1. We have audited the accompanying Standalone Financial Statements of Arman FinancialServices Limited (the'Company') which comprise the Balance Sheet as at March 31 2020 theStatement of Profit and Loss the Cash Flow Statement for the year then ended and asummary of the significant accounting policies and other explanatory information.
2. In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone financial statements give the information requiredby the Companies Act 2013 (the 'Act') in the manner so required and give a true and fairview in conformity with the accounting principles generally accepted in India of the stateof affairs of the Company as at March 312020 and its profit and its cash flows for theyear ended on that date.
3. We conducted our audit in accordance with the Standards on Auditing specified underSection 143(10) of the Act. Our responsibilities under those standards are furtherdescribed in the Auditor's Responsibilities for the Audit of the Financial Statementssection of our report. We are independent of the Company in accordance with the Code ofEthics issued by the Institute of Chartered Accountants of India ('ICAI') together withthe ethical requirements that are relevant to our audit of the financial statements underthe provisions of the Act and the rules thereunder and we have fulfilled our other ethicalresponsibilities in accordance with these requirements and the Code of Ethics. We believethat the audit evidence we have obtained is sufficient and appropriate to provide a basisfor our opinion.
4. As described in Note 46 to the standalone annual financial results in respect ofaccounts overdue but standard as at 29 February 2020 where moratorium benefit has beengranted the staging of those accounts as at March 31 2020 is based on the days past duestatus as on 29 February 2020 in accordance with Reserve Bank of India COVID-19Regulatory Package.
As described in Note 47 to the Standalone Financial Results the extent to which theCOVID-19 pandemic will impact the company's operations and financial performance isdependent on future developments which are highly uncertain.
Our opinion is not modified in respect of the above matters.
5. Key audit matters are those matters that in our professional judgment were ofmost significance in our audit of the standalone financial statements of the currentperiod. These matters were addressed in the context of our audit of the financialstatements as a whole and in forming our opinion thereon and we do not provide aseparate opinion on these matters.
Key audit matters identified in our audit are in respect of Adoption of IndianAccounting Standards Framework and Provision for Expected Credit Losses on loans asfollows:
|Key Audit Matter ||How our audit addressed the key audit matter |
|Adoption of Indian Accounting Standards Framework || |
|[Refer para 2 for the accounting policy and Note 28 for the related disclosures] || |
|The standalone financial statements for the year ended March 312020 are the first financial statements prepared in accordance with Indian Accounting Standards ('Ind AS') as notified by the Ministry of Corporate Affairs ('MCA') under Section 133 of the Act. ||Our key audit procedures in respect of the first time adoption of Ind-AS framework included but were not limited to the following: |
|This change in the financial reporting framework required an end-to-end evaluation of the potential impact on each item included in the standalone financial statements including presentation thereof additional notes and disclosures. ||(a) obtaining an understanding of the management's processes and controls to identify the potential impact areas in the financial statements due to the adoption of Ind AS; |
|This evaluation required significant audit efforts. Considering the significance of impact of this matter in the current year to the standalone financial statements and the audit efforts required this matter has been identified as a key audit matter for the current year audit. ||(b) reviewing the options chosen and exemptions availed and by the Company and its implementation in accordance with the Ind AS 101; |
| ||(c) assessing the appropriateness of the adjustments made to the opening balance sheet as at 1st April 2018; |
| ||(d) assessing the appropriateness of the adjustments recorded in the standalone financial statements as of and for the year-ended March 31 2019 which were prepared in the previous GAAP; |
| ||(e) evaluating the appropriateness of accounting policies selected by the Company on transition to Ind AS on the basis of our understanding of the |
| ||Company the nature and size of its operations and the requirements of the relevant accounting standards under the Ind AS framework; |
| ||(f) evaluating the adequacy and appropriateness of the standalone financial statements disclosures arising on adoption of the Ind AS to determine if these are in compliance with the requirements of the Ind AS; and |
| ||(g) obtaining written representations from management and those charged with governance on whether the financial statements comply with the Ind AS in all respects. |
|Provision for Expected Credit Losses on loans || |
|[Refer para 3.6 for the accounting policy and Note 3.1 for the related disclosures] || |
|As at March 312020 the Company has financial assets (loans) amounting to 122314.24 Lakhs. As per Ind AS 109- Financial Instruments the Company is required to recognise allowance for expected credit losses on financial assets. ||Our audit procedures in relation to expected credit losses were focused on obtaining sufficient appropriate audit evidence as to whether the expected credit losses recognised in the standalone financial statements were reasonable and the related disclosures in the standalone financial statements made by the management were adequate. These procedures included but not limited to the following: |
|Since this was the first year for the preparation and presentation of the standalone financial statements under Ind-AS framework the management had to also estimate the provision for expected credit losses for the loans outstanding as at 1st April 2018 and as at March 31 2019. Expected credit loss cannot be measured precisely but can only be estimated through use of statistics. ||(a) obtaining an understanding of the model adopted by the Company for calculation of expected credit losses including how management calculated the expected credit losses and the appropriateness data on which the calculation is based; complex |
