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Aster DM Healthcare Ltd.

BSE: 540975 Sector: Health care
NSE: ASTERDM ISIN Code: INE914M01019
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OPEN 162.05
PREVIOUS CLOSE 162.75
VOLUME 16815
52-Week high 180.50
52-Week low 78.50
P/E 231.71
Mkt Cap.(Rs cr) 8,102
Buy Price 161.80
Buy Qty 164.00
Sell Price 164.30
Sell Qty 100.00
OPEN 162.05
CLOSE 162.75
VOLUME 16815
52-Week high 180.50
52-Week low 78.50
P/E 231.71
Mkt Cap.(Rs cr) 8,102
Buy Price 161.80
Buy Qty 164.00
Sell Price 164.30
Sell Qty 100.00

Aster DM Healthcare Ltd. (ASTERDM) - Auditors Report

Company auditors report

To the Members of Aster DM Healthcare Limited

Report on the Audit of the Standalone Financial Statements

Opinion

We have audited the standalone financial statements of Aster DM Healthcare Limited(“the Company") which comprise the standalone balance sheet as at 31 March 2020and the standalone statement of profit and loss (including other comprehensive income)standalone statement of changes in equity and standalone statement of cash flows for theyear then ended and notes to the standalone financial statements including a summary ofthe significant accounting policies and other explanatory information.

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 (“Act") in the manner so required and give a true andfair view in conformity with the accounting principles generally accepted in India of thestate of affairs of the Company as at 31 March 2020 and profit and other comprehensiveincome changes in equity and its cash flows for the year ended on that date.

Basis for Opinion

We conducted our audit in accordance with the Standards on Auditing (SAs) specifiedunder section 143(10) of the Act. Our responsibilities under those SAs are furtherdescribed in the Auditor's Responsibilities for the Audit of the Standalone FinancialStatements section of our report. We are independent of the Company in accordance withthe Code of Ethics issued by the Institute of Chartered Accountants of India together withthe ethical requirements that are relevant to our audit of the standalone financialstatements under the provisions of the Act and the Rules thereunder and we have fulfilledour other ethical responsibilities in accordance with these requirements and the Code ofEthics. We believe that the audit evidence we have obtained is sufficient and appropriateto provide a basis for our opinion on the Standalone financial statements.

Key Audit Matters

Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the standalone financial statements of the current period.These matters were addressed in the context of our audit of the standalone financialstatements as a whole and in forming our opinion thereon and we do not provide aseparate opinion on these matters.

Description of Key Audit Matter

Key risk Our audit response
Impairment assessment on investments in subsidiaries (Refer to note 6 Investments in subsidiaries) In view of the significance of the matter we applied the following audit procedures in this area among others to obtain sufficient appropriate audit evidence:
As at 31 March 2020 the carrying amount of the Company's investments in subsidiaries aggregated to RS 2150.42 crore representing 60.52% of the total assets of the Company as at that date. (a) We obtained an understanding of the methodology adopted by the management in estimating the VIU and assessed whether such methodology is consistent with those used in the industry;
The Company is required to perform impairment test of its investments whenever there is an indication that the investments may be impaired. (b) We evaluated Management's key assumptions of revenue growth rate profit margin and long-term growth rate by taking into consideration the current and expected future economic conditions of the respective subsidiaries. We also compared the key assumptions against past actual outcomes and reasonableness of estimates considering the Covid-19 pandemic
Accordingly the Company performed an impairment assessment of the cash generating units (“CGU") representing those subsidiaries. This involved estimating the recoverable amounts of the CGU based on its value in use (“VIU") and comparing the recoverable amount to the carrying amount of the investment. (c) We involved our internal valuation specialists where required to assist us in evaluating the assumptions and methodologies used by the Company. In particular this included those relating to discount rates and terminal growth rates.
We identified this as an area of focus as the impairment assessment involves forecasting uncertainties and is a key judgment area. Estimation of the VIU involves estimating the future cash flows that will be derived from the investment and discounting them to present value at an appropriate rate. The estimated VIU is subject to possible variations in the amounts and timing of future cash flows. The future cash flows projections could be affected by future economic conditions in different markets and geographies including possible effects of the COVID-19 pandemic. (d) We performed sensitivity analysis of the key assumptions and assessed the adequacy of disclosures in standalone financial statements.
Ind AS 116 “Leases” In view of the significance of the matter we applied the following audit procedures in this area among others to obtain sufficient appropriate audit evidence:
(Refer to note 37 Leases)
Ind AS 116 introduces a new lease accounting model where lessees are required to recognize a Right-Of-Use (ROU) assets and a lease liabilities arising from a lease on its balance sheet. (a) We evaluated the appropriateness of the selection of accounting policies and practical expedients applied based on the requirements of Ind AS 116 our business understanding and industry practice.
The Company has adopted Ind AS 116 with effect from 1 April 2019 using the modified retrospective approach. (b) We evaluated the design and implementation of key controls and operating effectiveness of the relevant key controls with respect to the determination and quantification of the Ind AS 116 transition impact and impact on the financial statements for the year ended 31 March 2020;
Significant judgements are required in the assumptions and estimates made in order to determine the ROU asset and lease liability. The assumptions and estimates include application of practical expedients selection of accounting policy choices assessment of lease term determination of appropriate incremental borrowing rate among others. (c) We verified the completeness of the lease data by testing the data on a sample basis and reconciling the Company's existing lease commitments to the lease data underpinning the Ind AS 116 computations;
The first-time adoption of Ind AS 116 had a significant impact on the Company's standalone financial statements. A large number of lease arrangements of the Company which were previously classified as operating leases under Ind AS 17 'Leases' and held off balance sheet would need to be recognised within assets and liabilities under Ind AS 116. (d) We obtained the Company's quantification of ROU assets and lease liabilities and performed computation checks. We tested the accuracy of the lease data captured by Management for a sample of leases through inspection of lease contracts and challenged the discount rate used by involving our internal valuation specialists;
Additionally there is a risk that the lease data which underpins the Ind AS 116 calculations is incomplete or inaccurate. (e) We considered the adequacy and appropriateness of the disclosures in the standalone financial statements.
Accordingly we have considered this to be a key audit matter.

