To the Members of Birlasoft Limited
Report on the Audit of the Standalone Financial Statements
We have audited the standalone financial statements of Birlasoft Limited ("theCompany") which comprise the standalone balance sheet as at 31 March 2021 and thestandalone statement of profit and loss (including other comprehensive income) standalonestatement of changes in equity and standalone statement of cash flows for the year endedand notes to the standalone financial statements including a summary of the significantaccounting 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 2021 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 AuditorRs.s Responsibilities for the Audit of the Standalone FinancialStatements section of our report. We are independent of the Company in accordance with theCode of Ethics issued by the Institute of Chartered Accountants of India together with theethical requirements that are relevant to our audit of the standalone financial statementsunder the provisions of the Act and the Rules thereunder and we have fulfilled our otherethical responsibilities in accordance with these requirements and the Code of Ethics. Webelieve that the audit evidence we have obtained is sufficient and appropriate to providea 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
Revenue recognition in respect of fixed price contracts (See note 1.2 and 31 to thestandalone financial statements)
|The key audit matter ||How the matter was addressed in our audit |
|Revenue recognition in respect of fixed price contracts ||Our audit procedures in this area included the following: |
|(See note 1.3 and 30 to the consolidated financial statements) The Group engages into fixed-price contracts with customers. In respect of fixed-price contracts other than maintenance and support service contracts revenue is recognized using percentage of completion computed as per the input method. || Obtaining an understanding of the systems processes and controls implemented by the Group and evaluating the design and implementation of internal controls for measuring and recording revenue and the associated contract assets and unearned revenue. |
|This is based on the Group's estimate of contract costs and efforts for completion of contract. Provision for estimated losses on uncompleted contracts are recorded in the period in which such losses become probable based on the expected contract estimates at the reporting date. || Testing the design and operating effectiveness of key IT controls over IT environment in which the business systems operate. This includes access controls program change controls program development controls and IT operation controls; |
|Contract estimates are formed by the Group considering the following: || For selected samples of contracts we inspected the terms of the contract and assessed the revenue recognized in accordance with Ind AS by: |
| Application of the revenue recognition accounting standard is complex. It involves a number of key judgements and estimates. One of the key estimates is total cost-to-completion of these contracts. It is used to determine the percentage of completion of the relevant performance obligation. ||> Evaluating the identification of performance obligations. |
| ||> Agreeing the transaction price to the underlying contracts. |
| There is judgement involved in identification of distinct performance obligations and determination of transaction price for such performance obligations. ||> Inspecting the approval of the estimates of cost to complete. |
| COVID 19 pandemic may impact the total revenue and costs to complete the contracts. In some cases Group's contract interests are adequately protected. In other cases there may be possible significant risks though the Group is cautious of them. ||> Evaluating the impact of COVID 19 pandemic on the total revenue and the cost to complete the contract. |
| These contracts may involve onerous obligations on the Group requiring critical estimates to be made. ||> Challenging the Group's estimate of contract cost through a retrospective comparison of costs incurred with budgeted costs. Identifying significant variations and testing variations resulting into reestimating the remaining costs to complete the contract. |
| Contracts are subject to modification to account for changes in contract specification and requirements. ||> Assessing the work in progress (contract assets) on the balance sheet date by inspecting the underlying invoices and signed agreements on sample basis to identify possible delays in achieving milestones. |
| At year-end a significant amount of work in progress (Contract assets and liabilities) related to these contracts is recognised on the balance sheet representing the work completed costs incurred and accrued. ||Those may require change in estimated costs to complete the remaining performance obligations. |
|Considering the significant estimate involved in recognition of revenue based on percentage of completion method in respect of fixed price contracts we have considered this as key audit matter. ||> Comparing on a sample basis revenue transactions recorded during the year with the underlying contracts actual costs incurred and invoices raised on customers. Also checked the related revenue contract costs provision for onerous contracts contract assets and unearned revenue had been recognised in accordance with the requirements of Ind AS 115. |
| ||> Performing analytical procedures on incurred and estimated contract costs or efforts. It includes assessment of contracts with unusual or negative margins little or no movement in efforts from previous periods. We also performed analytical procedures on contract assets with little or no movement in invoicing from previous periods. |
|Impairment of Goodwill ||Our audit procedures in this area included the following: |