|The calculation of expected credit losses is and requires exercise of judgment around both the timing of recognition of impairment provisions and estimation of the amount of provisions required in relation to loss events. Further due to COVID Pandemic the calculation of expected credit loss had further challenges as the future outcome is dependent on various events the outcome of which is uncertain. ||b) testing the accuracy of inputs through substantive procedures and assessing the reasonableness of the assumptions used; |
|The management has recognised a provision of 1334.15 Lakhs in the Statement of Profit and Loss for the year ended March 31 2020. ||(c) developing a point estimate by making reference to the expected credit losses recognised by entities that carry comparable financial assets; |
|Considering the significance of the above matter to the standalone financial statements and since the matter required our significant attention to test the calculation of expected credit losses we have identified this as a key audit matter for current year audit. ||(d) testing the arithmetical calculation of the expected credit losses; |
| ||(e) verifying the adequacy of the related disclosures; and |
| ||(f) obtaining written representations from management and those charged with governance whether they believe significant assumptions used in calculation of expected credit losses are reasonable. |
Information other than the Financial Statements and Auditor's Report thereon
6. The Company's Board of Directors is responsible for the other information. The otherinformation comprises the information included in the Annual Report but does not includethe financial statements and our auditor's report thereon. The Annual Report is expectedto be made available to us after the date of this auditor's report.
Our opinion on the financial statements does not cover the other information and wewill not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements our responsibility is to readthe other information identified above when it becomes available and in doing soconsider whether the other information is materially inconsistent with the financialstatements or our knowledge obtained in the audit or otherwise appears to be materiallymisstated.
When we read the Annual Report if we conclude that there is a material misstatementtherein we are required to communicate the matter to those charged with governance and asmay be legally advised..
Responsibilities of Management and Those Charged with Governance for the StandaloneFinancial Statements
7. The Company's Board of Directors is responsible for the matters stated in Section134(5) of the Act with respect to the preparation of these standalone financial statementsthat give a true and fair view of the state of affairs profit and cash flows of the
Company in accordance with the accounting principles generally accepted in Indiaspecified under Section 133 of the Act. This responsibility also includes maintenance ofadequate accounting records in accordance with the provisions of the Act for safeguardingof the assets of the Company and for preventing and detecting frauds and otherirregularities; selection and application of appropriate accounting policies;makingjudgments and estimates that are reasonable and prudent; and design implementationand maintenance of adequate internal financial controls that were operating effectivelyfor ensuring 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.
8. In preparing the financial statements management is responsible for assessing theCompany's ability to continue as a going concern disclosing as applicable mattersrelated to going concern and using the going concern basis of accounting unless managementeither intends to liquidate the Company or to cease operations or has no realisticalternative but to do so.
9. Those Board of Directors are also responsible for overseeing the Company's financialreporting process.
Auditor's Responsibilities for the Audit of the Financial Statements
10. Our objectives are to obtain reasonable assurance about whether the financialstatements as a whole are free from material misstatement whether due to fraud or errorand to issue an auditor's report that includes our opinion. Reasonable assurance is a highlevel of assurance but is not a guarantee that an audit conducted in accordance withStandards on Auditing will always detect a material misstatement when it exists.Misstatements can arise from fraud or error and are considered material if individuallyor in the aggregate they could reasonably be expected to influence the economic decisionsof users taken on the basis of these financial statements.
11. As part of an audit in accordance with Standards on Auditing we exerciseprofessional judgment and maintain professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financialstatements whether due to fraud or error design and perform audit procedures responsiveto those risks and obtain audit evidence that is sufficient and appropriate to provide abasis for our opinion. The risk of not detecting a material misstatement resulting fromfraud is higher than for one resulting from error as fraud may involve collusionforgery intentional omissions misrepresentations or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order todesign audit procedures that are appropriate in the circumstances. Under Section 143(3)(i) of the Act we are also responsible for explaining our opinion on whether the Companyhas adequate internal financial controls system in place and the operating effectivenessof such controls.
Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basisof accounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the Company'sability to continue as a going concern. If we conclude that a material uncertainty existswe are required to draw attention in our auditor's report to the related disclosures inthe financial statements or if such disclosures are inadequate to modify our opinion.Our conclusions are based on the audit evidence obtained up to the date of our auditor'sreport. However future events or conditions may cause the Company to cease to continue asa going concern.
Evaluate the overall presentation structure and content of the financialstatements including the disclosures and whether the financial statements represent theunderlying transactions and events in a manner that achieves fair presentation.
