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Central Depository Services (India) Ltd.

BSE: 538434 Sector: Others
NSE: CDSL ISIN Code: INE736A01011
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Central Depository Services (India) Ltd. (CDSL) - Auditors Report

Company auditors report

To the Members of Central Depository Services (India) Limited

Report on the Audit of the Ind AS Financial Statements

Opinion

We have audited the accompanying standalone Ind AS financial statements of CentralDepository Services (India) Limited ("the Company") which comprise the Balancesheet as at March 31 2021 the Statement of Profit and Loss including the Statement ofOther Comprehensive Income the Cash Flow Statement and the Statement of Changes in Equityfor the year then ended and notes to the standalone Ind AS financial statementsincluding a summary of 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 Ind AS financial statements give the informationrequired by the Companies Act 2013 as amended ("the Act") in the manner sorequired and give a true and fair view in conformity with the accounting principlesgenerally accepted in India of the state of affairs of the Company as at March 31 2021its profit including other comprehensive income its cash flows and the changes in equityfor the year ended on that date.

Basis for Opinion

We conducted our audit of the standalone Ind AS financial statements in accordance withthe Standards on Auditing (SAs) as specified under section 143(10) of the Act. Ourresponsibilities under those Standards are further described in the ‘Auditor’sResponsibilities for the Audit of the Ind AS Financial Statements’ section of ourreport. We are independent of the Company in accordance with the ‘Code ofEthics’ issued by the Institute of Chartered Accountants of India together with theethical requirements that are relevant to our audit of the financial statements under theprovisions of the Act and the Rules thereunder and we have fulfilled our other ethicalresponsibilities in accordance with these requirements and the Code of Ethics. We believethat the audit evidence we have obtained is sufficient and appropriate to provide a basisfor our audit opinion on the standalone Ind AS 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 Ind AS financial statements for the financialyear ended March 31 2021. These matters were addressed in the context of our audit of thestandalone Ind AS financial statements as a whole and in forming our opinion thereon andwe do not provide a separate opinion on these matters. For each matter below ourdescription of how our audit addressed the matter is provided in that context.

We have determined the matters described below to be the key audit matters to becommunicated in our report. We have fulfilled the responsibilities described in theAuditor’s responsibilities for the audit of the standalone Ind AS financialstatements section of our report including in relation to these matters. Accordingly ouraudit included the performance of procedures designed to respond to our assessment of therisks of material misstatement of the standalone Ind AS financial statements. The resultsof our audit procedures including the procedures performed to address the matters belowprovide the basis for our audit opinion on the accompanying standalone Ind AS financialstatements.

Key audit matters How our audit addressed the key audit matter
Valuation of investments and its impairment (as described in note 4 & 5 of the standalone Ind AS financial statements)
Quoted investments and unquoted equity investments represents the most significant amount on the balance sheet. Our audit procedures included the following:
The total of these aggregating to ` 57615 Lakhs representing 69% of total assets of the Company as at March 31 2021. We assessed the design and implementation of controls over valuation and existence of investments.
There is a risk that the fair value of investments is not determined appropriately. Accordingly the valuation of investments and its impairment is considered as a key audit matter. We traced the quantity held from the confirmation obtained independently from Custodian and Fund houses.
We tested the valuation of the quoted and unquoted investments to independent pricing sources.
We assessed and tested the management procedures for performing impairment analysis of investments including COVID-19 impact wherever necessary.

Information Technology (IT) systems and controls

The reliability of IT systems plays a key role in the business operations. Since large volume of transactions are processed the IT controls are required to ensure that systems process data as expected and there are adequate controls in respect of changes made to the IT systems. Our audit procedures included the following:
The IT infrastructure is critical for smooth functioning of the Company’s business operations as well as for timely and accurate financial accounting and reporting. Assessed the information systems used by the Company for IT General Controls (ITGC) and Application controls;
Due to the pervasive nature and complexity of the IT environment and large volume of transactions we have considered IT systems and controls as a key audit matter. The aspects covered in the IT systems General Control audit were (i) User Access Management (ii) Program Change Management (iii) Other related ITGCs; - to understand the design and test the operating effectiveness of such controls in the system;
Performed tests of controls (including other compensatory controls wherever applicable) on the IT application controls and IT dependent manual controls in the system;
Tested the design and operating effectiveness of compensating controls where de_ciencies were identified and where necessary extended the scope of our substantive audit procedures.