|(Refer note 1.8(b)(ii) and 39 to the consolidated financial statements) || Assessing Group's evaluation of identification of cash generating units and allocation of goodwill to the respective Vertical Busines Units (VBU); |
|The Group is required to test goodwill for impairment every year or more frequently when there is an indication of impairment. || |
|The impairment charge is determined by comparing the carrying value of goodwill with its recoverable amount. We consider the impairment testing of goodwill by the Group to involve significant estimates and judgment. || Evaluating the Group's assessment of recoverable amount and impairment assessment for goodwill; |
|There is inherent uncertainty involved in forecasting and discounting future cashflows including the possible effects of COVID-19 pandemic which are the basis of the assessment of recoverability. || Testing the arithmetical accuracy of the cash flow projections and impairment assessment made by the Group; |
|Considering the significant judgement involved impairment of goodwill is identified as a key audit matter. || We challenged the Group's assumptions used in impairment analysis such as projected EBITDA & revenue growth rate terminal growth rates and discount rates including consideration of impact of COVID 19 by: |
| ||> comparing the same to externally derived data and industry comparators where available; |
| ||> assessing the sensitivity of assumptions on the impairment assessment; |
| ||> comparing the forecasts against the historical performance. |
| ||This was based on our knowledge of the Group and the markets in which the Vertical Business Units operate. We took assistance of our valuations team for above testing; |
| || Performing sensitivity analysis of the key assumptions such as future revenue growth rates and the discount rate used in determining the recoverable value; |
| || Evaluating the adequacy of the disclosures of key assumptions and judgements. |
Information Other than the Standalone Financial Statements and AuditorsRs. ReportThereon
The Company'smanagement and Board of Directors are responsible for the otherinformation. The other information comprises the information included in theCompany'sannual report but does not include the financial statements and our auditorsRs.report thereon.
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 thework we have performed we conclude that there is a material misstatement of this otherinformation we are required to report that fact. We have nothing to report in thisregard.
Management 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/loss 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'sability 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 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 auditorRs.s report that includes our opinion. Reasonableassurance is a high level of assurance but is not a guarantee that an audit conducted inaccordance with SAs will always detect a material misstatement when it exists.Misstatements can arise from fraud or error and are considered material if individuallyor in the aggregate they could reasonably be expected to influence the economic decisionsof users taken on the basis of these 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 thecompany has adequate internal financial controls with reference to 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'sability to continue as a going concern. If we conclude that amaterial uncertainty exists we are required to draw attention in our auditorRs.s reportto the related disclosures in the standalone financial statements or if such disclosuresare inadequate to modify our opinion. Our conclusions are based on the audit evidenceobtained up to the date of our auditorRs.s report. However future events or conditionsmay cause 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 auditorsRs. 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 (AuditorsRs. Report) Order 2016 ("theOrder") issued by the Central Government in terms of section 143 (11) of the Act wegive in the "Annexure A" a statement on the matters specified in paragraphs 3and 4 of the Order 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 2021 taken on record by the Board of Directors none of the directors isdisqualified as on 31 March 2021 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 AuditorsRs. 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 2021 onits financial position in its standalone financial statements - Refer Note 37(1) to thestandalone financial statements;
ii. The Company has made provision as required under the applicable law or accountingstandards for material foreseeable losses if any on long-term contracts includingderivative contracts- Refer Note 21 to the standalone financial statements;
iii. There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company.
iv. The disclosures in the standalone financial statements regarding holdings as wellas dealings in specified bank notes during the period from 8 November 2016 to 30 December2016 have not been made in these financial statements since they do not pertain to thefinancial year ended 31 March 2021.
(C) With respect to the matter to be included in the AuditorsRs. Report under section197(16):
a) 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.
Annexure A to the Independent AuditorsRs. report on the standalone financial statementsof Birlasoft Limited for the year ended 31 March 2021
With reference to the Annexure referred to in paragraph 1 of Report on Other Legal andRegulatory Requirements of the Independent AuditorsRs. Report to the members of theCompany on the standalone financial statements for the year ended 31 March 2021 we reportthat:
(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 its fixed assets are verified in a phased manner of three years. In our opinionthis periodicity of physical verification is reasonable having regard to the size of theCompany and the nature of its fixed assets. No material discrepancies were noticed on suchverification.
