2.12 Provisions and contingencies

The Company creates a provision when there is a present obligation as a result of a past event that probably requires an
outflow of resources and a reliable estimate can be made of the amount of the obligation. A disclosure for a contingent
liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an
outflow of resources. When there is a possible obligation or a present obligation in respect of which the likelihood of
outflow of resources is remote, no provision or disclosure is made.

2.13 Cash and cash equivalents

Cash and cash equivalents include cash on hand, other short term, highly liquid investments with original maturities of
three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk
of changes in value.

2.14 Financial Instruments

A financial instrument is defined as any contract that gives rise to a financial asset of one entity and a financial liability or
equity instrument of another entity. Trade receivables and payables, loan receivables, investments in securities and
subsidiaries, debt securities and other borrowings, preferential and equity capital etc. are some examples of financial
instruments.

All the financial instruments are recognised on the date when the Company becomes party to the contractual provisions
of the financial instruments. For tradable securities, the Company recognises the financial instruments on settlement
date.

(i) Financial assets

Financial assets include cash, or an equity instrument of another entity, or a contractual right to receive cash or
another financial asset from another entity. Few examples of financial assets are loan receivables, investment in
equity and debt instruments, trade receivables and cash and cash equivalents.

Initial measurement

All financial assets are recognised initially at fair value including transaction costs that are attributable to the acquisition
of financial assets except in the case of financial assets recorded at FVTPL where the transaction costs are charged
to profit or loss.

Subsequent measurement

For the purpose of subsequent measurement, financial assets are classified into four categories:

(a) Debt instruments at amortised cost

(b) Debt instruments at fair value through other Comprehensive Income (FVOCI)

(c) Debt instruments at fair value through Profit & Loss (FVTPL)

(d) Equity instruments designated at fair value through Other Comprehensive Income(FVOCI)

(a) Debt instruments at amortised cost

The Company measures its financial assets at amortised cost if both the following conditions are met:

• The asset is held within a business model of collecting contractual cash flows; and

• Contractual terms of the asset give rise on specified dates to cash flows that are Sole Payments of Principal
and Interest (SPPI) on the principal amount outstanding.

To make the SPPI assessment, the Company applies judgment and considers relevant factors such as the
nature of portfolio and the period for which the interest rate is set.

The Company determines its business model at the level that best reflects how it manages groups of financial
assets to achieve its business objective. The Company's business model is not assessed on an instrument by
instrument basis, but at a higher level of aggregated portfolios. If cash flows after initial recognition are realised
in a way that is different from the Company's original expectations, the Company does not change the classification
of the remaining financial assets held in that business model, but incorporates such information when assessing
newly originated financial assets going forward.

The business model of the Company for assets subsequently measured at amortised cost category is to hold
and collect contractual cash flows. However, considering the economic viability of carrying the delinquent portfolios
in the books of the Company, it may sell these portfolios to banks and/or asset reconstruction companies.

After initial measurement, such financial assets are subsequently measured at amortised cost on effective interest
rate (EIR). The expected credit loss (ECL) calculation for debt instruments at amortised cost is explained in
subsequent notes in this section.

(b) Debt instruments at FVOCI

The Company subsequently classifies its financial assets as FVOCI, only if both of the following criteria are met:

• The objective of the business model is achieved both by collecting contractual cash flows and selling the
financial assets; and

• Contractual terms of the asset give rise on specified dates to cash flows that are Solely Payments of Principal
and Interest (SPPI) on the principal amount outstanding.

Debt instruments included within the FVOCI category are measured at each reporting date at fair value with such
changes being recognised in other comprehensive income (OCI). The interest income on these assets is
recognised in profit or loss. The ECL calculation for debt instruments at FVOCI is explained in subsequent notes
in this section.

Debt instruments such as long term investments in Government securities to meet regulatory liquid asset
requirement of the Company's deposit program and mortgage loans portfolio where the Company periodically
resorts to partially selling the loans by way of assignment to willing buyers are classified as FVOCI.

On derecognition of the asset, cumulative gain or loss previously recognised in OCI is reclassified to profit or
loss.

