To the members of Asian Hotels (north) Limited
Report on the Consolidated Financial Statements
We have audited the accompanying consolidated financial statements of Asian Hotels (North) Limited (the Holding Company) and its subsidiaries (the Holding Company and its subsidiaries together referred to as `the Group') which comprises of the consolidated balance sheet as at 31st March 2019 and the consolidated statement of Profit and Loss (including other comprehensive income) and the consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended and notes to the financial statements including a summary of significant accounting policies and other explanatory information.
In our opinion and to the best of our information and according to the explanations given to us the aforesaid consolidated financial statements give the information required by the Companies Act 2013 (the Act) in the manner so required and give a true and fair view in conformity with the Indian Accounting Standards prescribed under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules 2015 as amended (Ind AS) and other accounting principles generally accepted in India of the consolidated state of affairs of the Group as at 31 March 2019 and its consolidated loss total consolidated comprehensive income its consolidated cash flows and the consolidated changes in equity for the year ended on that date subject to Note No. 3 on Financial Statements of subsidiary company Leading Hotels Limited for non-provision of interest liability amounting to Rs. 75013349/- by the Company relating to Inter Corporate Deposits and other financial commitments. The non-provisioning of interest has resulted in understatement of CWIP to the extent of Rs. 75013349/-.
Basis for opinion
We conducted our audit of the consolidated financial statements in accordance with the Standards on Auditing (SAs) specified under section 143(10) of the Act. Our responsibilities under those Standards are further described in the Auditors' Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India (ICAI) together with the ethical requirements that are relevant to our audit of the financial statements under the provisions of the Act and the rules thereunder and we have fulfilled our other ethical responsibilities in accordance with these requirements and the ICAI's Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion on the consolidated financial statements.
We did not audit the financial statements of 2 subsidiaries located outside India whose financial statements / consolidated financial statements reflect total assets of Rs. 60894.89 Lakhs as at 31st March 2019 and total revenue of Rs. 0.14 Lakhs and for the year ended on that date as considered in the consolidated financial statements. These financial statements / consolidated financial statements have been audited by other auditors whose reports have been furnished to us by the Holding Company's Management and our opinion on the consolidated financial statements in so far as it relates to the amounts and disclosures included in respect of these subsidiaries and our report in terms of sub sections (3) and (11) of Section 143 of the Act in so far as it relates to the aforesaid subsidiaries is based solely on the reports of the other auditors.
Emphasis of matters
We draw attention to the following matters in the Notes to the consolidated financial statements:
Refer Note 34(d) & 44 to the consolidated financial statements which describe the uncertainty related to the outcome of certain disputes and law-suits filed against the companies of the Group and on the subsidiary's desired progress of the project. The impact (if any) of these disputes/law-suits on the consolidated financial statements of the Group could not be ascertained. Further we believe that these events and conditions indicate material uncertainty that casts doubt with respect to the ability of the Subsidiary Company to timely discharge its financial obligations.
Our opinion is not modified in respect of these matters.
Key Audit matters
Key audit matters are those matters that in our professional judgment were of most significance statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole and in forming our opinion thereon and we do not provide a separate opinion on these matters. We have determined the matters described below to be the key audit matters to be communicated in our report.