Other Information

The Company's Management and Board of Directors are responsible for the otherinformation. The other information comprises of Management Reports such as Board's ReportManagement Discussion and Analysis Corporate Governance Report and BusinessResponsibility Report (but does not include the Standalone Financial Statements and ourAuditors' Report thereon) which we obtained prior to the date of this Auditor's Reportand the remaining section of the Company's Annual Report which are expected to be madeavailable to us after that date.

Our opinion on the standalone financial statements does not cover the other informationand we do not express any form of assurance conclusion thereon.

In connection with our audit of the standalone financial statements our responsibilityis to read the other information and in doing so consider whether the other informationis materially inconsistent with the standalone financial statements or our knowledgeobtained in the audit or otherwise appears to be materially misstated.

If based on the work we have performed on the other information that we obtained priorto the date of this Auditor's Report we conclude that there is a material misstatement ofthis other information we are required to report that fact. We have nothing to report inthis regard.

When we read the other sections of Annual Report (other than those mentioned above) ifwe conclude that there is a material misstatement therein we are required to communicatethe matter to those charged with governance and take necessary actions as applicableunder the applicable laws and regulations.

Management's and Board of Directors' Responsibility for the Standalone FinancialStatements

The Company's Management and Board of Directors are responsible for the matters statedin section 134(5) of the Act with respect to the preparation of these standalone financialstatements that give a true and fair view of the state of affairs profit and othercomprehensive income changes in equity and cash flows of the Company in accordance withthe accounting principles generally accepted in India including the Indian AccountingStandards (Ind AS) specified under section 133 of the Act. This responsibility alsoincludes maintenance of adequate accounting records in accordance with the provisions ofthe Act for safeguarding of the assets of the Company and for preventing and detectingfrauds and other irregularities; selection and application of appropriate accountingpolicies; making judgments and estimates that are reasonable and prudent; and designimplementation and maintenance of adequate internal financial controls that were operatingeffectively for ensuring accuracy and completeness of the accounting records relevant tothe preparation and presentation of the standalone financial statements that give a trueand fair view and are free from material misstatement whether due to fraud or error.

In preparing the standalone financial statements the Management and Board of Directorsare responsible for assessing the Company's ability to continue as a going concerndisclosing as applicable matters related to going concern and using the going concernbasis of accounting unless the Board of Directors either intends to liquidate the Companyor to cease operations or has no realistic alternative but to do so.

The Board of Directors is also responsible for overseeing the Company's financialreporting process.