(c) Debt instruments at FVTPL

The Company classifies financial assets which are held for trading under FVTPL category. Held for trading
assets are recorded and measured in the Balance Sheet at fair value. Interest and dividend incomes are recorded
in interest income and dividend income, respectively according to the terms of the contract, or when the right to
receive the same has been established. Gain and losses on changes in fair value of debt instruments are
recognised on net basis through profit or loss.

The Company's investments into mutual funds, Government securities (trading portfolio) and certificate of deposits
for trading and short term cash flow management have been classified under this category.

(d) Equity investments designated under FVOCI

All equity investments in scope of Ind AS 109 'Financial Instruments' are measured at fair value. The Company
has strategic investments in equity for which it has elected to present subsequent changes in the fair value in
other comprehensive income. The classification is made on initial recognition and is irrevocable.

All fair value changes of the equity instruments, excluding dividends, are recognised in OCI and not available for
reclassification to profit or loss, even on sale of investments. Equity instruments at FVOCI are not subject to an
impairment assessment.

De-recognition of Financial Assets

The Company derecognises a financial asset (or, where applicable, a part of a financial asset) when:

• The right to receive cash flows from the asset have expired; or

• The Company has transferred its right to receive cash flows from the asset or has assumed an obligation to
pay the received cash flows in full without material delay to a third party under an assignment arrangement
and the Company has transferred substantially all the risks and rewards of the asset. Once the asset is
derecognised, the Company does not have any continuing involvement in the same.

The Company transfers its financial assets through the partial assignment route and accordingly derecognises
the transferred portion as it neither has any continuing involvement in the same nor does it retain any control. If
the Company retains the right to service the financial asset for a fee, it recognises either a servicing asset or a
servicing liability for that servicing contract. A service liability in respect of a service is recognised at fair value if
the fee to be received is not expected to compensate the Company adequately for performing the service. If the
fees to be received are expected to be more than adequate compensation for the servicing, a service asset is
recognised for the servicing right at an amount determined on the basis of an allocation of the carrying amount
of the larger financial asset.

On derecognition of a financial asset in its entirety, the difference between:

• the carrying amount (measured at the date of derecognition) and

• the consideration received (including any new asset obtained less any new liability assumed) is recognised
in profit or loss.

Impairment of financial assets

ECL is recognised for financial assets held under amortised cost, debt instruments measured at FVOCI, and
certain loan commitments.

Financial assets where no significant increase in credit risk has been observed are considered to be in 'stage 1'
and for which a 12 month ECL is recognised.

Financial assets that are considered to have significant increase in credit risk are considered to be in 'stage 2'
and those which are in default or for which there is an objective evidence of impairment are considered to be in
'stage 3'. Lifetime ECL is recognised for stage 2 and stage 3 financial assets.

At initial recognition, allowance (or provision in the case of loan commitments) is required for ECL towards
default events that are possible in the next 12 months, or less, where the remaining life is less than 12 months.

In the event of a significant increase in credit risk, allowance (or provision) is required for ECL towards all
possible default events over the expected life of the financial instrument ('lifetime ECL').

Financial assets (and the related impairment loss allowances) are written off in full, when there is no realistic
prospect of recovery.

Treatment of the different stages of financial assets and the methodology of determination of ECL

(a) Credit impaired (stage 3)

The Company recognises a financial asset to be credit impaired and in stage 3 by considering relevant objective
evidence, primarily whether:

• Contractual payments of either principal or interest are past due for more than 90 days;

• The loan is otherwise considered to be in default.

Restructured loans, where repayment terms are renegotiated as compared to the original contracted terms due
to significant credit distress of the borrower, are classified as credit impaired. Such loans continue to be in stage
3 until they exhibit regular payment of renegotiated principal and interest over a minimum observation period,
typically 12 months- post renegotiation, and there are no other indicators of impairment. Having satisfied the
conditions of timely payment over the observation period these loans could be transferred to stage 1 or 2 and a
fresh assessment of the risk of default is done for such loans.

Interest income is recognised by applying the EIR to the net amortised cost amount i.e. gross carrying amount
less ECL allowance.