(c) According to the information and explanations given to us and on the basis of ourexamination of the records of the Company title deeds of immovable properties are held inthe name of the Company.
(ii) The Company is a service company primarily engaged in providing informationtechnology and related services. Accordingly it does not hold any physical inventories.Thus paragraph 3 (ii) of the Order is not applicable.
(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 paragraph 3 (iii) (a) (b) and (c) of the Order is not applicable to theCompany.
(iv) In our opinion and according to the information and explanations given to us theCompany has not given any loan guarantee or security or made any investment covered undersection 185 or section 186 of the Act during the year.
(v) As per the information and explanations given to us the Company has not acceptedany deposits from the public in accordance with the provisions of sections 73 to 76 of theAct and the rules made thereunder. Accordingly the provisions of paragraph 3(v) of theOrder are not applicable to the Company.
(vi) The Central Government has not prescribed the maintenance of cost records undersection 148(1) of the Act for any of the services rendered by the Company.
(vii) (a) According to the information and explanations
given to us and on the basis of our examination of the records of the Company amountsdeducted/ accrued in the books of account in respect of undisputed statutory duesincluding Provident fund EmployeesRs. State Insurance Income tax Goods and ServicesTax cess and other material statutory dues have generally been regularly deposited duringthe year by the Company with the appropriate authorities.
According to the information and explanations given to us no undisputed amountspayable in respect of Provident fund EmployeesRs. State Insurance Income tax Goods andServices Tax cess and other material statutory dues were in arrears as at 31 March 2021for 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 ofIncome tax Sales tax Service tax Value Added Tax or Goods and Service Tax which havenot been deposited by the Company on account of disputes except for the following:
|Name of the Statute ||Nature of Dues ||Forum where the dispute is pending ||Period to which the amount relates ||Amount demanded Rs. million ||Amount paid under protest Rs. Million |
|Income Tax Act 1961 ||Income Tax ||Delhi High Court ||2003 - 2010 ||601.96 ||- |
|Income Tax Act 1961 ||Income Tax ||Income Tax Appellate Tribunal ||2004 - 2015 ||7.82 ||- |
|Income Tax Act 1961 ||Income Tax ||Commissioner of Income Tax (Appeals) ||2007 - 2008 and 2011 - 2012 ||59.65 ||- |
|Income Tax Act 1961 ||Income Tax ||Assessing Officer of Income Tax ||2006 - 2012 ||112.57 ||1.04 |
|Income Tax Act 1961 ||Income Tax ||Commissioner of Income Tax (Appeals) ||2018 - 2019 ||3.70 ||- |
|Finance Act 1994 ||Service Tax ||Supreme Court ||October 2006 - March 2014 ||469.65 ||12.99 |
|Finance Act 1994 ||Service Tax ||Bombay High Court ||2007 - 2008 ||28.60 ||- |
|Finance Act 1994 ||Service Tax ||Central Excise and Service Tax Appellate Tribunal ||April 2014 to March 2015 ||18241 ||13.68 |
|Central Sales Tax Act 1956 ||Sales Tax ||Deputy Commissioner of Sales Tax (Appeals) ||2012 - 2013 ||0.21 ||0.16 |
|Central Sales Tax Act 1956 ||Sales Tax ||Assistant Commissioner of Sales Tax ||2008 - 2009 ||040 ||0.02 |
|Central Sales Tax Act 1956 ||Sales Tax ||Deputy Commissioner of Commercial Tax (Appeals) ||2017 - 2018 ||6.00 || |
(viii) The Company has not taken any loans or borrowings from financial institutionsbanks and government or has not issued any debentures. Accordingly reporting underparagraph 3 (viii) of the Order is not applicable to the Company.
(ix) In our opinion and according to the information and explanations given to us theCompany has not raised any money by way of initial public offer or further public offer(including debt instruments) or term loans during the year. Accordingly paragraph 3(ix)of the Order is not applicable to the Company.
