To the Members of
Centrum Capital Limited
Report on the Audit of the Standalone Ind AS Financial Statements
We have audited the accompanying standalone Ind AS financial statements of CentrumCapital Limited ("the Company") which comprise the Balance Sheet as atMarch 31 2020 the Statement of Profit and Loss (including Other Comprehensive Income)the Statement of Changes in Equity and the Statement of Cash Flows for the year thenended and notes to the standalone Ind AS financial statements including a summary ofsignificant accounting policies and other explanatory information (hereinafter referred toas "standalone Ind AS financial statements"). In our opinion and to the best ofour information and according to the explanations given to us the aforesaid standaloneInd AS financial statements give the information required by the Companies Act 2013("the Act") in the manner so required and give a true and fair view inconformity with the accounting principles generally accepted in India including the IndianAccounting Standards ("Ind AS") prescribed under section 133 of the Act of thestate of affairs of the Company as at March 31 2020 its Profit (including othercomprehensive income) changes in equity and its cash flows for the year ended on thatdate.
Basis for Opinion
We conducted our audit in accordance with Standards on Auditing (SAs) specified undersection 143(10) of the Act. Our responsibilities under those Standards are furtherdescribed in the Auditor's Responsibilities for the Audit of the Standalone Ind ASFinancial Statements section of our report. We are independent of the Company inaccordance with the Code of Ethics issued by the Institute of Chartered Accountants ofIndia ("ICAI") together with the ethical requirements that are relevant to ouraudit of the standalone Ind AS financial statements under the provisions of the Act andRules thereunder and we have fulfilled our other ethical responsibilities in accordancewith these requirements and the Code of Ethics. We believe that the audit evidence we haveobtained is sufficient and appropriate to provide a basis for our opinion on thestandalone 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 of the currentyear. These matters were addressed in the context of our audit of the standalone Ind ASfinancial statements as a whole and in forming our opinion thereon and we do not providea separate opinion on these matters. We have determined the matters described below to bethe key audit matters to be communicated in our report.
|Sr. No. Key Audit Matters ||How the matter was addressed in our audit: |
|1. Transition to Ind AS accounting framework (as described in note 48 of the standalone Ind AS financial statements) || |
|The Company has adopted Ind AS from April 1 2019 with an effective date of April 1 2018 for such transition. For periods up to and including the year ended March 31 2019 the Company had prepared and presented its standalone financial statements in accordance with Accounting ||Our audit procedures included but were not limited to the following: |
| ||- Assessed the Company's process to identify the impact of adoption and transition to Ind AS; |
|Standards prescribed under the section 133 of the Act (Indian GAAP). ||- Evaluated the design of internal controls and tested the operating effectiveness of key internal controls around the process of preparation of standalone Ind AS financial statements; |
|Accordingly for transition to Ind AS the Company has prepared its standalone financial statements for the year ended March 31 2020 together with the comparative financial information for the previous year ended March 31 2019 and the opening Balance Sheet as at April 1 2018 ||- Reviewed the mandatory and optional exemptions and exceptions allowed by Ind AS and availed by the Company in applying the first- time adoption principles of Ind AS 101; |
|The transition has involved significant change in the Company's policies and processes for financial reporting including generation of supportable information and applying estimates to inter alia determine impact of Ind AS on accounting. ||- Obtained an understanding of the governance over the determination of key judgments; |
|In view of the significant degree of management judgment involved in implementation of the Ind AS framework and significance of the various disclosures the transition to Ind AS accounting framework has been identified as an area of key focus in our audit of the standalone Ind AS financial statements. ||- Evaluated and tested the key assumptions and judgments adopted by management in line with principles under Ind AS; |
| ||- Assessed the disclosures made as required by the relevant Ind AS; and |
| ||- Determined the appropriateness of the methodologies and models used along with the responsibility of the outputs. |
|2. Carrying value of investment in subsidiaries and an associate (refer note 8 of the standalone Ind AS financial statements) ||Our audit procedures included but were not limited to the following: |
|The Company has equity investments in subsidiaries and an associate amounting to Rs. 60756.18 Lakhs as at March 31 2020 ("Investments") which are carried at cost as per Ind AS 27 on Separate Financial Statements'. ||- Understood the design and implementation of relevant internal controls with respect to Investments including its impairment assessment. |
|We considered the valuation of such Investments to be significant to the audit because of the materiality of the Investments to the standalone Ind AS financial statements of the Company. ||- Performed necessary audit procedures to test the operating effectiveness of the relevant internal controls with respect to valuation of Investments during the year ended and as of March 31 2020. |