(b) Significant increase in credit risk (stage 2)

An assessment of whether credit risk has increased significantly since initial recognition is performed at each
reporting period by considering the change in the risk of default of the loan exposure. However, unless identified
at an earlier stage, 30 days past due is considered as an indication of financial assets to have suffered a
significant increase in credit risk. Based on other indications such as borrower's frequently delaying payments
beyond due dates though not 30 days past due are included in stage 2 for mortgage loans.

The measurement of risk of defaults under stage 2 is computed on homogenous portfolios, generally by nature
of loans, tenors, underlying collateral, geographies and borrower profiles. The default risk is assessed using PD
(probability of default) derived from past behavioural trends of default across the identified homogenous portfolios.
These past trends factor in the past customer behavioural trends, credit transition probabilities and macroeconomic
conditions. The assessed PDs are then aligned considering future economic conditions that are determined to
have a bearing on ECL.

(c) Without significant increase in credit risk since initial recognition (stage 1)

ECL resulting from default events that are possible in the next 12 months is recognised for financial instruments
in stage 1. The Company has ascertained default possibilities on past behavioural trends witnessed for each
homogenous portfolio using application/behaviourial score cards and other performance indicators, determined
statistically.

(d) Measurement of ECL

The assessment of credit risk and estimation of ECL are unbiased and probability weighted. It incorporates all
information that is relevant including information about past events, current conditions and reasonable forecasts
of future events and economic conditions at the reporting date. In addition, the estimation of ECL takes into
account the time value of money. Forward looking economic scenarios determined with reference to external
forecasts of economic parameters that have demonstrated a linkage to the performance of our portfolios over a
period of time have been applied to determine impact of macro economic factors.

Measurement of expected credit losses are based on 3 main parameters:

• Probability of default (PD):

It is defined as the probability of whether borrowers will default on their obligations in future. Since the
company don't have any history of past losses therefore it was not adequate enough to create our own
internal model through which actual defaults for each grade could be estimated. Hence, the default study
published by one of the recognised rating agency is used for estimating the PDs for each range grade.

• Loss given default (LGD):

It is the magnitude of the likely loss, if there is a default. The LGD represents expected losses on the EAD
given the event of default, taking into account, among other attributes, the mitigating effect of collateral value.
The default study published by one of the recognised rating agency is used for estimating the LGD for
secured and unsecured loans.

• Exposure at default (EAD):

EAD represents the expected balance at default, taking into account the repayment of principal and interest
from the Balance Sheet date to the date of default together with any expected drawdowns of committed
facilities.

Write offs - The gross carrying amount of a financial asset is written-off (either partially or in full) to the extent
that there is no reasonable expectation of recovering the asset in its entirety or a portion thereof. This is
generally the case when the Company determines that the borrower does not have assets or sources of

income that could generate sufficient cash flows to repay the amounts subject to the write-off and when there
is no reasonable expectation of recovery from the collaterals held. However, financial assets that are written-
off could still be subject to enforcement activities in order to comply with the Company's procedures for
recovery of amounts due.

The Company has calculated ECL using three main components: a probability of default (PD), a loss given
default (LGD) and the exposure at default (EAD). ECL is calculated by multiplying the PD, LGD and EAD and
adjusted for time value of money using a rate which is a reasonable approximation of EIR.

• Determination of PD is covered above for each stages of ECL.

• EAD represents the expected balance at default, taking into account the repayment of principal and interest
from the Balance Sheet date to the date of default together with any expected drawdowns of committed
facilities.

• LGD represents expected losses on the EAD given the event of default, taking into account, among other
attributes, the mitigating effect of collateral value at the time it is expected to be realised and the time value
of money.

(ii) Financial liabilities

Financial liabilities include liabilities that represent a contractual obligation to deliver cash or another financial asset
to another entity, or a contract that may or will be settled in the entities own equity instruments. Few examples of
financial liabilities are trade payables, debt securities and other borrowings and subordinated debts.

Initial measurement

All financial liabilities are recognised initially at fair value and, in the case of borrowings and payables, net of directly
attributable transaction costs. The Company's financial liabilities include trade payables, other payables, debt securities
and other borrowings.