(x) According to the information and explanations given to us no fraud by the Companyor on the Company by its officers or employees has been noticed or reported during theyear.
(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 as per the Act. Accordingly paragraph 3(xii) of the Orderis not applicable.
(xiii) I n our opinion and according to the information and explanations given to usall transactions with related parties are in compliance with section 177 and 188 of theAct and the details as required by the applicable accounting standards have beendisclosed in the standalone financial statements.
(xiv) According to the information and explanations given to us the Company has notmade any preferential allotment or private placement of shares or fully or partiallyconvertible debentures during the year. Accordingly paragraph 3(xiv) of the Order is notapplicable.
(xv) According to the information and explanations given to us the Company has notentered into any non-cash transactions with directors or persons connected with him duringthe year.
(xvi) In our opinion and according to the information and explanations given to us theCompany is not required
to be registered under section 45-IA of the Reserve Bank of India 1934.
Annexure B to the Independent AuditorsRs. report on the standalone financial statementsof Birlasoft Limited for the year ended 31 March 2021
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 paragraph 2 (A) (f) under Rs.Report on Other Legal and RegulatoryRequirementsRs. section of our report of even date.
We have audited the internal financial controls with reference to financial statementsof Birlasoft Limited ("the Company") as of 31 March 2021 in conjunction with ouraudit of the standalone financial statements of the Company for the year ended on thatdate.
In our opinion the Company has in all material respects adequate internal financialcontrols with reference to standalone financial statements and such internal financialcontrols were operating effectively as at 31 March 2021 based on the internal financialcontrols with reference to standalone financial statements criteria established by theCompany considering the essential components of internal control stated in the GuidanceNote on Audit of Internal Financial Controls Over Financial Reporting issued by theInstitute of Chartered Accountants of India (the "Guidance Note").
ManagementRs.s Responsibility for Internal Financial Controls
The Company'smanagement and the Board of Directors are responsible for establishing andmaintaining internal financial controls based on the internal financial controls withreference to standalone financial statements criteria established by the Companyconsidering the essential components of internal control stated in the Guidance Note.These responsibilities include the design implementation and maintenance of adequateinternal financial controls that were operating effectively for ensuring the orderly andefficient conduct of its business including adherence to Company'spolicies thesafeguarding of its assets the prevention and detection of frauds and errors theaccuracy and completeness of the accounting records and the timely preparation ofreliable financial information as required under the Companies Act 2013 (hereinafterreferred to as "the Act").
Our responsibility is to express an opinion on the Company'sinternal financial controlswith reference to standalone
financial statements based on our audit. We conducted our audit in accordance with theGuidance Note and the Standards on Auditing prescribed under section 143(10) of the Actto the extent applicable to an audit of internal financial controls with reference tostandalone financial statements. Those Standards and the Guidance Note require that wecomply with ethical requirements and plan and perform the audit to obtain reasonableassurance about whether adequate internal financial controls with reference to financialstatements were established and maintained and whether such controls operated effectivelyin 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 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 internal financial controls withreference to standalone financial statements.
Meaning of Internal Financial controls with Reference to Standalone FinancialStatements
A company internal financial controls with reference to standalone financial statementsis a process designed to provide reasonable assurance regarding the reliability offinancial reporting and the preparation of standalone financial statements for externalpurposes in accordance with generally accepted accounting principles. A company internalfinancial controls with reference to
standalone financial statements include those policies and procedures that (1) pertainto the maintenance of records that in reasonable detail accurately and fairly reflectthe transactions and dispositions of the assets of the company; (2) provide reasonableassurance that transactions are recorded as necessary to permit preparation of standalonefinancial 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'sassets that could have a material effect on the standalonefinancial statements.
Inherent Limitations of Internal Financial controls with Reference to StandaloneFinancial Statements Because of the inherent limitations of internal financial controlswith reference to standalone financial statements including the possibility of collusionor improper management override of controls material misstatements due to error or fraudmay occur and not be detected. Also projections of any evaluation of the internalfinancial controls with reference to standalone financial statements to future periods aresubject to the risk that the internal financial controls with reference to standalonefinancial statements may become inadequate because of changes in conditions or that thedegree of compliance with the policies or procedures may deteriorate.