assets			266,525				266,656				4,194
Less: Accumulated amortization			142,537				142,875				2,247
Total intangible assets, net			123,988				123,781				1,947

  

Amortization expense amounted to ` 705 and ` 470 for the quarters ended June 30, 2014 and 2015 respectively.

 

11.

Investments

 

Investments consist of:

 

As of		March 31, 2015				June 30, 2015				June 30, 2015
										US $
Current Investment
Trading investment			339,878				362,635				5,703
Sub Total (A)			339,878				362,635				5,703
Non Current Investment
Other investment			20,686				20,686				325
Sub Total (B)			20,686				20,686				325
Total (A+B)			360,564				383,321				6,028

 

As part of its corporate strategy and in the normal course of its business, the Group makes investments in the equity of companies which are engaged in businesses similar to Group’s core business.

 

Trading investment consists of investment in shares, mutual fund and derivatives and includes ` 11,766 as of June 30, 2015 of net unrealized gain/(loss).

 

 

12.

Overdrafts and Long Term Debt

 

a)

Overdraft & Debt

 

Bank Overdrafts

 

The Group’s debt financing is generally obtained through the use of overdraft facilities from banks. The interest rates on such borrowings reflect market rates of interest at the time of the transactions. The balance of these facilities was ` 269,005 and ` 470 as of March 31, 2015 and June 30, 2015, respectively, at average effective interest rates of 11.29% and 11.29%, respectively. Deposits have been pledged by the Group with bankers to secure these debts. These deposits are classified in the balance sheet under “Deposits with clearing organizations and others”.

 

Book Overdraft

 

Book overdrafts were ` 93,732 and ` 19,680 at March 31, 2015 and June 30, 2015, respectively.

 

Loan from Financial Institution

 

Debt outstanding comprises of loan facilities from financial institution. The long-term debt was ` 402,915 and ` 111,785 at March 31, 2015 and June 30, 2015, respectively, at average effective interest rates of 11.29% and 11.29%, respectively.

 

b)

Long Term Debt

 

Long term debt outstanding comprises of loans taken against vehicles. The long term debt was ` 11,730 and ` 13,784 at March 31, 2015 and June 30, 2015, respectively, at average effective interest rates of 10.27% and 10.09%, respectively. Long term debt is secured by hypothecation of vehicles.

 

Refer Note 19 for assets pledged as collateral.

 

13.

Net Capital Requirements

 

The Group is subject to regulations of SEBI, RBI and stock exchanges, which specifies minimum net capital requirements. The net capital for this purpose is computed on the basis of the information contained in Company’s statutory books and records kept under accounting principles generally accepted in local jurisdiction. The Company submits periodic reports to the regulators.

 

SMC Global is subject to regulations of SEBI (Securities and Exchange Board of India) and stock exchanges in India which specifies minimum net capital requirements of ` 100,000 each. As of March 31, 2015 and June 30, 2015, the net capital as calculated in the periodic reports was ` 1,353,914 and ` 1,699,870.

 

SMC Comtrade is subject to regulations of FMC (Forward Market Commission) and commodity exchanges in India, which specifies minimum net capital requirements of ` 5,000 in each. As of March 31, 2015 and June 30, 2015, the net capital as calculated in the periodic reports was ` 1,338,257 and `1,367,363 which was in excess of its net capital requirement.

 

SMC Comex is subject to regulations of SCA (Securities and Commodities Authority) and DGCX in Dubai. The Company is required to maintain net capital of USD 350 thousand. As of March 31, 2015 and June 30, 2015, the net capital as calculated in the periodic reports was USD 1,241 thousand and USD 1,389 thousand.

 

SMC Capital is subject to regulations of SEBI in India. The Company is required to maintain net capital of ` 50,000. As of March 31, 2015 and June 30, 2015, the net capital as calculated in the periodic reports was ` 75,319 and `125,302.

 

Moneywise Financial Services is subject to regulations of RBI in India, which specifies minimum net owned funds (NOF) requirements of ` 20,000. As of March 31, 2015 and June 30, 2015, the NOF as calculated in the periodic reports was ` 800,767 and ` 1,006,456.

 

 

14.

Payable to Broker Dealers and Clearing Organizations

 

As of		March 31, 2015				June 30, 2015				June 30, 2015
										US $
Payable to clearing organizations			267,296				580,086				9,123
Commission payable			46,625				63,102				992
Total			313,921				643,188				10,115

 

15.

