To the Members of Bharat Financial Inclusion Limited (formerly "SKS MicrofinanceLimited")
Report on the Financial Statements
We have audited the accompanying financial statements of Bharat Financial InclusionLimited (formerly known as SKS Microfinance Limited) ("the Company") whichcomprise the Balance Sheet as at March 31 2017 the Statement of Profit and Loss and CashFlow Statement for the year then ended and a summary of significant accounting policiesand other explanatory information.
Management's Responsibility for the Financial Statements
The Company's Board of Directors is responsible for the matters stated in Section134(5) of the Companies Act 2013 ("the Act") with respect to the preparation ofthese financial statements that give a true and fair view of the financial positionfinancial performance and cash flows of in accordance with accounting principles generallyaccepted in India including the Accounting Standards specified under section 133 of theAct read with Rule 7 of the Companies (Accounts) Rules 2014 and the Companies(Accounting Standards) Amendment Rules 2016. This responsibility also includesmaintenance of adequate accounting records in accordance with the provisions of the Actfor safeguarding of the assets of the Company and for preventing and detecting frauds andother irregularities; selection and application of appropriate accounting policies; makingjudgments and estimates that are reasonable and prudent; and the design implementationand maintenance of adequate internal financial control that were operating effectively forensuring the accuracy and completeness of the accounting records relevant to thepreparation and presentation of the financial statements that give a true and fair viewand are free from material misstatement whether due to fraud or error.
Our responsibility is to express an opinion on these financial statements based on ouraudit. We have taken into account the provisions of the Act the accounting and auditingstandards and matters which are required to be included in the audit report under theprovisions of the Act and the Rules made thereunder. We conducted our audit in accordancewith the Standards on Auditing issued by the Institute of Chartered Accountants of Indiaas specified under Section 143(10) of the Act. Those Standards require that we comply withethical requirements and plan and perform the audit to obtain reasonable assurance aboutwhether the financial statements are free from material misstatement
An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures in the financial statements. The procedures selected depend on the auditor'sjudgment including the assessment of the risks of material misstatement of the financialstatements whether due to fraud or error. In making those risk assessments the auditorconsiders internal financial control relevant to the Company's preparation of thefinancial statements that give a true and fair view in order to design audit proceduresthat are appropriate in the circumstances. An audit also includes evaluating theappropriateness of accounting policies used and the reasonableness of the accountingestimates made by the Company's Directors as well as evaluating the overall presentationof the financial We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our audit opinion on the financial statements.
In our opinion and to the best of our information and according to the explanationsgiven to us the financial statements give the information required by the Act in themanner so required and give a true and fair view in conformity with the accountingprinciples generally accepted in India of the state of affairs of the Company as at March31 2017 its profit and its cash flows for the year ended on that date.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditor's report) Order 2016 ("the Order")issued by the Central Government of India in terms of sub-section (11) of section 143 ofthe Act we give in the Annexure 1 a statement on the matters specified in paragraphs 3and 4 of the Order.
2. As required by section 143 (3) of the Act we report that:
(a) We have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purpose of our audit;
(b) In our opinion proper books of account as required by law have been kept by theCompany so far as it appears from our examination of those books;
(c) The Balance Sheet Statement of Profit and Loss and Cash Flow Statement dealt withby this Report are in agreement with the books of account;
(d) In our opinion the aforesaid financial statements comply with the AccountingStandards specified under section 133 of the Act read with Rule 7 of the Companies(Accounts) Rules 2014 and the Companies (Accounting Standards) Amendment Rules 2016;
(e) On the basis of written representations received from the directors as on March 312017 and taken on record by the Board of Directors none of the directors is disqualifiedas on March 31 2017 from being appointed as a director in terms of section 164 (2) ofthe Act;
(f) With respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate Report in Annexure 2 to this report;
(g) With respect to the other matters to be included in the Auditor's Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 as amended inour opinion and to the best of our information and according to the explanations given tous:
i. The Company has disclosed the impact of pending litigations on its its financialstatements Refer Note 38 to the financial statements.
ii. The Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses.
iii. There were no amounts which were required to be transferred to the InvestorEducation and Protection Fund by the Company.
iv. The Company has provided disclosures in Note 40 (a) in the financial statements asto the holding of Specified Bank Notes on November 8 2016 and December 30 2016 as wellas dealings in Specified Bank Notes during the period from November 9 2016 to December30 2016. Based on our audit procedures and relying on the management representationregarding the holding and nature of cash transactions including those in Specified BankNotes we report that these disclosures are in accordance with the books of accountsmaintained by the Company and as produced to us by the management. However as stated inNote 40 (a) in the financial statements and as represented to us by the Management theCompany has received amount aggregating Rs 95.60 crores from transactions which are notpermitted.
For S.R. BATLIBOI & CO. LLP
ICAI Firm's Registration Number: 301003E/E300005
per Shrawan Jalan
Membership Number: 102102
May 1 2017
Annexure referred to in paragraph 1 under the heading "Report on other legal andregulatory requirements" of our report of even date
Re: Bharat Financial Inclusion Limited (formerly "SKS Microfinance Limited")
(i) (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.
