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AU Small Finance Bank Ltd.

BSE: 540611 Sector: Financials
NSE: AUBANK ISIN Code: INE949L01017
BSE 00:00 | 16 Aug 697.45 14.30
(2.09%)
OPEN

679.05

HIGH

705.00

LOW

675.90

NSE 00:00 | 16 Aug 697.70 15.20
(2.23%)
OPEN

678.90

HIGH

705.65

LOW

675.00

OPEN 679.05
PREVIOUS CLOSE 683.15
VOLUME 31220
52-Week high 746.95
52-Week low 523.00
P/E 65.86
Mkt Cap.(Rs cr) 20,228
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 679.05
CLOSE 683.15
VOLUME 31220
52-Week high 746.95
52-Week low 523.00
P/E 65.86
Mkt Cap.(Rs cr) 20,228
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

AU Small Finance Bank Ltd. (AUBANK) - Auditors Report

Company auditors report

To

The Members of AU Small Finance Bank Limited (formerly known as Au Financiers (India)Limited)

Report on the Financial Statements

We have audited the accompanying standalone financial statements of AU Small FinanceBank Limited (formerly known as Au Financiers (India) Limited) (the "Company")which comprise the Balance Sheet as at March 31 2017 the Statement of Profit and Lossand Cash Flow Statement for the year then ended and a summary of significant accountingpolicies and other explanatory information.

Management's Responsibility for the Financial Statements

The Company's Board of Directors is responsible for the matters stated in Section134(5) of the Companies Act 2013 (the "Act") with respect to the preparation ofthese standalone financial statements that give a true and fair view of the financialposition financial performance and cash flows of the Company in accordance withaccounting principles generally accepted in India including the Accounting Standardsspecified under section 133 of the Act read with Rule 7 of the Companies (Accounts)Rules 2014 and the Companies (Accounting Standards) Amendment Rules 2016. Thisresponsibility also includes maintenance of adequate accounting records in accordance withthe provisions of the Act for safeguarding of the assets of the Company and for preventingand detecting frauds and other irregularities; selection and application of appropriateaccounting policies; making judgments and estimates that are reasonable and prudent; andthe design implementation and maintenance of adequate internal financial control thatwere operating effectively for ensuring the accuracy and completeness of the accountingrecords relevant to the preparation and presentation of the financial statements thatgive a true and fair view and are free from material misstatement whether due to fraud orerror.

Auditor's Responsibility

Our responsibility is to express an opinion on these standalone financial statementsbased on our audit. We have taken into account the provisions of the Act the accountingand auditing standards and matters which are required to be included in the audit reportunder the provisions of the Act and the Rules made thereunder. We conducted our audit inaccordance with the Standards on Auditing issued by the Institute of CharteredAccountants of India as specified under Section 143(10) of the Act. Those Standardsrequire that we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether the financial statements are free from materialmisstatement.

An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures in the financial statements. The procedures selected depend on the auditor'sjudgment including the assessment of the risks of material misstatement of the financialstatements whether due to fraud or error. In making those risk assessments the auditorconsiders internal financial control relevant to the Company's preparation of thefinancial statements that give a true and fair view in order to design audit proceduresthat are appropriate in the circumstances. An audit also includes evaluating theappropriateness of accounting policies used and the reasonableness of the accountingestimates made by the Company's Directors as well as evaluating the overall presentationof the financial statements. We believe that the audit evidence we have obtained issufficient and appropriate to provide a basis for our audit opinion on the standalonefinancial statements.

Opinion

In our opinion and to the best of our information and according to the explanationsgiven to us the standalone financial statements give the information required by the Actin the manner so required and give a true and fair view in conformity with the accountingprinciples generally accepted in India of the state of affairs of the Company as at March31 2017 its profit and its cash flows for the year ended on that date.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor's Report) Order 2016 (the "Order")issued by the Central Government of India in terms of sub-section (11) of section 143 ofthe Act we give in the Annexure 1 a statement on the matters specified in paragraphs 3and 4 of the Order.