|The management assesses at least annually the existence of impairment indicators of each Investments. The recoverable amounts of the Investments is determined based on the management's estimates of future cash flows and their judgment with respect to the subsidiaries and associate performance. ||- We compared the carrying values of the Investment in subsidiaries and associate for which audited financial statements were available with their respective net asset values and earnings for the period. |
|Accordingly the impairment of Investments was determined to be a key audit matter in our audit of the standalone Ind AS financial Statements. ||- We obtained management's evaluation of impairment analysis and evaluated the forecast of future cash flows used by the management in the model to compute the recoverable value/ value in use. |
| ||- We assessed the disclosures made in the standalone Ind AS financial statements. |
|3. Valuation of Market Linked Debenture (refer note 18 of the standalone Ind AS financial statements) ||Our audit procedures included but were not limited to the following: |
|The Company has significant amount of outstanding Market Linked Debenture (MLD) as on March 31 2020 which amounts to Rs. 11840.85 Lakhs. Also the Company has engaged external experts for valuation of MLD. ||- Inspected Board minutes and other appropriate documentation of authorization to assess whether the transactions were appropriately authorized. |
|We have identified the valuation of and the accounting treatment for MLD as a key audit matter because the accounting and valuation of MLD involves a significant degree of management's judgment and external expert's opinion. ||- Understood the design and implementation of relevant internal controls with respect to MLD. |
| ||- Performed necessary audit procedures to test the operating effectiveness of the relevant internal controls with respect to MLD during the year ended and as of March 31 2020 |
| ||- Verified the terms and condition of the MLD with the MLD deed prospectuses and other supporting documents. |
| ||- Verified the calculations carried out to separate the derivative component from MLD. |
| ||- We examined the valuation report from external experts engaged by the Company to identify the value of derivative element which was assessed by us particularly with reference to underlying assumptions in discussion with external experts. |
Emphasis of Matter
We draw attention to Note 51 to the standalone Ind AS financial statements whichexplains that the extent to which the COVID-19 pandemic will impact the Company'sfinancial performance is dependent on future developments which are highly uncertain.
Our opinion is not modified in respect of this matter.
The Company's Board of Directors is responsible for the other information. The otherinformation comprises the information included in the Director's Report ManagementDiscussion & Analysis and Corporate Governance Report but does not include thestandalone Ind AS financial statements consolidated Ind AS financial statements and ourauditor's report thereon.
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 theother information is materially inconsistent with the standalone Ind AS financialstatements or our knowledge obtained in the audit or otherwise appears to be materiallymisstated.
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.
Responsibilities of Management and Those Charged with Governance for the Standalone IndAS 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 Ind AS financialstatements that give a true and fair view of the financial position financial performance(including other comprehensive income) changes in equity and cash flows of the Company inaccordance with the accounting principles generally accepted in India including Ind ASprescribed under section 133 of the Act read with the Companies (Indian AccountingStandards) Rules 2015 as amended. This responsibility also includes maintenance ofadequate accounting records in accordance with the provisions of the Act for safeguardingof the 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 Ind AS financial statements that give atrue and fair view and are free from material misstatement whether due 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 as applicablematters related to going concern and using the going concern basis of accounting unlessmanagement either intends to liquidate the Company or to cease operations or has norealistic alternative but to do so. Those Board of Directors are also responsible foroverseeing the Company's financial reporting process.
Auditor's Responsibilities for the Audit of the Standalone 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. 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 this standalone Ind AS 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 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 todesign audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Act we are also responsible for expressing our opinion on whether the Companyhas adequate internal financial controls with reference to financial statements in placeand the operating effectiveness of such controls.
Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basisof accounting 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 auditor's report to the related disclosures inthe standalone Ind AS 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 the Companyto cease to continue as a going concern.
Evaluate the overall presentation structure and content of the standalone IndAS financial 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 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 Ind AS financialstatements of the current year and are therefore the key audit matters. We describe thesematters in our auditor's report unless law or regulation precludes public disclosure aboutthe matter or when in extremely rare circumstances we determine that a matter should notbe communicated in our report because the adverse consequences of doing so wouldreasonably be expected to outweigh the public interest benefits of such communication.