Subsequent measurement

After initial recognition, all financial liabilities are subsequently measured at amortised cost using the EIR. Any gains
or losses arising on derecognition of liabilities are recognised in the Statement of Profit and Loss.

Derecognition

The Company derecognises a financial liability when the obligation under the liability is discharged, cancelled or
expired.

(iii) Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount is reported in the Balance Sheet only if there is
an enforceable legal right to offset the recognised amounts with an intention to settle on a net basis or to realise the
assets and settle the liabilities simultaneously.

2.15 Fair value measurements

The Company measures its qualifying financial instruments at fair value on each Balance Sheet date.

Fair value is the price that would be received against sale of an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. The fair value measurement is based on the presumption that the
transaction to sell the asset or transfer the liability takes place in the accessible principal market or the most advantageous
accessible market as applicable.

The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data is available
to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the
fair value hierarchy into Level I, Level II and Level III based on the lowest level input that is significant to the fair value
measurement as a whole.

For assets and liabilities that are fair valued in the financial statements on a recurring basis, the Company determines
whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest
level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the
nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy

Notes:

i) Statutory Reserve under Section 45-IC of the RBI Act, 1934:

The Company has created a reserve pursuant to section 45 IC of the Reserve Bank of India Act, 1934 by transferring
amount not less than twenty per cent of its net profit after tax every year before any dividend is declared.

ii) Securities premium:

The amount received in excess of face value of the equity shares is recognised in Securities Premium Account. In case of
equity-settled share based payment transactions, the difference between fair value on grant date and nominal value of
share is accounted as securities premium account. The account is utilised in accordance with the provisions of the Companies
Act, 2013 read with rules made thereunder.

iii) General reserve:

Under the erstwhile Companies Act 1956, general reserve was created through an annual transfer of net income at a
specified percentage in accordance with applicable regulations. Consequent to introduction of Companies Act 2013, the
requirement to mandatorily transfer a specified percentage of the net profit to general reserve has been withdrawn. However,
the amount previously transferred to the general reserve can be utilised only in accordance with the specific requirements
of Companies Act, 2013.

iv) Retained earnings:

Retained earnings represents accumulated earnings of the Company. This reserve can be utilised in accordance with the
provisions of Companies Act, 2013 read with rules made thereunder.

Defined Benefit Plan - Gratuity

The Company operates an unfunded gratuity plan, under which every employee who has completed atleast five years of
service gets a gratuity on departure @15 days of last drawn basic salary for each completed year of service.

The plan is of a final salary defined benefit in nature which is sponsored by the Company and hence it underwrites all the risks
pertaining to the plan. The actuarial risks associated are:

Interest Rate Risk:

The risk of government security yields falling due to which the corresponding discount rate used for valuing liabilities falls. Such
a fall in discount rate will result in a larger value placed on the future benefit cash flows whilst computing the liability and thereby
requiring higher accounting provisioning.

Longevity Risks:

Longevity risks arises when the quantum of benefits payable under the plan is based on how long the employee lives post
cessation of service with the company. The gratuity plan provides the benefit in a lump sum form and since the benefit is not
payable as an annuity for the rest of the lives of the employees, there is no longevity risks.

Salary Risks:

The gratuity benefits under the plan are related to the employee's last drawn salary. Consequently, any unusual rise in future
salary of the employee raises the quantum of benefit payable by the company, which results in a higher liability for the company
and is therefore a plan risk for the company.

The estimates of the future salary increases, considered in actuarial valuation, include inflation, seniority, promotion and other
relevant factors such as supply and demand in the employment market. The discount rate is based on the prevailing market
yield on government securities as at the balance sheet date for the estimated average remaining service.

