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Arman Financial Services Ltd.

BSE: 531179 Sector: Financials
NSE: ARMANFIN ISIN Code: INE109C01017
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OPEN 567.20
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VOLUME 4700
52-Week high 1119.95
52-Week low 287.30
P/E 29.08
Mkt Cap.(Rs cr) 473
Buy Price 552.00
Buy Qty 300.00
Sell Price 565.00
Sell Qty 31.00
OPEN 567.20
CLOSE 562.45
VOLUME 4700
52-Week high 1119.95
52-Week low 287.30
P/E 29.08
Mkt Cap.(Rs cr) 473
Buy Price 552.00
Buy Qty 300.00
Sell Price 565.00
Sell Qty 31.00

Arman Financial Services Ltd. (ARMANFIN) - Auditors Report

Company auditors report

Standalone Accounts

INDEPENDENT AUDITOR'S REPORT

To

The Members of

ARMAN FINANCIAL SERVICES LIMITED

Ahmedabad

Report on the Audit of the Standalone Financial Statements

Opinion

1. We have audited the accompanying standalone financial statements of Arman FinancialServices Limited (the 'Company') which comprise the Balance Sheet as at 31 March 2019 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 (financial position) of the Company as at 31 March 2019 and its profit(financial performance) and its cash flows for the year ended on that date.

Basis for Opinion

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.

Key Audit Matters

4. 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 matter identified in our audit is on Provision on Non-Performing Assets asfollows:

Key audit matter Audit Approach
Provisioning on Non-Performing Assets
Identification of and provisioning for NonPerforming Assets (loans) in accordance with the RBI guidelines (Refer para (p) of significant accounting policy read with Note 4 11 & 21 to the financial statements). Our audit approach included testing the design operating effectiveness of internal controls and substantive audit procedures in respect of income recognition asset classification and recoverability of loan amount including underline security and provisioning pertaining to advances. In particular:
The Company has net advances amounting to 189.21 Crores as at 31 March 2019. Identification of and provisioning for non-performing assets (loans) in accordance with relevant prudential norms issued by the Reserve Bank of India (RBI) in respect of income recognition asset classification and provisioning pertaining to advances (herein after referred as "Relevant RBI guidelines") is a key audit matter due to the current processes at the Company which requires manual interventions management estimates and judgment regarding recoverability of loans and underline security. • we have evaluated and understood the Company's internal control system in adhering to the Relevant RBI guidelines regarding income recognition asset classification and provisioning pertaining to advances;
• we have understood key IT systems / applications used and tested operational effectiveness of relevant controls including involvement of manual process and manual controls in relation to income recognition asset classification and provisioning pertaining to advances ;
• we test checked advances to examine the validity of the recorded amounts loan documentation examined the statement of accounts indicators of impairment impairment provision for non-performing assets and compliance with income recognition asset classification and provisioning pertaining to advances; and
• evaluated the past trends of management judgment governance process and review controls over impairment provision calculations and discussed the provisions made with senior management including the Chief Executive Officer Chief Financial Officer.

Information other than the Financial Statements and Auditor's Report thereon

5. 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 Standalone Financial Statements

6. 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 (financial position) profit orloss (financial performance) and cash flows of the Company in accordance with theaccounting principles generally accepted in India specified under Section 133 of the Act.This responsibility also includes maintenance of adequate accounting records in accordancewith the provisions of the Act for safeguarding of the assets of the Company and forpreventing and detecting frauds and other irregularities; selection and application ofappropriate accounting policies; making judgments and estimates that are reasonable andprudent; and design implementation and maintenance of adequate internal financialcontrols that were operating effectively for ensuring the accuracy and completeness ofthe accounting records relevant to the preparation and presentation of the financialstatements that give a true and fair view and are free from material misstatement whetherdue to fraud or error.

7. 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.

8. Those Board of Directors are also responsible for overseeing the Company's financialreporting process.

Auditor's Responsibilities for the Audit of the Financial

Statements

9. 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 high level of assurance but is not a guarantee that an audit conductedin accordance with Standards on Auditing will always detect a material misstatement whenit exists. Misstatements can arise from fraud or error and are considered material ifindividually or in the aggregate they could reasonably be expected to influence theeconomic decisions of users taken on the basis of these financial statements.

10. 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.

11. 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.

12. 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.

13. 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

14. 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 theAnnexure "A" a statement on the matters specified in paragraphs 3 and 4 of theOrder.