Information Other than the Financial Statements and Auditor’s Report Thereon

The Company’s Board of Directors is responsible for the other information. Theother information comprises the information included in the Annual report but does notinclude the standalone Ind AS financial statements and our auditor’s report thereon.The Annual report is expected to be made available to us after the date of this auditor'sreport.

Our opinion on the standalone Ind AS financial statements does not cover the otherinformation and we do not express any form of assurance conclusion thereon.

In connection with our audit of the standalone Ind AS financial statements ourresponsibility is to read the other information and in doing so consider whether suchother information is materially inconsistent with the financial statements or ourknowledge obtained in the audit or otherwise appears to be materially misstated.

When we read the Annual report if we conclude that there is a material misstatementtherein we are required to communicate the matter to those charged with governance.

Responsibilities of Management and the Board of Directors for the Ind AS FinancialStatements

The Company’s Board of Directors is responsible for the matters stated in section134(5) of the Act with respect to the preparation of these standalone Ind AS financialstatements that give a true and fair view of the financial position financial performanceincluding other comprehensive income cash flows and changes in equity of the Company inaccordance with the accounting principles generally accepted in India including theIndian Accounting Standards (Ind AS) specified under section 133 of the Act read with theCompanies (Indian Accounting Standards) Rules 2015 as amended. 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 the designimplementation and maintenance of adequate internal financial controls that wereoperating effectively for ensuring the accuracy and completeness of the accountingrecords relevant to the preparation and presentation of the standalone Ind AS financialstatements that give a true and fair view and are free from material misstatement whetherdue to fraud or error.

In preparing the standalone Ind AS financial statements management is responsible forassessing the Company’s ability to continue as a going concern disclosing asapplicable matters related to going concern and using the going concern basis ofaccounting unless management either intends to liquidate the Company or to ceaseoperations or has no realistic alternative but to do so.

The Board of Directors are also responsible for overseeing the Company’s financialreporting process.

Auditor’s Responsibilities for the Audit of the Ind AS Financial Statements

Our objectives are to obtain reasonable assurance about whether the standalone Ind ASfinancial 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. 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 ifindividually or in the aggregate they could reasonably be expected to influence theeconomic decisions of users taken on the basis of these standalone Ind AS financialstatements.

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 standalone Ind ASfinancial 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 to designaudit procedures that are appropriate in the circumstances. Under section 143(3) (i) ofthe Act we are also responsible for expressing our opinion on whether the Company hasadequate internal financial controls with reference to financial statements in place andthe operating effectiveness of such controls.

Evaluate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures made by management.

Conclude on the appropriateness of management’s use of the going concern basis ofaccounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast significant doubt on theCompany’s ability to continue as a going concern. If we conclude that a materialuncertainty exists we are required to draw attention in our auditor’s report to therelated disclosures in the financial statements or if such disclosures are inadequate tomodify our opinion. Our conclusions are based on the audit evidence obtained up to thedate of our auditor’s report. However future events or conditions may cause theCompany to cease to continue as a going concern.

Evaluate the overall presentation structure and content of the standalone Ind ASfinancial statements including the disclosures and whether the standalone Ind ASfinancial statements represent the underlying transactions and events in a manner thatachieves fair presentation.

We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant audit findings including anysignificant de_ciencies 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 Ind AS financialstatements for the financial year ended March 31 2021 and are therefore the key auditmatters. We describe these matters in our auditor’s report unless law or regulationprecludes public disclosure about the matter or when in extremely rare circumstances wedetermine that a matter should not be communicated in our report because the adverseconsequences of doing so would reasonably be expected to outweigh the public interestbenefits of such communication.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor’s Report) Order 2016 ("theOrder") issued by the Central Government of India in terms of sub-section (11) ofsection 143 of the Act we give in the Annexure 1 a statement on the mattersspecified in paragraphs 3 and 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 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 Balance Sheet the Statement of Profit and Loss including Other ComprehensiveIncome the Cash Flow Statement and Statement of Changes in Equity dealt with by thisReport are in agreement with the books of account;