Accounts Payable, Accrued Expenses and Other Liabilities

 

As of		March 31, 2015				June 30, 2015				June 30, 2015
										US $
Current Liabilities
Security deposits			17,319				22,279				350
Accrued expenses			170,513				150,241				2,363
Other liabilities			86,418				84,252				1,325
Employee benefits			4,214				5,590				88
Salary payable			7,568				22,459				353
Others			19,392				38,963				613
Sub- Total (A)			305,424				323,784				5,092
Non Current Liabilities
Security deposits			1,728				1,728				27
Employee benefits			70,298				74,472				1,171
Others			7,767				-				-
Sub- Total (B)			79,793				76,200				1,198
Total (A+B)			385,217				399,984				6,290

 

“Security deposits” primarily include deposits taken from sub-brokers for satellite equipment and deposits from employees. “Other Liabilities” includes payable towards statutory authorities and “Others” includes margin received from clients.

 

16.

Distribution Income

 

The net distribution income comprises of:

 

Quarter ended		June 30, 2014				June 30, 2015				June 30, 2015
										US $
Gross distribution revenue			69,955				70,989				1117
Less: Distribution revenues attributable to sub-brokers			60,272				57,411				903
Net distribution income			9,683				13,578				214

 

17.

Employee benefits

 

The Gratuity Plan

 

Net gratuity cost for the three months ended June 30, 2013 and 2014 comprises the following components:

 

Quarter ended		June 30, 2014				June 30, 2015				June 30, 2015
										US $
Service cost			6,057				9,521				150
Interest cost			2,306				3,184				50
Amortization			(1,979	)			(3,879	)			(61	)
Net gratuity costs			6,384				8,826				139

 

 

Provident Fund

 

The Group’s contribution towards the provident fund amounted to ` 3,291 and ` 6,720 for the quarter ended June 30, 2014 and 2015 respectively.

 

18.

Income Taxes

 

The effective tax rate was 33.063% in the first quarter of year 2015 and 32.045% in the first quarter of 2014.

 

The Group’s major tax jurisdiction is India. In India, the assessment is not yet completed for the financial year 2012-13 and onwards. The Group continues to recognize interest and penalties related to income tax matters as part of the income tax provision.

 

19.

Collateral and Significant Covenants

 

The Group has provided its assets as collateral for credit facilities availed from banks and for margin requirements with exchanges. Amounts that the Group has pledged as collateral, which are not reclassified and reported separately, consist of the following:

 

As of		March 31, 2015				June 30, 2015				June 30, 2015
										US $
Fixed deposits			2,341,881				2,247,231				35,339
Securities owned			926,125				457,069				7,188
Total			3,268,006				2,704,300				42,527

 

The fixed deposits are classified in the balance sheet under “Deposits with clearing organizations and others”.

 

State Bank of Bikaner and Jaipur, one of the bankers to the Group, has created first pari-passu charge over the current assets of SMC, as a security for credit facilities provided to the Group.

 

The Company has obtained overdraft facility against pledge of shares from Kotak Mahindra Bank, Indusind Bank, HDFC Bank, Bajaj Finance Limited and Kotak Mahindra Investments Limited. The Company has obtained overdraft facility against pledge of Term Deposits from HDFC Bank, Yes Bank, DCB Bank and IndusInd Bank.

 

SMC Global has executed an undertaking in favour of Yes Bank, one of the bankers to the Group, agreeing to continue to maintain more than 26% holding in SMC Comtrade.

 

20.

Earnings Per Share

 

The following is a reconciliation of the equity shares used in the computation of basic and diluted earnings per equity share:

 

Quarter ended		June 30, 2014				June 30, 2015
Weighted average shares outstanding- Basic			113,134,450				113,134,450
Effect of diluted securities on account of contract with Sanlam International Investment Partners Limited for issue of equity shares			-				-
Weighted average shares outstanding-diluted (Par value of `2 for qtr. ending June 30, 2014, Par value of `2 for qtr. ending June 30, 2015)			113,134,450				113,134,450

 

 

Income available to common stock holders of the group used in the basic and diluted earnings per share calculation was determined as follows:

 

Quarter ended		June 30, 2014				June 30, 2015				June 30,2015
										US $
Income available to the common shareholders of the group			179,710				145,943				2,295
Net Income available for calculating diluted earnings per share			179,710				145,943				2,295
Basic earnings per share			1.59				1.29				0.02
Diluted earnings per share			1.59				1.29				0.02

 

Par value of common stock for qtr. ending June 30, 2014 was `2 and Par value of common stock for qtr. ending June 30, 2015 is `2, thus, the earning per share is not comparable. Pro forma Earnings per share is as follows:

 

Quarter ended		June 30,2014				June 30,2015				June 30,2015
										US $
Basic earnings per share			1.59				1.29				0.02
Diluted earnings per share			1.59				1.29				0.02

 

21.

Concentration

 

The following table gives details in respect of percentage of commission income generated from top two, five and ten customers:

 

Quarter ended (in %)		June 30, 2014				June 30, 2015
Revenue from top two customers			8.88				1.23
Revenue from top five customers			10.09				2.91
Revenue from top ten customers			11.71				4.97

 

22.