27 Additional regulatory information

i) The Company does not have any immovable property, hence disclosure for title deeds not held in the name of the
company is not applicable

ii) The Company does not hold any investment property in its books of accounts, so fair valuation of investment is not
applicable

iii) During the year the company has not revalued any of its Property, plant and equipment or intangible assets.

iv) The Company does not have any trade receivables during the current and previous year

v) The Company does not have any trade payable during the current and previous year

vi) The Company does not have any Capital work in progress (CWIP) as on 31 March 2025 (PY -Nil)

vii) The Company does not have any Intangible Assets under development.

viii) No proceeding have been initiated or pending against the company under the Benami Transactions (Prohibitions) Act
1988.

ix) The Company does not have any borrowings from banks or financial institutions on the basis of security of current assets.

x) The Company have not declared as a wilful defaulter by any bank or financial Institution or other lender.

xi) The Company has not any transactions with companies struck off during the period.

xii) The Company has no cases of any charges or satisfaction yet to be registered with ROC beyond the statutory time limits.

xiii) The Company has complied with the provisions of clause (87) of section 2 of the Act read with the Companies (Restriction
on number of Layers) Rules, 2017

xv) No scheme of arrangements has been approved by the competent authority in terms of sections 230 to 237 of the
Companies Act,2013 in respect of the Company.

xvi) The Company has not provided nor taken any loan or advance to/from any other person or entity with the understanding
that benefit of the transaction will go to a third party, the ultimate beneficiary.

xvii) The Company does not have any transaction not recorded in the books of accounts that has been surrendered or disclosed
as income during the year in the tax assessments under the Income Tax Act, 1961

xviii) The Company has neither traded nor invested in crypto currency or virtual currency during the financial year under
review.

30 Financial Risk Management

The Company's Board of Directors has overall responsibility for the establishment and oversight of the Company's risk
management framework. The Company's Board of Directors oversees how management monitor compliances with the Company's
risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks
faced by the Company.

The Company's risk management policies are established to identify and analyse the risks faced by the Company, to set
appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are
reviewed regularly to reflect changes in market conditions.

The Company has exposure to the following risks arising from its business operations:

i) Credit risk

Credit risk is the risk of financial loss if a customer or counterparty fails to meet an obligation under a contract. Lending
activities account for most of the Company's credit risk. Other sources of credit risk also exist in loans and transaction
settlements. Credit risk is measured as the amount that could be lost if a customer or counterparty fails to make repayments.
The maximum exposure to credit risk in case of all the financial instruments is restricted to their respective carrying
amount.Credit Risk is monitored through stringent credit appraisal, counter party limits ands internal risk ranges of the
borrowers. Exposure to credit risk is managed through regular analysis of the ability of all the customers and counterparties
to meet interest and capital repayment obligations and by changing lending limits where appropriate.

b) Credit quality analysis

An impairment analysis is performed at each reporting date based on the facts and circumstances existing on that
date to identify expected losses on account of time value of money and credit risk. The credit quality of Loans and
advances measured at amortised cost is primarily assessed by the Days Past Due (DPD) status and other qualitative
factors leading to increase in credit risk.

Inputs, assumptions and techniques used for estimating impairment

In assessing the impairment of financial assets under the expected credit loss model, the Company defines default
when a loan obligation is overdue for more than 90 days and credit impaired.

Assessment of significant increase in credit risk

When determining whether the risk of default has increased significantly since initial recognition, the Company considers
the DPD status of the loans. Credit risk is deemed to have increased significantly when an asset is more than 30 days
past due (DPD) and other qualitative internal or external factors demonstrating credit or liquidity risk.

Calculation of expected credit losses

The key elements in calculation of ECL are as follows:

PD - The Probability of Default is an estimate of the likelihood of default over a given time horizon. A default may only
happen at a certain time over the assessed period, if the facility has not been previously derecognised and is still in the
portfolio.

EAD - The Exposure at Default is an estimate of the exposure at a future default date, taking into account expected
changes in the exposure after the reporting date, including repayments of principal and interest, whether scheduled by
contract or otherwise, expected drawdowns on committed facilities, accrued interest from missed payments and loan
commitments.

LGD - The Loss Given Default is an estimate of the loss arising in the case where a default occurs at a given time. It
is based on the difference between the contractual cash flows due and those that the lender would expect to receive,
including from the realisation of any collateral. It is usually expressed as a percentage of the EAD. The LGD is
determined based on valuation of collaterals and other relevant factors.