(d) In our opinion the aforesaid standalone Ind AS financial statements comply withthe Accounting Standards specified under Section 133 of the Act read with Companies(Indian Accounting Standards) Rules 2015 as amended;

(e) On the basis of the written representations received from the directors as on March31 2021 taken on record by the Board of Directors none of the directors is disqualifiedas on March 31 2021 from being appointed as a director in terms of Section 164 (2) of theAct;

(f) With respect to the adequacy of the internal financial controls of the Company withreference to these standalone Ind AS financial statements and the operating effectivenessof such controls refer to our separate Report in Annexure 2 to this report;

(g) In our opinion the managerial remuneration for the year ended March 31 2021 hasbeen paid / provided by the Company to its directors in accordance with the provisions ofsection 197 read with Schedule V to the Act;

(h) 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 standalone Ind AS financial statements - Refer Note 32 to the standaloneInd AS 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.

For S.R. Batliboi & Co. LLP

Chartered Accountants

ICAI Firm Registration Number: 301003E/E300005

per Jayesh Gandhi

Partner

Membership Number: 037924

UDIN: 21037924AAAACZ4549

Mumbai

May 01 2021

Re: Central Depository Services (India) Limited

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

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

(b) Fixed assets have been physically verified by the management during the year and nomaterial discrepancies were identified 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 nature of business does not require holding of any inventoriesand accordingly the requirements under paragraph 3(ii) of the Order are not applicableto the Company.

(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 theCompanies Act 2013. Accordingly the provisions of clause 3(iii)(a) (b) and (c) of theOrder 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 given in respect of whichprovisions of section 185 of the Companies Act 2013 are applicable. According to theinformation and explanations given to us the Company has complied with the provisions of186 of the Companies Act 2013 in respect of investments made by the Company.

(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 Companies Act 2013for the services rendered by the Company.

(vii) (a) The Company is regular in depositing with appropriate authorities undisputedstatutory dues including provident fund income-tax goods and service tax cess and otherstatutory dues applicable to the Company. As informed to us the provisions relating toemployees’ state insurance sales-tax duty of custom duty of excise service taxand value added tax are not applicable to the Company.

(b) According to the information and explanations given to us no undisputed amountspayable in respect of provident fund income-tax service tax goods and service tax cessand other statutory dues applicable to the Company were outstanding at the year end fora period of more than six months from the date they became payable. As informed to us theprovisions relating to employees’ state insurance sales-tax duty of custom duty ofexcise service tax and value added tax are not applicable to the Company.

(c) According to the records of the Company the dues of income-tax sales-tax servicetax duty of custom duty of excise value added tax goods and services tax and cesswhich have not been deposited on account of any dispute are as follows:

Name of the statute Nature of disputed dues Amount under dispute Amount paid (` in crore) Period to which the amount relates Forum where dispute is pending
Income Tax Act 1961 Income Tax ` 57390 Nil FY 2017-18 Commissioner of Income Tax (Appeals)

(viii) The Company did not have any outstanding loans or borrowings from financialinstitution or bank or government or had any debentures outstanding during the year.

(ix) According to the information and explanations given by the management the Companyhas not raised any money way of initial public offer or further public offer or debtinstruments or term loans hence reporting under clause (ix) is not applicable to theCompany and hence not commented upon.

(x) Based upon the audit procedures performed for the purpose of reporting the true andfair view of the financial statements and according to the information and explanationsgiven by the management we report that no fraud by the Company or on the Company by theofficers and employees of the Company has been noticed or reported during the year.

(xi) According to the information and explanations given by the management themanagerial remuneration has been paid / provided in accordance with the requisiteapprovals mandated by the provisions of section 197 read with Schedule V to the CompaniesAct 2013.

(xii) In our opinion the Company is not a nidhi company. The provisions of clause3(xii) of the Order are therefore not applicable to the Company and hence not commentedupon.

(xiii) According to the information and explanations given by the managementtransactions with the related parties are in compliance with section 177 and 188 ofCompanies Act 2013 where applicable and the details have been disclosed in the notes tothe financial statements 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 not made any preferential allotment orprivate placement of shares or fully or partly convertible debentures during the yearunder review and hence reporting requirements under clause 3(xiv) are not applicable tothe Company and not commented upon.

(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 Companies Act 2013.

