To the Members of Capital India Finance Limited
Report on the Audit of the Standalone Financial Statements
We have audited the accompanying standalone financial statements of Capital IndiaFinance Limited ("the Company") which comprise the Balance Sheet as at 31stMarch 2019 and the Statement of Profit and Loss and the Cash Flow Statement for the yearthen ended and a summary of significant accounting policies and other explanatoryinformation. In our opinion and to the best of our information and according to theexplanations given to us the aforesaid standalone financial statements give theinformation required by the Companies Act 2013 ("the Act") in the manner sorequired and give a true and fair view in conformity with the Accounting Standardsprescribed under section 133 of the Act read with the Companies (Accounting Standards)Rules 2006 as amended ("Accounting Standards") and other accounting principlesgenerally accepted in India of the state of affairs of the Company as at 31st March 2019and its profit and its cash flows for the year ended on that date.
Basis for Opinion
We conducted our audit of the standalone financial statements in accordance with theStandards on Auditing specified under section 143(10) of the Act (SAs). Ourresponsibilities under those Standards are further described in the Auditors'Responsibility for the Audit of the Standalone Financial Statements section of our report.We are independent of the Company in accordance with the Code of Ethics issued by theInstitute of Chartered Accountants of India (ICAI) together with the ethical requirementsthat are relevant to our audit of the standalone financial statements under the provisionsof the Act and the Rules made thereunder and we have fulfilled our other ethicalresponsibilities in accordance with these requirements and the ICAI's Code of Ethics. Webelieve that the audit evidence obtained by us is sufficient and appropriate to provide abasis for our audit 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. We have determined the matters described below to bethe key audit matters to be communicated in our report.
|Key Audit Matter ||Auditors' Response |
|1 Identification of non-performing assets (loans) in accordance with the Reserve Bank of India ("the RBI") guidelines ||Our audit approach included testing the design operating effectiveness of internal controls and substantive audit procedures in respect of asset classification pertaining to loans and advances. In particular: |
|(Refer Note 2.7 and 11 to the financial statements) || |
| ||we have evaluated the Company's internal control system in adhering to the Relevant RBI guidelines regarding asset classification pertaining to loans and advances; |
|The Company has given loans and advances amounting to Rs. 5559646487 as at 31st March 2019. Identification of non-performing assets (loans and advances) in accordance with relevant Prudential Regulations issued by the RBI in respect of asset classification pertaining to loans and advances (herein after referred as "Relevant RBI guidelines") is a key audit matter due to the current processes at the Company which requires manual interventions management estimates and judgment and level of regulatory and other stakeholders focus. Accordingly our audit was focused on asset classification pertaining to advances due to the materiality of the balances. ||we have identified and tested the design and implementation as well as operational effectiveness of key control pertaining to monthly monitoring of overdue positions by business and finance team; |
| ||we have test checked loans and advances to examine the validity of the recorded amounts loan documentations examined the manual statement of accounts indicators of impairment and compliance with asset classification pertaining to loans and advances; and evaluated the management judgment governance process and review controls over asset classification and discussed the asset classifications with senior management including the Chief Executive Officer Chief Financial Officer and Head of Credit and Risk. |
Information Other than the Financial Statements and Auditors' Report Thereon
The Company's Board of Directors is responsible for the preparation of otherinformation. The other information comprises the Directors' Report including annexures toDirectors' Report Management Discussion and Analysis Report and Report on CorporateGovernance but does not include the standalone financial statements and our auditors'report thereon.
Our opinion on the standalone financial statements does not cover the other informationand accordingly 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 during the course of our audit or otherwise appears to be materially misstated.
If based on the work we have performed we conclude that there is a materialmisstatement of this other information we are required to report that fact. We havenothing to report in this regard.
Management's Responsibility for the Standalone Financial Statements
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 financial statementsthat give a true and fair view of the financial position financial performance and cashflows of the Company in accordance with the Accounting Standards and other accountingprinciples generally accepted in India. This responsibility also includes maintenance ofadequate accounting records in accordance with the provisions of the Act for safeguardingthe assets of the Company and for preventing and detecting frauds and otherirregularities; selection and application of appropriate accounting policies; makingjudgments and estimates that are reasonable and prudent; and design implementation andmaintenance of adequate internal financial controls that were operating effectively forensuring the accuracy and completeness of the accounting records relevant to thepreparation and presentation of the standalone financial statement that give a true andfair view and are free from material misstatement whether due to fraud or error. Inpreparing the standalone financial statements management is responsible for assessing theCompany's ability to continue as a going concern disclosing as applicable mattersrelated to going concern and using the going concern basis of accounting unless managementeither intends to liquidate the Company or to cease operations or has no realisticalternative but to do so. Those Board of Directors are also responsible for overseeing theCompany's financial reporting process.