|Key Audit matter description||Response to Key Audit matter|
|A. Assessment of:||Principal Audit Procedures|
|a) Impairment of carrying value of investments in a subsidiary||Our procedures included amongst others the following:|
|Refer note 5 to the financial statements of the Company.||Understanding and evaluating the design and testing the operating effectiveness of the Company's controls over review of impairment assessment of investments in subsidiary;|
|- The Company has investments (net) of Rs. 56585.12 Lakhs in equity and preference shares of Fineline Hospitality & Consultancy Pte Ltd Mauritius (FHCPL) a subsidiary (investments in subsidiary) as at 31st March 2019. FHCPL has a further step-down subsidiary named Lexon Hotel Ventures Limited Mauritius (Lexon) wherein FHCPL holds 80% shares. Lexon has named further step down subsidiary Leading Hotels Limited (LHL) being ultimate subsidiary of the company wherein the company establishes significant equity control of 79.81%.|
|In respect of impairment assessment of investments in subsidiary (LHL):|
|(i) Testing the mathematical accuracy of the underlying model and checking the impairment assessment prepared by the management;|
|(ii) Comparing the business forecasts with the latest approved management approved budgets;|
|- The total exposure of the Company in respect of above is significant to the standalone financial statements of the Company.||(iii) Considered the work of external independent valuation expert engaged by the Company;|
|(iv) Assessed the independent valuation expert's methods and working;|
|- Considering the current financial position and status of the project of one of the subsidiaries LHL there are indications of potential impairment of the equity investments in subsidiary as set out in above paragraphs.||(v) Examined and assessed the Land Valuation report obtained from the Registered valuer appointed by the management;|
|- The Management has assessed the impairment of its investments in its subsidiary using the business forecasts of LHL applying the Discounted Cash Flow Method of valuation (the model) and noted that at present there is no requirement for making any provision for impairment in respect of these investments.||(vi) Appointed on our own accord another Independent Valuer (Category -1) Merchant Banker for testing appropriateness of the method and model used evaluating reasonableness and challenging key assumptions used such as Discount rates terminal growth rate etc.|
|(vii) Compared the reports issued by the Independent Valuer appointed by us and the valuation report obtained by the Company and analysed the difference in the valuation approach and results.|
|- We considered this as a key audit matter due to significant judgement involved in the reviewing the model prepared by the Independent Valuer's to support the carrying value of above investments and determining significant assumptions of discount rate terminal growth rate etc. adopted in the model.||Based on the above procedures performed we noted that the Management's assessment of impairment of investments based on valuation reports received in subsidiary FHCPL is reasonable.|
|B. Evaluation of uncertain tax matters||Principal Audit procedures|
|The Company has a material uncertain income tax outstanding w.r.t AY 2016-17. The matter is presently disputed and is being contested in appeal. As required the Company has deposited part of the tax demand before appeal and the matter is now pending for final order||We have performed the following audit procedures:|
|1. Obtained details of assessment notice / order.|
|2. Obtained necessary details from the tax consultant regarding on going tax litigations|
|3. Verified whether the Company has taken appropriate steps to defend itself before the appellate authorities and has filed necessary appeal as per the prescribed process within the given timelines.|
|C. Non-payment/belated payment of Interest to Bankers/ lenders||Principal Audit procedures|
|We have performed the following audit procedures:|
|Company has not paid/paid belatedly interest amount to Bankers / Lenders.||1. Obtained details of interest payments to be made by company on term loan and inter-corporate & other deposits.|
|Payment of interest to Bankers / Lenders in time reflects on the health of the company apart from the need for us to report on such issues to the members.||2. Evaluated the existence of internal controls relating to compliance with interest payments with Bankers / Lenders.|
|We have therefore considered payment of interest to Bankers / Lenders' dues as a key audit matter.||3. Verified that whether company has been regular in payment of interest dues.|
Information other than the Consolidated Financial Statements and Auditor's report thereon
The Holding Company's Board of Directors is responsible for the other information. The other information comprises the information included in the Annual Report but does not include the consolidated financial statements and our auditor's report thereon.
Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the consolidated financial statements our responsibility is to read the other information and in doing so consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If based on the work we have performed we conclude that there is a material misstatement of this other information we are required to report that fact. We have nothing to report in this regard.
Responsibilities of management and those Charged with Governance for the Consolidated Financial Statements
The Holding Company's Board of Directors is responsible for the matters stated in section 134(5) of the Act with respect to the preparation of these consolidated financial statements that give a true and fair view of the consolidated financial position consolidated financial performance consolidated changes in equity and consolidated cash flows of the Group in accordance with the accounting principles generally accepted in India including the Indian Accounting Standards (Ind AS) specified under Section 133 of the Act.
This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Group and for preventing and detecting frauds and other irregularities; selection and application of appropriate implementation and maintenance of accounting policies; making judgments and estimates that are reasonable and prudent; and design implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the accuracy and completeness of the accounting records relevant to the preparation and presentation of the consolidated financial statement that give a true and fair view and are free from material misstatement whether due to fraud or error.
In preparing the consolidated financial statements respective company's management is responsible for assessing the Group's ability to continue as a going concern disclosing as applicable matters related to going concern and using the going concern basis of accounting unless respective company's management either intends to liquidate the Group or to cease operations or has no realistic alternative but to do so. Respective company's Board of Directors are also responsible for overseeing the Group's financial reporting process.
Auditors' responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement whether due to fraud or error and 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 conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if individually or in the aggregate they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with SAs we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the consolidated financial and perform audit procedures responsive to those risks and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error as fraud may involve collusion forgery intentional omissions misrepresentations or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Act we are also responsible for expressing our opinion on whether the company has adequate internal financial controls system in place and the operating effectiveness of such controls.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of Holding Company management's use of the going concern basis of accounting and based on the audit evidence obtained whether a material uncertainty exists related to events or conditions that may cast significant Group's ability to continue as a going concern. If we conclude that a material uncertainty exists we are required to draw attention in our auditor's report to the related disclosures in the 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's report. However future events or conditions may cause the Company to cease to continue as a going concern.