15. 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 31 March2019 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 31 March 2019 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 23 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 has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company.

For Samir M Shah & Associates
Chartered Accountants
[Firm Regd. No. 122377W]
(Samir M Shah)
Place : Ahmedabad Partner
Date : 28.05.2019 [M. No. 111052]

ANNEXURE "A" TO INDEPENDENT AUDITOR'S REPORT

Referred to in paragraph 14 of our report of even date to the Members of ARMANFINANCIAL SERVICES LIMITED

for the year ended 31st March 2019.

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 not granted any loanssecured or unsecured to Companies Firms Limited Liability Partnerships or others undersection 189 of the Companies Act 2013 and hence clause 3(iii) of the Companies (Auditor'sReport) Order 2016 is not applicable.

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 ofC17050.00 Lakhs (amount of Loan O/s is of C10356.00 Lakhs) and the maximum amount involvedduring the year was C17050.00 Lakhs (maximum amount of Loan O/s is of C 15626.18 Lakhs).As provided in section 185 and 186 and

as specified in The Companies (Meetings of Board and its Powers) Rules 2014 loans andguarantee given by Holding Company to Wholly Owned Subsidiary 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 sales tax wealth tax service tax duty ofcustoms duty of excise value added tax cess and any other statutory dues with theappropriate 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 31st March 2019 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.

Name of Statute Nature of Dues Amount (Iln Lakhs) Period to Which amount Relates (A.Y.) Forum Where

Remarks if any

Dispute is Pending

Income Tax Act 1961 Income Tax 13.31 2009-10 CIT (Appeals) --
Income Tax Act 1961 Income Tax 5.70 2011-12 CIT(Appeals) --
Income Tax Act 1961 Income Tax 594.23 2012-13 CIT(Appeals) --
Income Tax Act 1961 Income Tax 5.06 2013-14 CIT(Appeals) --
Income Tax Act 1961 Income Tax 3.00 2014-15 ITAT --

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 the Company has paid managerial remuneration which is inaccordance with the requisite approvals mandated by the provisions of section 197 readwith schedule V of The Companies Act 2013.

12. In our opinion and according to the information and

explanations given to us the provisions of special statute

applicable to chit funds and nidhi / mutual benefit funds / societies are notapplicable to the company. Hence clause (xii) of the Company's (Auditor's Report) Order2016 is not applicable.

13. In our opinion and according to the information and

explanations given to us the transactions entered by the

Company with related parties are in compliance with the provisions of section 177 and188 of The Companies Act 2013 and details thereof are properly disclosed in the financialstatements.

14. The Company has made private placement of convertible debentures during the yearunder review and provisions of sections of 42 of the Companies Act 2013 are complied withand also fund is utilized for the purpose for which it has been raised.

15. The Company has not entered in to any non-cash 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 45-1A of Reserve Bank of India Act 1934 andregistration certificate for the same has been obtained.

For Samir M Shah & Associates
Chartered Accountants
[Firm Regd. No. 122377W]
Place : Ahmedabad (Samir M Shah)
Date : 28.05.2019 Partner
[M. No. 111052]

ANNEXURE "B" TO INDEPENDENT AUDITOR'S REPORT

Referred to in paragraph 15(f) of our Report of even date to the Members of ARMANFINANCIAL SERVICES

LIMITED for the year ended 31st March 2019.

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 31st March 2019 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.

Auditor's Responsibility

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 deemedto be prescribed under section 143(10) of the Companies Act 2013 to the extentapplicable to an audit of internal financial controls both applicable to an audit ofinternal financial controls and both issued by the Institute of Chartered Accountants ofIndia. Those standards and the guidance note require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whether

adequate internal financial controls over financial reporting was established andmaintained and if such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls over financial reporting includedobtaining an understanding of internal financial controls over financial reportingassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditor's judgment including the assessment of the risks ofmaterial misstatement 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.

Opinion

In our opinion the Company has in all material respects an adequate internalfinancial controls system over financial

reporting and such internal financial controls over financial reporting were operatingeffectively as at 31st March 2019 based on the internal control over financial reportingcriteria established by the Company considering the essential components of internalcontrol stated in the guidance note on audit of internal financial controls over financialreporting issued by the Institute of Chartered Accountants of India.

For Samir M Shah & Associates
Chartered Accountants
[Firm Regd. No. 122377W]
Place : Ahmedabad (Samir M Shah)
Date : 28.05.2019 Partner
[M. No. 111052]