Auditors' Responsibility 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 auditors' 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 inaccordance with SAs we exercise professional judgment and maintain professionalskepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the standalone financialstatements whether due to fraud or error design and perform audit procedures responsiveto those risks and obtain audit evidence that is sufficient and appropriate to provide abasis for our opinion. The risk of not detecting a material misstatement resulting fromfraud is higher than for one resulting from error as fraud may involve collusionforgery intentional omissions misrepresentations or the override of internal control.
Obtain an understanding of internal financial controls relevant to the audit in orderto design audit procedures that are appropriate in the circumstances. Under section143(3)(i) of the Act we are also responsible for expressing our opinion on whether theCompany has adequate internal financial controls system in place and the operatingeffectiveness of such controls.
Evaluate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures made by the 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 the Company'sability to continue as a going concern. If we conclude that a material uncertainty existswe are required to draw attention in our auditors' report to the related disclosures inthe standalone financial statements or if such disclosures are inadequate to modify ouropinion. Our conclusions are based on the audit evidence obtained up to the date of ourauditors' report. However future events or conditions may cause the Company to cease tocontinue as a going concern.
Evaluate the overall presentation structure and content of the standalone financialstatements including the disclosures and whether the standalone financial statementsrepresent the underlying transactions and events in a manner that achieves fairpresentation.
Materiality is the magnitude of misstatements in the standalone financial statementsthat individually or in aggregate makes it probable that the economic decisions of areasonably knowledgeable user of the standalone financial statements may be influenced. Weconsider quantitative materiality and qualitative factors in (i) planning the scope of ouraudit work and in evaluating the results of our work; and (ii) to evaluate the effect ofany identified misstatements in the standalone financial statements.
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 alsoprovide those charged with governance with a statement that we have complied with relevantethical requirements regarding independence and to communicate with them allrelationships 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 Section 143(3) of the Act based on our audit 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 and the Cash Flow Statementdealt with by this Report are in agreement with the books of account.
d) In our opinion the aforesaid financial statements comply with the AccountingStandards specified under Section 133 of the Act as applicable.
e) On the basis of the written representations received from the directors as on 31stMarch 2019 taken on record by the Board of Directors none of the directors isdisqualified as on 31st March 2019 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 over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate Report in "Annexure A". Our report expresses an unmodified opinion onthe adequacy and operating effectiveness of the Company's internal financial controls overfinancial reporting.
g) With respect to the other matters to be included in the Auditors' Report inaccordance with the requirements of section 197(16) of the Act as amended In our opinionand to the best of our information and according to the explanations given to us theremuneration paid by the Company to its directors during the year is in accordance withthe provisions of section 197 of the Act.
h) 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 as amended inour opinion and to the best of our information and according to the explanations given tous:
i. The Company does not have any pending litigations which would impact its financialposition;
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.
2. As required by the Companies (Auditor's Report) Order 2016 ("the Order")issued by the Central Government in terms of Section 143(11) of the Act we give in"Annexure B" a statement on the matters specified in paragraphs 3 and 4 of theOrder.
For DELOITTE HASKINS & SELLS LLP
(Firm's Registration No. 117366W/W-100018)
Sd/-Rukshad N. Daruvala
(Membership No. 111188)
Place: MUMBAI Date: 10th May 2019
ANNEXURE "A" TO THE INDEPENDENT AUDITORS' REPORT
(Referred to in paragraph 1(f) under Report on Other Legal and RegulatoryRequirements' section of our report of even date)
Report on the Internal Financial Controls Over Financial Reporting under Clause (i) ofSub-section 3 of Section 143 of the Companies Act 2013 ("the Act")
We have audited the internal financial controls over financial reporting of CapitalIndia Finance Limited ("the Company") as of 31st March 2019 in conjunctionwith our audit of the financial statements of the Company 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 Reporting (the"Guidance Note") issued by the Institute of Chartered Accountants of India.These responsibilities include the design implementation and maintenance of adequateinternal financial controls that are operating effectively for ensuring the orderly andefficient conduct 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.
Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting of the Company based on our audit. We conducted ouraudit in accordance with the Guidance Note issued by the Institute of CharteredAccountants of India and the Standards on Auditing prescribed under Section 143(10) of theCompanies Act 2013 to the extent applicable to an audit of internal financial controls.Those Standards and the Guidance Note require that we comply with ethical requirements andplan 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 controls based on the assessed risk. Theprocedures selected depend on the auditors' judgment including the assessment of therisks of material misstatement of the financial statements whether due to fraud or error.
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 systemover financial reporting.
Meaning of Internal Financial Controls Over Financial Reporting
A company's internal financial controls 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 controls 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 ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorised acquisition use or disposition of thecompany's assets that could have a material effect on the financial statements.