Auditor's Responsibilities for the Audit of the Standalone Financial Statements

Our objectives are to obtain reasonable assurance about whether the standalonefinancial statements as a whole are free from material misstatement whether due to fraudor error and to issue an auditor's report that includes our opinion. Reasonable assuranceis a high level of assurance but is not a guarantee that an audit conducted in accordancewith SAs will always detect a material misstatement when it exists. Misstatements canarise from fraud or error and are considered material if individually or in theaggregate they could reasonably be expected to influence the economic decisions of userstaken on the basis of these standalone financial statements.

As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the standalonefinancial statements whether due to fraud or error design and perform audit proceduresresponsive to those risks and obtain audit evidence that is sufficient and appropriate toprovide a basis for our opinion. The risk of not detecting a material misstatementresulting from fraud is higher than for one resulting from error as fraud may involvecollusion forgery intentional omissions misrepresentations or the override of internalcontrol.

• 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 expressing our opinion on whether the company hasadequate internal financial controls with reference to standalone financial statements inplace and the operating effectiveness of such controls.

• Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures in the standalone financial statementsmade by the Management and Board of Directors.

• Conclude on the appropriateness of the Management and Board of Directors use ofthe going concern basis of accounting and based on the audit evidence obtained whether amaterial uncertainty exists related to events or conditions that may cast significantdoubt on the Company's ability to continue as a going concern. If we conclude that amaterial uncertainty exists we are required to draw attention in our auditor's report tothe related disclosures in the standalone financial statements or if such disclosures areinadequate to modify our opinion. Our conclusions are based on the audit evidenceobtained up to the date of our auditor's report. However future events or conditions maycause the Company to cease to continue as a going concern.

• Evaluate the overall presentation structure and content of the standalonefinancial statements including the disclosures and whether the standalone financialstatements represent the underlying transactions and events in a manner that achieves fairpresentation.

We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have compliedwith relevant ethical requirements regarding independence and to communicate with themall relationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safeguards.

From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the standalone financial statementsof the current period and are therefore the key audit matters. We describe these mattersin our auditors' report unless law or regulation precludes public disclosure about thematter or 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

1. As required by the Companies (Auditors' Report) Order 2016 (“the Order")issued by the Central Government 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 to the extent applicable.

2. (A) 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 purposes 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 balance sheet the standalone statement of profit and loss (includingother comprehensive income) the standalone statement of changes in equity and thestandalone statement of cash flows dealt with by this Report are in agreement with thebooks of account.

d) In our opinion the aforesaid standalone financial statements comply with the Ind ASspecified under section 133 of the Act.

e) On the basis of the written representations received from the directors as on 31March 2020 taken on record by the Board of Directors none of the directors isdisqualified as on 31 March 2020 from being appointed as a director in terms of Section164(2) of the Act.

f) With respect to the adequacy of the internal financial controls with reference tofinancial statements of the Company and the operating effectiveness of such controlsrefer to our separate Report in “Annexure B".

(B) With respect to the other matters to be included in the Auditors' Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand to the best of our information and according to the explanations given to us:

i. The Company has disclosed the impact of pending litigations as at 31 March 2020 onits financial position in its standalone financial statements - Refer Note 30 to thestandalone financial statements;

ii. The Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses - Refer note 30 to the standalonefinancial statements;

iii. There were no amounts which were required to be transferred to the InvestorEducation and Protection Fund by the Company;

iv. The disclosures in the financial statements regarding holdings as well as dealingsin specified bank notes during the period from 8 November 2016 to 30 December 2016 havenot been made in these financial statements since they do not pertain to the financialyear ended 31 March 2020.

(C) With respect to the matter to be included in the Auditors' Report under section197(16):

In our opinion and according to the information and explanations given to us theremuneration paid by the Company to its directors during the current year is in accordancewith the provisions of Section 197 of the Act. The remuneration paid to any director isnot in excess of the limit laid down under Section 197 of the Act. The Ministry ofCorporate Affairs has not prescribed other details under Section 197(16) which arerequired to be commented upon by us.

B S R & Associates LLP

Chartered Accountants

Firm's Registration No.: 116231W/ W-100024

Rushank Muthreja

Partner

Membership No: 211386

Unique Document Identification Number: 20211386AAAABI5968

Bengaluru

23 June 2020

Annexure - A to the Independent Auditors' Report

The Annexure referred to in our Independent Auditors' Report to the members of Aster DMHealthcare Limited ('the Company') on the standalone financial statements for the yearended 31 March 2020.

We report that:

(i) (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.

(b) The Company has a regular program of physical verification of its fixed assets bywhich all fixed assets are verified in a phased manner over a period of two years. Inaccordance with this program certain fixed assets were verified during the year and nomaterial discrepancies were noticed on such verification. In our opinion this periodicityof physical verification is reasonable having regard to the size of the Company and thenature of its assets.