12. We communicate with those charged with governance regarding among other mattersthe planned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit.
13. We also provide those charged with governance with a statement that we havecomplied with relevant ethical requirements regarding independence and to communicatewith them all relationships and other matters that may reasonably be thought to bear onour independence and where applicable related safeguards.
14. From the matters communicated with those charged with governance we determinethose matters that were of most significance in the audit of the financial statements ofthe current period and are therefore the key audit matters. We describe these matters inour auditor's report unless law or regulation precludes public disclosure about the matteror when in extremely rare circumstances we determine that a matter should not becommunicated in our report because the adverse consequences of doing so would reasonablybe expected to outweigh the public interest benefits of such communication.
Report on Other Legal and Regulatory Requirements
15. As required by the Companies (Auditor's Report) Order 2016 (the 'Order') issued bythe Central Government of India in terms of Section 143(11) of the Act we give in the"Annexure A" a statement on the matters specified in paragraphs 3 and 4 of theOrder.
16. Further to our comments in Annexure A as required by Section 143(3) of the Act wereport 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 standalone financial statements dealt with by this report are in agreement withthe books of account;
d) In our opinion the aforesaid standalone financial statements comply accountingprinciples generally accepted in India specified under Section 133 of the Act.
e) On the basis of the written representations received from the directors and taken onrecord by the Board of Directors none of the directors is disqualified as on March 312020 from being appointed as a director in terms of Section 164(2) of the Act;
f) We have also audited the internal financial controls over financial reporting(IFCoFR) of the Company as on March 31 2020 in conjunction with our audit of thestandalone financial statements of the Company for the year ended on that date and ourreport as per Annexure B expressed an unmodified opinion;
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 financialposition in the standalone financial statements; (Refer Note 29 to the financialstatements);
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.
ANNEXURE "A" TO INDEPENDENT AUDITOR'S REPORT
Referred to in paragraph 15 of our report of even date to the Members of ARMANFINANCIAL SERVICES LIMITED for the year ended March 31 2020.
1. In respect of Fixed Assets:
(a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets on the basis of available information.
(b) As per the information and explanations given to us the management at reasonableintervals during the year in accordance with a programme of physical verificationphysically verified the fixed assets and no material discrepancies were noticed on suchverification as compared to the available records.
(c) As explained to us the title deeds of all the immovable properties are held in thename of the Company.
2. In respect of its Inventories:
The Company does not have any Inventories and hence clause 3(ii) of the Companies(Auditor's Report) Order 2016 is not applicable.
3. In respect of Loans and Advances granted during the year:
As per information and explanation given to us the Company has granted secured andunsecured loans to Companies covered in the registered maintained under section 189 of theCompanies Act 2013 and with respect to the same.
a. in our opinion the terms and conditions of grant of such loans are prima facie notprejudicial to the Company's interest.
b. the schedule of repayment of principal and payment of interest has been stipulatedand the repayment / receipts of the principal amount and the interest are regular;
c. there is no overdue amount in respect of loans granted to such companies.
4. Loans Investments and Guarantees:
According to the information and explanation given to us the Company has not givenloans secured or unsecured to Companies Firms Limited Liability Partnerships or othersunder section 189 of the Companies Act 2013 but provided Corporate Guarantees in respectof loans taken by its Wholly Owned Subsidiary Company having the year-end balance ofH25200 Lakhs (amount of Loan O/s is of H13950.03 Lakhs) and the maximum amount involvedduring the year was H28050.00 Lakhs (maximum amount of Loan O/s is of H21356.50 Lakhs).As provided in section 185 and 186 and as specified in The Companies (Meetings of Boardand its Powers) Rules 2014 loans and guarantee given by Holding Company to Wholly OwnedSubsidiary Company is exempt.
5. During the year the Company has not accepted any deposits from public and hence thedirectives issued by the Reserve Bank of India and the provisions of sections 73 to 76 orany other relevant provisions of the Companies Act and the rules framed there under arenot applicable to the Company. Therefore clause (v) of Companies (Auditor's Report) Order2016 is not applicable.
6. According to the information and explanations given to us the Company is notrequired to maintain cost records as required by the central government under sub section(1) of section 148 of the Companies Act 2013. Hence clause (vi) of the (Auditor's Report)Order 2016 is not applicable.
7. In respect of Statutory Dues :
(a) According to the records of the Company the Company is by and large regular indepositing with appropriate authorities undisputed statutory dues including providentfund employee's state insurance income tax goods and service tax sales tax wealthtax service tax duty of customs duty of excise value added tax cess and any otherstatutory dues with the appropriate authorities applicable to it.
According to the information and explanations given to us no undisputed amountspayable in respect statutory dues which remained outstanding as at March 31 2020 for aperiod of more than six months from the date they became payable.