2. As required by section 143 (3) of the Act we report

that:

(a) We have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purpose of our audit;

(b) In our opinion proper books of account as required by law have been kept by theCompany so far as it appears from our examination of those books;

(c) The Balance Sheet Statement of Profit and Loss and Cash Flow Statement dealt withby this Report are in agreement with the books of account;

(d) In our opinion the aforesaid standalone financial statements comply with theAccounting Standards specified under section 133 of the Act read with Rule 7 of theCompanies (Accounts) Rules 2014 and the Companies (Accounting Standards) Amendment Rules2016;

(e) On the basis of written representations received from the directors as on March 312017 and taken on record by the Board of Directors none of the directors is disqualifiedas on March 31 2017 from being appointed as a director in terms of section 164 (2) ofthe Act;

(f) With respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate Report in Annexure 2 to this report;

(g) With respect to the other matters to be included in the Auditor's Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 as amended inour opinion and to the best of our information and according to the explanations given tous:

i. The Company has disclosed the impact of pending litigations on its financialposition

in its financial statements - Refer Note 38 to the standalone financial statements.

ii. The Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses.

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

iv. The Company has provided disclosures in Note 35 to these financial statements as tothe holding of Specified Bank Notes (SBNs) on November 8 2016 and December 30 2016 aswell as dealings in Specified Bank Notes during the period from November 9 2016 toDecember 30 2016. Based on audit procedures and relying on management representationsexcept for the segregation between SBNs and other denominations as more fully described inNote 35 (a) to these financial statements on which we are unable to comment in theabsence of sufficient appropriate audit evidence we report that the amounts disclosed inthe said note are in accordance with the books of account maintained by the Company andproduced before us for verification. Further as stated in Note 35 (e) to the financialstatements the borrowers of the Company have directly deposited cash in the Company'sbank accounts and as represented to us the denomination wise details of all suchdeposits are not available with the Company and accordingly in the absence of sufficientappropriate audit evidence in this regard we are unable to comment on the matter.

For S. R. BATLIBOI & ASSOCIATES LLP

ICAI Firm registration number: 101049W/E300004 Chartered Accountants

per Amit Kabra

Partner

Membership No. 094533

Jaipur May 13 2017

Annexure

Annexure 1 referred to in paragraph 1 under the heading "Report on other legal andregulatory requirements" of our report of even date

Re: AU Small Finance Bank Limited

(i) (a) The Company has maintained proper records

showing full particulars including quantitative

details and situation of fixed assets.

(b) All fixed assets have not been physically verified by the management during theyear but there is a regular programme of verification which in our opinion is reasonablehaving regard to the size of the Company and the nature of its assets. No materialdiscrepancies were noticed on such verification.

(c) According to the information and explanations given by the management the titledeeds of immovable properties included in property plant and equipment are held in thename of the Company.

(ii) The Company's business does not involve inventories and accordingly therequirements under clause 3(ii) of the Order are not applicable to the Company and hencenot commented upon.

(iii) According to the information and explanations given to us the Company has notgranted any loans secured or unsecured to companies firms limited liabilitypartnerships or other parties covered in the register maintained under section 189 of theAct. Accordingly the provisions of clause 3(iii) (a) (b) and

(c) of the Order are not applicable to the Company and hence not commented upon.

(iv) In our opinion and according to the information and explanations given to usthere are no loans investments guarantees and securities granted in respect of whichprovisions of section 185 and 186 of the Act are applicable and hence not commented upon.

(v) The Company has not accepted any deposits within the meaning of Sections 73 to 76of the Act and the Companies (Acceptance of Deposits) Rules 2014 (as amended).Accordingly the provisions of clause 3(v) of the Order are not applicable.

(vi) To the best of our knowledge and as explained the Central Government has notspecified the maintenance of cost records under section 148(1) of the Act for theservices of the Company.

(vii) (a) Undisputed statutory dues including provident

fund employees' state insurance income-tax sales-tax service tax duty of customsduty of excise value added tax cess and other statutory dues have generally beenregularly deposited with the appropriate authorities though there have been delays in afew cases.