(b) Fixed assets have been physically verified by the management during the year and nomaterial discrepancies were identified on such verification.
(c) According to the information and explanations given by the management there are noimmovable properties included in fixed assets of the Company and accordingly therequirements under clause 3(i)(c) of the Order are not applicable to the Company.
(ii) The Company's business does not involve inventories and accordingly therequirements under clause 3(ii) of the Order are not applicable to the Company and hencenot commented upon.
(iii) According to the information and explanations given to us the Company has notgranted any loans secured or unsecured to companies firms Limited LiabilityPartnerships or other parties covered in the register maintained under section 189 of theAct. Accordingly the provisions of clause 3 (iii)(a) (b) and (c) of the Order are notapplicable to the Company and hence not commented upon.
(iv) In our opinion and according to the information and explanations given to usthere are no loans investments guarantees and securities given in respect of whichprovisions of section 185 and 186 of the Act are applicable and hence not commented upon.
(v) The Company has not accepted any deposits within the meaning of Sections 73 to 76of the Act and the Companies (Acceptance of Deposits) Rules 2014 (as amended).Accordingly the provisions of clause 3(v) of the Order are not applicable.
(vi) To the best of our knowledge and as explained the Central Government has notspecified the maintenance of cost records under section 148(1) of the Act for theproducts/services of the Company
(vii) (a) The Company is regular in depositing with appropriate authorities undisputedstatutory dues including provident fund employees' state insurance income-taxsales-tax service tax customs duty excise duty value added tax cess and othermaterial statutory dues applicable to it.
According to the information and explanations given to us no undisputed amountspayable in respect of provident fund employees' state insurance income-tax service taxsales-tax duty of custom duty of excise value added tax cess and other materialstatutory dues were outstanding at the year end for a period of more than six monthsfrom the date they became payable.
(b) According to the records of the Company the dues of income-tax sales-tax servicetax duty of custom duty of excise value added tax and cess on account of any disputeare as follows:
|Name of the Statute ||Nature of dues ||Amount under dispute ( Rs ) ||Amount paid ( Rs )* ||Period to which its relates ||Forum where dispute is pending |
|Income Tax Act 1961 ||Income Tax ||16918466 ||- ||Assessment Year 2010-11 ||The Deputy Commissioner of Income Tax |
|Income Tax Act 1961 ||Income Tax ||8117274 ||8117274 ||Assessment Year 2012-13 ||Income Tax Appellate Tribunal |
|Chapter V of the Finance Act 1994** # ||Service Tax ||777874850 ||44574205 ||Financial years 2006-07 to 2014-15 ||Customs Excise and Service Tax Appellate Tribunal |
* Excluding interest and penalty as applicable
**The Company has paid this amount under protest
# Includes an order received from service tax authorities against which the Companyintends to file an appeal
(viii) In our opinion and according to the information and explanations given by themanagement the Company has not defaulted in repayment of loans or borrowings to afinancial institution or bank or dues to debenture holders.
(ix) According to the information and explanations given by the management the Companyhas not raised any money by way of initial public offer or further public offer hence notcommented upon. Further monies raised by the Company by way of term loans were appliedfor the purpose for which those were raised though idle/surplus funds which were notrequired for immediate utilization were gainfully invested in liquid assets payable ondemand.
(x) Based upon the audit procedures performed for the purpose of reporting the true andfair view of the financial statements and according to the information and explanationsgiven by the management we report that no material fraud by the Company or on the Companyby the officers and employees of the Company has been noticed or reported during the year.
(xi) According to the information and explanations given by the management themanagerial remuneration has been paid / provided in accordance with the requisiteapprovals mandated by the provisions of section 197 read with Schedule V to the Act.
(xii) In our opinion the Company is not a nidhi company. Therefore the provisions ofclause 3(xii) of the Order are not applicable to the Company and hence not commented upon.
(xiii) According to the information and explanations given by the managementtransactions with the related parties are in compliance with section 177 and 188 of theAct where applicable and the details have been disclosed in the notes to the financialstatements as required by the applicable accounting standards.
(xiv) According to the information and explanations given to us and on an overallexamination of the balance sheet the Company has complied with provisions of section 42of the Companies Act 2013 in respect of the private placement of shares during the year.According to the information and explanations given by the management we report that theamounts raised have been used for the purposes for which the funds were raised.
(xv) According to the information and explanations given by the management the Companyhas not entered into any non-cash transactions with directors or persons connected withhim as referred to in section 192 of the Act.
(xvi) According to the information and explanations given to us we report that theCompany has registered as required under section 45-IA of the Reserve Bank of India Act1934.
For S.R. BATLIBOI & CO. LLP
ICAI Firm's Registration Number: 301003E/E30000
per Shrawan Jalan
Membership Number: 102102
May 1 2017