(b) According to the records of the Company following dues of income tax sales taxwealth tax or service tax or duty of customs or duty of excise or value added tax whichhave not been deposited on account of dispute.
8. Based on our audit procedure and according to the information and explanation givento us we are of the opinion that the Company has not defaulted in repayment of dues to afinancial institutions banks or debenture holders.
9. According to the information and explanations given to us the Company had notraised any money by way of public issue during the year. According to the information andexplanations given to us and on an overall examination of the balance sheet of theCompany in our opinion the term loans taken during the year were applied for the purposefor which they were obtained.
10. Based upon the audit procedures performed and information and explanations given bythe management we report that no fraud by the Company or any fraud on the Company by it'sofficer or employees has been noticed or reported during the course of our audit.
11. In our opinion and according to the information and explanations given to us theCompany has paid managerial remuneration which is in accordance with the requisiteapprovals mandated by the provisions of section 197 read with schedule V of The CompaniesAct 2013.
12. In our opinion and according to the information and explanations given to us theprovisions of special statute applicable to chit funds and nidhi / mutual benefit funds /societies are not applicable to the company. Hence clause (xii) of the Company's(Auditor's Report) Order 2016 is not applicable.
13. In our opinion and according to the information and explanations given to us thetransactions entered by the Company with related parties are in compliance with theprovisions of section 177 and 188 of The Companies Act 2013 and details thereof areproperly disclosed in the financial statements.
14. During the year the Company has not issued any preferential allotment or privateplacement of shares or fully or partly convertible debentures.
15. The Company has not entered in to any noncash transactions with the directors orpersons connected with him during the year hence section 192 of the Companies Act 2013and clause (xvi) of Company's (Auditor's Report) Order 2016 is not applicable.
16. In our opinion and according to the information and explanation given to us theCompany is registered under section 45-IA of Reserve Bank of India Act 1934 andregistration certificate for the same has been obtained.
ANNEXURE "B" TO INDEPENDENT AUDITOR'S REPORT
Referred to in paragraph 16 (f) of our Report of even date to the Members of ARMANFINANCIAL SERVICES LIMITED for the year ended March 31 2020.
Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section143 of the Companies Act 2013 ("the Act")
We have audited the internal financial controls over financial reporting of ARMANFINANCIAL SERVICES LIMITED as of March 31 2020 in conjunction with our audit of thestandalone financial statements of the Company for the year ended on that date.
Management's Responsibility for Internal Financial Controls
The Company's management is responsible for establishing and maintaining internalfinancial controls based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the guidance note on audit of internal financial controls over financial reportingissued by the Institute of Chartered Accountants of India. These responsibilities includethe design implementation and maintenance of adequate internal financial controls thatwere operating effectively for ensuring the orderly and efficient conduct of its businessincluding adherence to Company's policies the safeguarding of its assets the preventionand detection of frauds and errors the accuracy and completeness of the accountingrecords and the timely preparation of reliable financial information as required underthe Companies Act 2013.
Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting based on our audit. We conducted our audit in accordancewith the guidance note on audit of internal financial controls over financial reporting(the"Guidance Note") and the standards on auditing issued by ICAI and deemed tobe prescribed under section 143(10) of the Companies Act 2013 to the extent applicableto an audit of internal financial controls with reference to Standalone FinancialStatements. Those standards and the guidance note require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetheradequate internal financial controls over financial reporting was established andmaintained and if such controls operated effectively in all material respects. Our auditinvolves performing procedures to obtain audit evidence about the adequacy of the internalfinancial controls system over financial reporting and their operating effectiveness. Ouraudit of internal financial controls over financial reporting included obtaining anunderstanding of internal financial controls over financial reporting assessing the riskthat a material weakness exists and testing and evaluating the design and operatingeffectiveness of internal control based on the assessed risk. The procedures selecteddepend on the auditor's judgment including the assessment of the risks of materialmisstatement of the financial statements whether due to fraud or error.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's internal financial controls systemover financial reporting.
Meaning of Internal Financial Controls over Financial Reporting
A Company's internal financial control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. A company's internal financial control over financialreporting includes those policies and procedures that: (1) Pertain to the maintenance ofrecords that in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the Company; (2) Provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles and that receipts andexpenditures of the Company are being made only in accordance with authorizations ofmanagement and directors of the Company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorized acquisition use or disposition of theCompany's assets that could have a material effect on the financial statements.
Inherent Limitations of Internal Financial Controls over Financial Reporting
Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.
In our opinion the Company has in all material respects an adequate internalfinancial controls system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at March 31 2020 based on theinternal control over financial reporting criteria established by the Company consideringthe essential components of internal control stated in the guidance note on audit ofinternal financial controls over financial reporting issued by the Institute of CharteredAccountants of India.