(c) According to the information and explanations given to us and on the basis of ourexamination of the records of the Company the title deeds of immovable properties areheld in the name of the Company.

(ii) The inventory has been physically verified by the management during the year andno material discrepancies were noticed on such verification. In our opinion the frequencyof such verification is reasonable.

(iii) The Company has granted unsecured loans to five parties covered in the registermaintained under section 189 of the Companies Act 2013 (“the Act")

(a) In our opinion the rate of interest and other terms and conditions on which theloans had been granted to the parties listed in the register maintained under Section 189of the Act were not prima facie prejudicial to the interest of the Company.

(b) According to the information and explanations given to us and on the basis of ourexamination of the records of the Company no amount is due at the year end. AccordinglyparagrapRs 3(iii) (b) and (c) are not applicable.

(iv) In our opinion and according to the information and explanations given to usbased on the legal opinion obtained by the management the Company has complied with theprovisions of sections 185 and 186 of the Act with respect to the loans investments andguarantees made.

(v) According to information and explanations given to us the Company has not acceptedany deposits from the public. Accordingly paragrapRs 3(v) of the Order is not applicableto the Company.

(vi) We have broadly reviewed the books of accounts maintained by the Company pursuantto the Companies (Cost Records and Audit) Rules 2014 as amended prescribed by theCentral Government under section 148 of the Act and are of the opinion that prima faciethe prescribed accounts and records have been made and maintained. However we have notmade a detailed examination of such records.

(vii) (a) According to the information and explanations given to us and on the basis ofour examination of the records of the Company amounts deducted / accrued in the books ofaccount in respect of undisputed statutory dues including provident fund employees' stateinsurance income taxes goods and services tax customs duty cess and other materialstatutory dues have generally been regularly deposited during the year by the Company withthe appropriate authorities. As explained to us the Company did not have any dues onaccount of excise duty sales tax value added tax and service tax.

According to the information and explanations given to us no undisputed amountspayable in respect of provident fund employees' state insurance income tax goods andservices tax customs duty cess and other material statutory dues were in arrears as at31 March 2020 for a period of more than six months from the date they became payable.

(b) According to the information and explanations given to us there are no dues ofprovident fund employees' state insurance goods and services tax service tax customsduty and cess which have not been deposited with the appropriate authorities on account ofany dispute. However according to information and explanations given to us the followingdues of income tax sales tax and value added tax have not been deposited by the Companyon account of disputes:

Name of the statute Nature of dues Amount (in J) Amount paid under protest (in Rs ) Period to which the amount relates Forum where dispute is pending
Income tax Act 1961 Income tax and interest 172186780 25900000 FY 2013-14 Commissioner of Income Tax
28581158 5716232 FY 2014-15 Appeals
1800000 360000 FY 2011-12
Kerala Value Added Tax 2003 Sales tax and interest 230390 57600 FY 2013-14 Deputy Commissioner (Appeals)
147200 36800 FY 2013-14 Ernakulam
637018 - FY 2013-14
149330 149330 FY 2013-14 Assistant Commissioner Appeals (KVAT Appellate Tribunal)
Central Sales Tax Act Central sales tax 217302 217302 FY 2012-13 Deputy Commissioner (Appeals)
469372 65195 FY 2012-13 Ernakulam

(viii) In our opinion and according to the information and explanations given to usthe Company does not have defaults existing as at the balance sheet date in repayment ofborrowings from banks. The Company did not have any borrowings during the year by way ofdebentures loans from financial institutions or loan from the Government.

(ix) In our opinion and according to the information and explanations given to usmoney raised by way of initial public offer in the prior year and the term loans have beenapplied by the Company during the year for the purposes for which they were raised otherthan temporary deployment pending application of proceeds.

(x) According to the information and explanations given to us no material fraud by theCompany or on the Company by its officers or employees has been noticed or reported duringthe course of our audit.

(xi) According to the information and explanations give to us and based on ourexamination of the records of the Company the Company has paid/provided for managerialremuneration in accordance with the requisite approvals mandated by the provisions ofsection 197 read with Schedule V to the Act.

(xii) In our opinion and according to the information and explanations given to us theCompany is not a nidhi company. Thus paragrapRs 3(xii) of the Order is not applicable.