The comparative financial information of the Company for the year ended March 31 2019and the transition date opening balance sheet as at April 01 2018 included in thesestandalone Ind AS financial statements are based on the previously issued statutoryfinancial statements prepared in accordance with the Companies (Accounting Standards)Rules 2006 audited by us whose report for the year ended March 31 2018 and March 312019 dated May 26 2018 and May 28 2019 respectively expressed an unmodified opinion onthose financial statements as adjusted for the differences in the accounting principlesadopted by the Company on transition to the Ind AS which have been audited by us.
Our opinion is not modified in respect of this matter.
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 section 143(11) of the Act we givein "Annexure 1" a statement on the matters specified in paragraphs 3 and 4 ofthe Order to the extent applicable.
(2) As required by section 143(3) of the Act we report that: a. We have sought andobtained all the information and explanations which to the best of our knowledge andbelief were necessary for the purposes of our audit; b. In our opinion proper books ofaccount as required by law have been kept by the Company so far as it appears from ourexamination of those books; c. The Balance Sheet the Statement of Profit and
Loss (including Other Comprehensive Income) the Statement of Changes in Equity and theStatement of Cash Flows dealt with by this report are in agreement with the books ofaccount; d. In our opinion the aforesaid standalone Ind AS financial statements complywith the Ind AS prescribed under section 133 of the Act read with the Companies (IndianAccounting Standards) Rules 2015 as amended; e. On the basis of the writtenrepresentations received from the directors as on March 31 2020 and taken on record bythe Board of Directors none of the directors is disqualified as on March 31 2020 frombeing appointed as a director in terms of section 164(2) of the Act; f. With respect tothe adequacy of the internal financial controls with reference to financial statements ofthe Company and the operating effectiveness of such controls refer our separate report in"Annexure 2"; g. With respect to the other matter to be included in theAuditor's Report in accordance with the requirements of section 197(16) of the Act; In ouropinion and to the best of our information and according to the explanations given to usthe remuneration paid by the Company to its directors during the year is in accordancewith the provisions of section 197 of 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 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 on its financialposition in its standalone Ind AS financial statements Refer Note 37.1 onContingent Liabilities to the standalone Ind AS financial statements; (ii) The Company hasmade provision as required under the applicable law or accounting standards for materialforeseeable losses if any on long-term contracts including derivative contracts Refer Note 5 & 17 to the standalone Ind AS financial statements; (iii) There were noamounts which were required to be transferred to the Investor Education and ProtectionFund by the Company.
[Referred to in paragraph 1 under Report on Other Legal and RegulatoryRequirements' section in the Independent Auditor's Report of even date to the members ofCentrum Capital Limited on the standalone Ind AS financial statements for the year endedMarch 31 2020]
Based on the audit procedures performed for the purpose of reporting a true and fairview on the standalone Ind AS financial statements of the Company and taking intoconsideration the information and explanations given to us and the books of account andother records examined by us in the normal course of audit we report that:
(i) (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.
(b) During the year the fixed assets of the Company have been physically verified bythe management and no material discrepancies were noticed on such verification. In ouropinion the frequency of verification is reasonable having regard to the size of theCompany and the nature of its assets.
(c) The title deeds of immovable properties recorded as fixed assets in the books ofaccount of the Company are held in the name of the Company.
(ii) The Company is in the business of providing services and does not have anyinventory. Accordingly clause 3(ii) of the Order is not applicable.
(iii) The Company has granted unsecured loans to companies and Limited LiabilityPartnerships covered in the register maintained under section 189 of the Act. However theCompany has not granted any secured or unsecured loan to any firm or other party coveredin the register maintained under section 189 of the Act.
(a) The terms and conditions of the aforesaid loans granted by the Company are notprejudicial to the interest of the Company.
(b) The aforesaid loans and interest thereon are repayable / payable on demand. As nosuch demand has been raised by the Company as at March 31 2020 clause 3(iii) (b) and (c)of the Order are not applicable to the Company.
(iv) The Company has complied with the provisions of sections 185 and 186 of the Act inrespect of grant of loans making investments and providing guarantees and securities asapplicable.
(v) In our opinion the Company has not accepted any deposits from the public withinthe provisions of sections 73 to 76 of the Act and the rules framed there under.Accordingly the provisions of clause 3(v) of the Order are not applicable.