Inherent Limitations of Internal Financial Controls Over Financial Reporting
Because of the inherent limitations of internal financial controls over 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.
In our opinion to the best of our information and according to the explanations givento us the Company has in all material respects an adequate internal financial controlssystem over financial reporting and such internal financial controls over financialreporting are operating effectively as at 31st March 2019 based on the criteria forinternal financial control over financial reporting 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 DELOITTE HASKINS & SELLS LLP
(Firm's Registration No. 117366W/W-100018)
Sd/-Rukshad N. Daruvala
(Membership No. 111188)
Date: 10th May 2019
ANNEXURE "B" TO THE INDEPENDENT AUDITORS' REPORT
(Referred to in paragraph 2 under Report on Other Legal and RegulatoryRequirements' section of our report of even date)
i) In respect of the Company's fixed assets:
a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.
b) Some of the fixed assets were physically verified during the year by the Managementin accordance with a regular programme of verification which in our opinion provides forphysical verification of all the fixed assets at reasonable intervals. According to theinformation and explanation given to us no material discrepancies were noticed on suchverification.
c) The Company does not have any immovable properties of freehold or leasehold land andbuilding and hence reporting under clause 3(i)(c) of the Companies (Auditor's Report)Order 2016 ("the CARO 2016") is not applicable.
ii) The Company does not have any inventory and hence reporting under clause 3(ii) ofthe CARO 2016 is not applicable.
iii) The Company has not granted any loans secured or unsecured to companies firmsLimited Liability Partnerships or other parties covered in the register maintained underSection 189 of the Companies Act 2013 ("the Act").
iv) The Company has not granted any loans made investments or provided guarantees andhence reporting under clause 3(iv) of the CARO 2016 is not applicable. v) According to theinformation and explanations given to us the Company has not accepted any deposit duringthe year and hence directives issued by the Reserve Bank of India and the provisions ofSections 73 to 76 or any other relevant provisions of the Act and rules framed thereunderare not applicable.
vi) Having regard to the nature of the Company's business / activities reporting underclause 3(vi) of the CARO 2016 is not applicable.
vii) According to the information and explanations given to us in respect of statutorydues:
(a) The Company has been regular in depositing undisputed statutory dues includingProvident Fund Income-tax Goods and Services Tax cess and other material statutory duesapplicable to the appropriate authorities. We are informed that the provisions of ESIC andCustom Duty are not applicable to the Company.
(b) There were no undisputed amounts payable in respect of Provident Fund Income-taxGoods and Services Tax cess and other material statutory dues in arrears as on 31st March2019 for a period of more than six months from the date they became payable.
(c) There are no dues of Income-tax and Goods and Services Tax as on 31st March 2019on account of disputes.
viii) In our opinion and according to the information and explanations given to us theCompany has not defaulted in the repayment of loans or borrowings to financialinstitutions and banks. The Company has not taken any loans or borrowings from government.The Company has not issued any debentures.
ix) In our opinion and according to the information and explanations given to us moneyraised by way of further public offer and the term loans have been applied by the Companyduring the year for the purposes for which they were raised other than temporarydeployment pending application of proceeds.
x) To the best of our knowledge and according to the information and explanations givento us no fraud by the Company and no material fraud on the Company by its officers oremployees has been noticed or reported during the year.
xi) In our opinion and according to the information and explanations given to us theCompany has paid / provided managerial remuneration in accordance with the requisiteapprovals mandated by the provisions of section 197 read with Schedule V to the CompaniesAct 2013.
xii) The Company is not a Nidhi Company and hence reporting under clause 3(xii) of theCARO 2016 is not applicable.
xiii) In our opinion and according to the information and explanations given to us theCompany is in compliance with Section 177 and 188 of the Act where applicable for alltransactions with the related parties and the details of related party transactions havebeen disclosed in the financial statements as required by the applicable accountingstandards.
xiv) According to the information and explanations given to us the Company has madeprivate placement of shares during the year under review.
In respect of the above issue we further report that:
a) the requirement of Section 42 of the Companies Act 2013 as applicable have beencomplied with; and
b) the amounts raised have been applied by the Company during the year for the purposesfor which the funds were raised other than temporary deployment pending application.
xv) In our opinion and according to the information and explanations given to usduring the year the Company has not entered into any non-cash transactions with itsdirectors or directors of its subsidiary company or persons connected with him and henceprovisions of section 192 of the Act are not applicable.
xvi) The Company is required to be registered under section 45IA of the ReserveBank of India Act 1934 and it has obtained the registration.
For DELOITTE HASKINS & SELLS LLP
Chartered Accountants (Firm's Registration No. 117366W/W-100018)
Sd/-Rukshad N. Daruvala (Partner) (Membership No. 111188)
Date: 10th May 2019