(xiii) According to the information and explanations given to us and based on ourexamination of the records of the Company transactions with the related parties are incompliance with sections 177 and 188 of the Act where applicable and details of suchtransactions have been disclosed in the standalone Ind AS financial statements as requiredby the applicable accounting standards.

(xiv) During the year the Company has not made any preferential allotment or privateplacement of shares or fully or partly convertible debentures. Thus paragrapRs 3(xiv) ofthe Order is not applicable.

(xv) According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not entered into non-cashtransactions with directors or persons connected with him. Thus paragrapRs 3(xv) of theOrder is not applicable.

(xvi) According to the information and explanation given to us and in our opinion theCompany is not required to be registered under Section 45-IA of the Reserve Bank of IndiaAct 1934.

B S R & Associates LLP

Chartered Accountants

Firm's Registration No.: 116231W/ W-100024

Rushank Muthreja

Partner

Membership No: 211386

Unique Document Identification Number: 20211386AAAABI5968

Bengaluru

23 June 2020

Annexure - B to the Independent Auditors' Report

Report on the internal financial controls with reference to the aforesaid standalonefinancial statements under Clause (i) of Sub-section 3 of Section 143 of the CompaniesAct 2013

(Referred to in paragrapRs 2(A)(f) under 'Report on Other Legal and RegulatoryRequirements' section of our report of even date)

Opinion

We have audited the internal financial controls with reference to financial statementsof Aster DM Healthcare Limited (“the Company") as of 31 March 2020 inconjunction with our audit of the standalone financial statements of the Company for theyear ended on that date.

In our opinion the Company has in all material respects adequate internal financialcontrols with reference to financial statements and such internal financial controls wereoperating effectively as at 31 March 2020 based on the internal financial controls withreference to financial statements criteria established by the Company considering theessential components of internal control stated in the Guidance Note on Audit of InternalFinancial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India (the “Guidance Note").

Management's Responsibility for Internal Financial Controls

The Company's management and the Board of Directors are responsible for establishingand maintaining internal financial controls based on the internal financial controls withreference to financial statements criteria established by the Company considering theessential components of internal control stated in the Guidance Note. Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of its business including adherence to company's policies the safeguarding ofits assets the prevention and detection of frauds and errors the accuracy andcompleteness of the accounting records and the timely preparation of reliable financialinformation as required under the Companies Act 2013 (hereinafter referred to as“the Act").

Auditors' Responsibility

Our responsibility is to express an opinion on the Company's internal financialcontrols with reference to financial statements based on our audit. We conducted our auditin accordance with the Guidance Note and the Standards on Auditing prescribed undersection 143(10) of the Act to the extent applicable to an audit of internal financialcontrols with reference to financial statements. Those Standards and the Guidance Noterequire that we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether adequate internal financial controls with reference tofinancial statements were established and maintained and whether such controls operatedeffectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls with reference to financial statements and their operatingeffectiveness. Our audit of internal financial controls with reference to financialstatements included obtaining an understanding of such internal financial controlsassessing 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 judgement including the assessment of the risks ofmaterial misstatement of the standalone financial statements whether due to fraud orerror.

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 withreference to financial statements.

Meaning of Internal Financial controls with Reference to Financial Statements

A company's internal financial controls with reference to financial statements is aprocess designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles. A company's internal financial controlswith reference to financial statements include those policies and procedures that (1)pertain to the maintenance of records that in reasonable detail accurately and fairlyreflect the transactions and dispositions of the assets of the company; (2) providereasonable assurance that transactions are recorded as necessary to permit preparation offinancial statements in accordance with generally accepted accounting principles and thatreceipts and expenditures of the company are being made only in accordance withauthorisations of management and directors of the company; and (3) provide reasonableassurance regarding prevention or timely detection of unauthorised acquisition use ordisposition of the company's assets that could have a material effect on the financialstatements.

Inherent Limitations of Internal Financial controls with Reference to FinancialStatements

Because of the inherent limitations of internal financial controls with reference tofinancial statements including the possibility of collusion or improper managementoverride of controls material misstatements due to error or fraud may occur and not bedetected. Also projections of any evaluation of the internal financial controls withreference to financial statements to future periods are subject to the risk that theinternal financial controls with reference to financial statements may become inadequatebecause of changes in conditions or that the degree of compliance with the policies orprocedures may deteriorate.

B S R & Associates LLP

Chartered Accountants

Firm's Registration No.: 116231W/ W-100024

Rushank Muthreja

Partner

Membership No: 211386

Unique Document Identification Number: 20211386AAAABI5968

Bengaluru

23 June 2020

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