(xvi) According to the information and explanations given to us the provisions ofsection 45-IA of the Reserve Bank of India Act 1934 are not applicable to the Company.

For S.R. Batliboi & Co. LLP

Chartered Accountants

ICAI Firm Registration Number: 301003E/E300005

per Jayesh Gandhi

Partner

Membership Number: 037924

UDIN: 21037924AAAACZ4549

Mumbai

May 01 2021

Re: Central Depository Services (India) Limited

ANNEXURE2 referred to in paragraph 2 (f) under the heading "Report on other legaland regulatory requirements" of our report of even date Report on the InternalFinancial Controls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act2013 ("the Act")

We have audited the internal financial controls with reference to financial statementsof Central Depository Services (India) Limited ("the Company") as of March 312021 in conjunction with our audit of the standalone Ind AS financial statements of theCompany for the year ended on that date.

Management’s Responsibility for Internal Financial Controls

The Company’s Management is responsible for establishing and maintaining internalfinancial controls based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal Financial Controls Over Financial Reportingissued by the Institute of Chartered Accountants of India ("ICAI"). 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 the Company’s policies 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.

Auditor’s Responsibility

Our responsibility is to express an opinion on the Company's internal financialcontrols with reference to these standalone Ind AS financial statements based on ouraudit. We conducted our audit in accordance with the Guidance Note on Audit of InternalFinancial Controls Over Financial Reporting (the "Guidance Note") and theStandards on Auditing as specified under section 143(10) of the Act to the extentapplicable to an audit of internal financial controls both issued by the ICAI. ThoseStandards and the Guidance Note require that we comply with ethical requirements and planand perform the audit to obtain reasonable assurance about whether adequate internalfinancial controls with reference to these standalone Ind AS financial statements wasestablished and maintained and if such controls operated effectively in all materialrespects. Our audit involves performing procedures to obtain audit evidence about theadequacy of the internal financial controls with reference to these standalone Ind ASfinancial statements and their operating effectiveness. Our audit of internal financialcontrols with reference financial statements included obtaining an understanding ofinternal financial controls with reference to these standalone Ind AS financialstatements assessing the risk that a material weakness exists and testing and evaluatingthe design and operating effectiveness of internal control based on the assessed risk. Theprocedures selected depend on the auditor’s judgement including the assessment ofthe risks of material misstatement of the 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 controlswith reference to these standalone Ind AS financial statements.

Meaning of Internal Financial Controls with reference to these Standalone Ind ASFinancial Statements

A company's internal financial control with reference to these standalone Ind ASfinancial statements is a process designed to provide reasonable assurance regarding thereliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles. A company'sinternal financial control with reference to these standalone Ind AS financial statementsincludes those policies and procedures that

(1) pertain to the maintenance of records that in reasonable detail accurately andfairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accountingprinciples and that receipts and expenditures of the company are being made only inaccordance with authorisations of management and directors of the company; and

(3) provide reasonable assurance regarding prevention or timely detection ofunauthorised acquisition use or disposition of the company's assets that could have amaterial effect on the financial statements.

Inherent Limitations of Internal Financial Controls With Reference to these StandaloneInd AS Financial Statements

Because of the inherent limitations of internal financial controls with reference tothese standalone Ind AS financial statements including the possibility of collusion orimproper management override of controls material misstatements due to error or fraud mayoccur and not be detected. Also projections of any evaluation of the internal financialcontrols with reference to these standalone Ind AS financial statements to future periodsare subject to the risk that the internal financial control with reference to thesestandalone Ind AS financial statements may become inadequate because of changes inconditions or that the degree of compliance with the policies or procedures maydeteriorate.

Opinion

In our opinion the Company has in all material respects adequate internal financialcontrols with reference to these standalone Ind AS financial statements and such internalfinancial controls with reference to these standalone Ind AS financial statements wereoperating effectively as at March 31 2021 based on the internal control over financialreporting criteria established by the Company considering the essential components ofinternal control stated in the Guidance Note issued by the ICAI.

For S.R. Batliboi & Co. LLP

Chartered Accountants

ICAI Firm Registration Number: 301003E/E300005

per Jayesh Gandhi

Partner

Membership Number: 037924

UDIN: 21037924AAAACZ4549

Mumbai

May 01 2021

.