For PD the Company has relied upon the PD data from industry benchmarks and external rating agencies. For Loss
Given Default (LGD) the Company has relied on internal and external information.

ii) Liquidity Risk

Liquidity risk is the risk that the Company will encounter difficulties in meeting the obligations associated with its financial
liabilities that are settled by delivering cash or other financial assets. The Company's approach to managing liquidity is to
ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and
stressed conditions, without incurring unacceptable losses or risking damage to the Company's reputation.Company has
in place an Asset-Liability Management Committee (ALCO) which functions as the operational unit for managing the
Balance Sheet within the performance and risk parameters laid down by the Board and Risk Committee of the Board.
ALCO reviews Asset Liability strategy and Balance Sheet management in relation to asset and liability profile. ALCO
ensures that the objectives of liquidity management are met by monitoring the gaps in the various time buckets, deciding
on the source and mix of liabilities, setting the maturity profile of the incremental assets and liabilities etc.

Key principles adopted in the Company's approach to managing liquidity risk include:

a) Monitoring the Company's liquidity position on a regular basis, using a combination of contractual and behavioural
modelling of balance sheet and cash flow information.

iii) Market Risk

Market Risk is the risk of financial loss arising on account of changes/fluctuations in market variables such as interest
rates, equity prices etc. Market risk stems from the Company's Loan book and balance sheet management activities, the
impact of changes and correlation between interest rates, credit spreads and volatility in bond or equity prices.

Market risk represents the risk that the fair value or future cash flows of financial instruments will fluctuate due to changes
in market variables such as interest rates, foreign exchange rates and equity prices.

iv) Interest rate risk

Company has exposure to interest rate risk, primarily from its lending business and related borrowings. The following table
demonstrates the sensitivity to a reasonably possible change in interest rates (all other variables being constant) of the
Company's Statement of Profit and Loss.

31 Financial Instruments

i) Accounting classification and fair values

The following table shows the carrying amounts and fair values of financial instruments, including their levels in the fair
value hierarchy. The company has disclosed financial instruments not measured at fair value at carrying values because
their carrying amounts are a reasonable approximation of the fair values.

34. Contingent Liability

There is an outstanding Income Tax demand of Rs.9.90 lakhs regarding assessment year 2008-09 on account of mismatch of
TDS Credit vs TDS Certificates (previous year -Rs.9.90 lakh).

35. Segment information

The Company is an NBFC registered with Reserve Bank of India and is in the business of providing credit. As such there are no
separate reportable segments as per the Accounting Standards (Ind AS-108) -'Operating Segment 'Specified under section
133 of the companies Act 2013. Since the business operations of the Company are concentrated in India, the Company is
considered to operate only in the domestic segment and therefore there is no reportable geographic segment.

39. In certain cases, the Company has advanced loans on which no amount has been received against the principal and interest
accrued thereon. The same is in accordance with the loan agreements entered by the Company which provides for payment of
interest along with principal amount or at the expiry of the said loan agreements. The Company has correctly followed the
relevant provisions of IND-AS as well as RBI regulations, so far as they are applicable to the said loan agreements in respect
of provisioning. The Company is confident of the recovery of the said amounts as per respective terms of the loan agreements
and has obtained declarations and confirmations from the respective parties.

40. The figures for the corresponding previous year have been regrouped/ reclassified wherever necessary to make them comparable.

41. The Financial Statements have been reviewed by the Audit Committee and approved by the Board of Directors at its meeting
held on 28 May 2025.

42. There have been no events after the reporting date that require disclosure in these financial statements.

As per our report of even date

For Kumra Bhatia & Co. On behalf of the Board of Directors

Chartered Accountants For Sainik Finance & Industries Limited

ICAI Firm Registration No. : 002848N

Harish Kumar Bhargava Rudra Sen Sindhu Sarvesh Sindhu

Partner Director Director

Membership No. 090572 DIN-00006999 DIN-06545787

Jagdish Chandra Chandra Datt Piyush Garg

Place : New Delhi Chief Financial Officer Chief Executive Officer Company Secretary

Date : 28 May 2025 PAN-AAJPU3255G PAN-AAPPD9901J PAN-AZAPP6975E