According to the information and explanations given to us no undisputed amountspayable in respect of provident fund employees' state insurance income-tax service taxsales-tax duty of custom duty of excise value added tax cess and other statutory dueswere outstanding at the year end for a period of more than six

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(b) According to the records of the Company the dues outstanding of income-taxsales-tax service tax duty of custom duty of excise value added tax and cess onaccount of any dispute are as follows:

Name of the Statute Nature of dues Amount unde dispute (?) r Amount paid (?) Period to which its relates Forum where dispute is pending
Rajasthan Value Added Tax Act 2003 Value Added Tax 1389000# -# Financial years 200809 to 2011-12 Rajasthan Tax Board Ajmer
Chapter V of the Finance Act 1994 Service Tax 204754318* 9072158 ** April 2008 - March 2015 Central Excise and Service Tax Appellate Tribunal
Income Tax Act 1961 Income Tax 47257170 5194780 @ Financial years 201213 and 2013-14 Income Tax Appellate Tribunal (FY 12-13); CIT-(A) (FY 13-14)

(viii) In our opinion and according to the information and explanations given by themanagement the Company has not defaulted in repayment of loans or borrowings to afinancial institution or bank or dues to debenture holders.

(ix) According to the information and explanations given by the management the Companyhas not raised any money by way of initial public offer or further public offer.

Further monies raised by the Company by way of term loans were applied for the purposefor which those were raised though idle/surplus funds which were not required forimmediate utilization were gainfully invested in liquid assets payable on demand.

(x) We have been informed that during the year there was an instance reported wherebyamounts aggregating ' 8606679 were collected from customers against issue of counterfeitreceipts and the cash was misappropriated by the employees over a period of time. Asinformed the Company has terminated the services of the employees involved and hasinitiated legal action against them. The outstanding balance in such loan accounts net ofrecovery has been fully provided.

(xi) According to the information and explanations given by the management themanagerial remuneration has been paid and provided in accordance with the requisiteapprovals mandated by the provisions of section 197 read with Schedule V to the Act.

(xii) In our opinion the Company is not a nidhi company. Therefore the provisions ofclause

3(xii) of the Order are not applicable to the Company and hence not commented upon.

(xiii) According to the information and explanations given by the managementtransactions with the related parties are in compliance with section 177 and 188 of theAct where applicable and the details have been disclosed in the notes to the financialstatements as required by the applicable accounting standards.

(xiv) According to the information and explanations given to us and on an overallexamination of the balance sheet the Company has complied with provisions of section 42of the Act in respect of the preferential allotment or private placement of shares duringthe year. According to the information and explanations given by the management we reportthat the amounts raised have been used for the purposes for which the funds were raised.

(xv) According to the information and explanations given by the management the Companyhas not entered into any non-cash transactions with directors or persons connected withhim as

referred to in section 192 of the Act.

(xvi) According to the information and explanations given to us we report that theCompany has registered as required under section 45-IA of the

Reserve Bank of India Act 1934.

For S. R. BATLIBOI & ASSOCIATES LLP

ICAI Firm registration number: 101049W/E300004 Chartered Accountants

per Amit Kabra

Partner

Membership No. 094533

Jaipur May 13 2017

Annexure

Annexure 2 referred to in paragraph 2 (f) under the heading "Report on other legaland regulatory requirements" of our report of even date

Report on Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143of the Companies Act 2013 (the "Act")

We have audited the internal financial controls over financial reporting of AU SmallFinance Bank Limited (the "Company") as of March 31 2017 in conjunction withour audit of the standalone financial statements of the Company for the year ended on thatdate.

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 the Company's policies the safeguarding of its assets theprevention and detection of frauds and errors the accuracy and completeness of theaccounting records and the timely preparation of reliable financial information asrequired under the Act.

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 as specified under section143(10) of the Act to the extent applicable to an audit of internal financial controlsand both issued by the Institute of Chartered Accountants of India. Those Standards andthe Guidance Note require that we comply with ethical requirements and plan

and perform the audit to obtain reasonable assurance about whether adequate internalfinancial controls over financial reporting was established and maintained and if suchcontrols 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 judgement 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 to provide a basis for our audit opinion on the internalfinancial controls system over 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 authorisations of management and directors of the company; and(3) provide reasonable assurance regarding prevention or timely detection of unauthorisedacquisition use or disposition of the company's assets that could have a material effecton 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 controlsover financial reporting were operating effectively as at March 31 2017 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.

For S. R. BATLIBOI & ASSOCIATES LLP

ICAI Firm registration number: 101049W/E300004 Chartered Accountants

per Amit Kabra

Partner

Membership No. 094533

Jaipur May 13 2017