Evaluate the overall presentation structure and content of the consolidated financial statements including the disclosures and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Materiality is the magnitude of misstatements in the consolidated financial statements that individually or in aggregate makes it probable that the economic decisions of a reasonably knowledgeable user of the consolidated financial statements may be influenced. We consider quantitative materiality and qualitative factors in (i) planning the scope of our audit work and in evaluating the results of our work; and (ii) to evaluate the effect of any identified misstatements in the consolidated financial statements.
We communicate with those charged with governance regarding among other matters the planned scope and timing of the audit and significant audit findings including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence and where applicable related safeguards.
From the matters communicated with those charged with governance we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when in extremely rare circumstances we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
Report on other legal and regulatory requirements
1. 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 best of our knowledge and belief were necessary for the purposes of our audit;
b. In our opinion proper books of account as required by law have been kept by the Group so far as it appears from our examination of those books;
c. The consolidated balance sheet the consolidated statement of profit and loss the consolidated cash flow statement and consolidated statement of changes in equity dealt with by this Report are in agreement with the books of account maintained by the Group; d. In our opinion the aforesaid consolidated financial statements comply with the Indian Accounting Standards specified under Section 133 of the Act read with Rule 7 of the Companies (Accounts) Rules 2014;
e. On the basis of the written representations received from the directors of the Holding Company as on 31st March 2019 taken on record by the Board of Directors of the Holding Company none of the directors of Holding Company and its subsidiary is disqualified as on 31st March 2019 from being appointed as a director in terms of Section 164 (2) of the Act;
f. With respect to the adequacy of the internal financial controls over financial reporting of the Holding Company and its subsidiaries and the operating effectiveness of such controls refer to our separate report in Annexure A; and
g. With respect to the other matters to be included in the Auditor's Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinion and to the best of our information and according to the explanations given to us:
i. the consolidated financial statements disclose the impact of pending litigations on the consolidated financial position of the Group Refer Note 34 to the consolidated financial statements;
ii. The Group has did not have any long-term contracts including derivatives contracts for which there were any material foreseeable losses;
iii. There has been no delay in transferring amounts required to be transferred to the Investor Education and Protection Fund by the Company.
For Dhirubhai Shah & Co llp
Firm's registration number: 102511W/W100298
Kaushik d Shah
Membership number: 016502
Place: New Delhi
Date: 28th May 2019
Annexure - A to the Auditors' report report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act 2013 (the Act)
We have audited the internal financial controls over financial reporting of Asian Hotels (North) Limited (the Company) as of 31st March 2019 in conjunction with our audit of the consolidated financial statements of the Group for the year ended on that date.
Management's responsibility for Internal Financial Controls
The respective company's management is responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Group considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by the Institute of Chartered Accountants of India (`ICAI'). These responsibilities include the design implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business including adherence to Group's policies the safeguarding of its assets the prevention and detection of frauds and errors the accuracy and completeness of the accounting records and the timely preparation of reliable financial information as required under the CompaniesAct 2013.
Our responsibility is to express an opinion on the Group's internal financial controls over financial reporting based on our audit. We conducted our audit in accordance with 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 to be prescribed under section 143(10) of the Companies Act 2013 to the extent applicable to an audit of internal financial controls both applicable to an audit of Internal Financial Controls and both issued by the Institute of Chartered Accountants of India. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects. Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting understanding of internal financial controls over financial reporting assessing the risk that a material weakness exists and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditor's judgment including the assessment of the risks of material misstatement of the consolidated financial statements whether due to fraud or error.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Group's internal financial controls system over financial reporting.
Meaning of Internal Financial Controls over Financial reporting
Group's internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal financial control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition use or disposition of the company'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 financial reporting including the possibility of collusion or improper management override of controls material misstatements due to error or fraud may occur and not be detected. Also projections of any evaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion the Holding Company and its subsidiaries has in all material respects an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at 31 st March 2019 based on the internal control over financial reporting criteria established by the Group considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India.
For Dhirubhai Shah & Co llp
Firm's registration number: 102511W/W100298
Kaushik d Shah
Membership number: 016502
Place: New Delhi
Date: 28th May 2019