Segment

 

The Group follows the provisions of SFAS 131 “Disclosures about Segments of an Enterprise and Related Information”. SFAS 131 establishes standards for reporting information regarding operating segments in annual financial statements and requires selected information for those segments to be presented in interim financial reports issued to stockholders.

 

The Group has recognized the following segments on the basis of Business activities carried on (including by its subsidiaries), in respect of which financial statements are consolidated with the financial statements of the Company.

 

The accounting policies of the segments are the same as those described in note 2 – Summary of Significant Accounting Policies. Revenues and expenses are directly attributable to segments. Management evaluates performance based on stand-alone revenues and earnings after taxes for the companies in Group. The Group’s operations and customers are primarily based in India.

 

Quarter ended June 30,		2015
		Capital and derivatives markets				Commodities				Insurance				Wealth Management				NBFC Services				Merchant Banking				ARC				Elimination				Total				US $
Revenue from external customer excluding interest income			516,634				167,262				91,975				45,949				(10,299	)			9,545				270				(6,313	)			815,023				12,817
Earnings after taxes			73,295				40,407				18,210				3,379				9,836				1,510				(244	)			-				146,393				2,302
Total assets			9,033,999				2,271,388				379,389				168,492				1,337,039				104,071				42,707				(3,616,921	)			9,720,164				152,857

 

 

Quarter ended June 30,		2014
			Capital and derivatives markets				Commodities				Insurance				Wealth Management				NBFC Services				Merchant Banking				ARC				Elimination				Total				US $
Revenue from external customer excluding interest income			602,080				192,960				78,204				14,345				18,812				15,297				3,975				(13,727	)			911,946				15,184
Earnings after taxes			75,765				70,651				8,442				(5,435	)			22,208				5,013				3,270				-				179,914				2,996
Total assets			10,100,992				1,805,744				291,695				139,918				941,686				96,832				28,614				(3,500,619	)			9,904,862				164,916

 

23.

Commitments and Contingent Liabilities

 

a) Operating Leases

 

SMC Global has certain operating leases for office premises. Rental expenses for operating leases are accounted for on a straight line method. Rental expense amounted to ` 101,954 and ` 33,078 for the year ended March 31, 2015 and quarter ended June 30, 2015 respectively. There are no non-cancelable lease arrangements.

 

b) Guarantees

 

As of March 31, 2015 and June 30, 2015, guarantees of ` 5,410,075 and ` 5,410,075 are provided by various banks to exchange clearing houses and sale tax authorities for the Group, in the ordinary course of business, as a security for due performance and fulfillment by the Group of its commitments and obligations.

 

The initial term of these guarantees is generally for a period of 12 to 15 months. The bankers charge commission as consideration to issue the guarantees. The commission charged generally is in the range of 0.6% to 0.85% of the guarantee amount. The Group recognizes commission expense over the period of the guarantee and classify in the income statement under `interest expense’. The unamortized commission expense is included in prepaid expenses and classified in the balance sheet under “other assets”. The potential requirement for the Group to make payments under these agreements is remote. Thus, no liability has been recognized for these transactions. The fair value of the guarantees is considered to be insignificant given the risk of loss on such guarantees at the date of its inception and, therefore, no amount was recognized towards fair value of guarantees given in the financial statements on the inception date.

  

c) Litigation

 

SMC Group has diversified business interests and its activities are within the frame work, rules and regulations devised by Statute from time to time. These activities are subject to periodic inspection by government and its appointed regulatory authorities, which may sometimes result in litigation. Sometimes these litigations may have outcome in the form of adverse judgments, fines or penalties. However outcome of the the action in the below case may turn out to be adverse, but considering the case in entirety, SMC’s management believes that adverse judgment, if any, will not have a material adverse effect on the financial statements of the Group

 

SMC Group has one Show Cause Notice, issued by SEBI, pending as on date of reporting. Details of the show cause notice are as under;

 

SHOW CAUSE NOTICE UNDER REGULATIONS 25 AND 38 OF SEBI (INTERMEDIARIES) REGULATIONS, 2008 VIDE NOTICE NO. EAD/ENQ/JJ/AK/568/2014 DATED 6TH JANUARY 2014.

 

A Show Cause Notice (SCN) dated 6^th January, 2014 was issued to SAM Global Securities limited (which was merged with SMC Global Securities Limited w.e.f. 26th February 2009 vide order of Delhi High Court). SCN was issued under regulations 25 and 38 of Securities and Exchange Board of India (Intermediaries) Regulations, 2008 in relation to transactions by one client in the scrip of Gangotri Textiles Limited during the period 7^th April, 2006 to 31^st May, 2006. We have already submitted our reply and written submissions and also have explained our stand during the personal hearing on 11th July, 2014 & 16th July, 2014 before the designated authority. Last communication in the matter was on 4^th August, 2014 where SMC Global securities Ltd. had submitted additional submissions to the designated authority in writing.

 

“The matter is currently pending before SEBI.”