(vi) The Central Government has not prescribed the maintenance of cost records for anyof the products of the Company under sub-section (1) of section 148 of the Act and therules framed there under.
(vii) (a) The Company is regular in depositing with appropriate authorities undisputedstatutory dues including provident fund employees' state insurance income tax goods andservices tax (GST) customs duty cess and any other material statutory dues applicable toit except that there have been slight delay in few cases.
No undisputed amounts payable in respect of provident fund employees' state insuranceincome tax GST customs duty cess and any other material statutory dues applicable toit were outstanding at the year end for a period of more than six months from the datethey became payable.
(b) There are no dues with respect to income tax sales tax service tax value addedtax GST customs duty excise duty which have not been deposited on account of anydispute.
(viii) During the year the Company has not defaulted in repayment of loans orborrowings to financial institution banks or debenture holders. The Company did not haveany outstanding loans or borrowings from government during the year.
(ix) The Company has not raised any moneys by way of initial public offer furtherpublic offer (including debt instruments) or term loans during the year. Accordinglyclause 3(ix) of the Order is not applicable to the Company.
(x) During the course of our examination of the books and records of the Companycarried out in accordance with the generally accepted auditing practices in India andaccording to the information and explanations given to us we have neither come across anyinstance of fraud by the Company or any fraud on the Company by its officers or employeesnoticed or reported during the year nor have we been informed of any such instance by themanagement.
(xi) Managerial remuneration has been paid / 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 clause 3(xii) ofthe Order is not applicable to the Company.
(xiii) All transactions entered into by the Company with the related parties are incompliance with sections 177 and 188 of Act where applicable and the details have beendisclosed in the standalone Ind AS financial statements as required by the applicableaccounting standards.
(xiv) The Company has not made any preferential allotment or private placement ofshares or fully or partly convertible debentures during the year. Therefore clause 3(xiv)of the Order is not applicable to the Company.
(xv) The Company has entered into non-cash transactions with person connected with thedirector during the year by the acquisition of assets and disposal of existing assets ofthe Company which in our opinion is covered under the provisions of section 192 of theAct and has complied with the provisions of section 192 of the Act and for which approvalhas been obtained in a general meeting of the Company.
(xvi) The Company is not required to be registered under section 45-IA of the ReserveBank of India Act 1934.
[Referred to in paragraph 2(f) under Report on Other Legal and RegulatoryRequirements' section in our Independent Auditor's Report of even date to the members ofCentrum Capital Limited on the standalone Ind AS financial statements for the year endedMarch 31 2020]
Report on the Internal Financial Controls with reference to Financial Statements underclause (i) of sub-section 3 of section 143 of the Companies Act 2013 ("theAct")
We have audited the internal financial controls with reference to financial statementsof Centrum Capital Limited ("the Company") as of March 31 2020 in conjunctionwith our audit of the standalone Ind AS financial statements of the Company for the yearended 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 with reference to financial statementscriteria established by the Company considering the essential components of internalcontrol stated in the Guidance Note on Audit of Internal Financial Controls Over FinancialReporting (the "Guidance Note") issued by the Institute of Chartered Accountantsof India ("ICAI"). These responsibilities include the design implementation andmaintenance of adequate internal financial controls that were operating effectively forensuring the orderly and efficient conduct of its business including adherence tocompany's policies the safeguarding of its assets the prevention and detection of fraudsand errors the accuracy and completeness of the accounting records and the timelypreparation of reliable financial information as required under the Act.
Our responsibility is to express an opinion on the Company's internal financialcontrols with reference to financial statements based on our audit. We conducted our auditin accordance with the Guidance Note and the Standards on Auditing specified under section143(10) of the Act to the extent applicable to an audit of internal financial controlsboth issued by the ICAI. Those Standards and the Guidance Note require that we comply withethical requirements and plan and perform the audit to obtain reasonable assurance aboutwhether adequate internal financial controls with reference to financial statements wasestablished and maintained and if such controls operated effectively in all materialrespects.
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 financial statementsincluded obtaining an understanding of internal financial controls with reference tofinancial statements assessing the risk that a material weakness exists and testing andevaluating the design and operating effectiveness of internal controls based on theassessed risk. The procedures selected depend on the auditor's judgement including theassessment of the risks of material misstatement of the financial statements whether dueto 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 withreference to financial statements.
Meaning of Internal Financial Controls with reference to Financial Statements
A company's internal financial control with reference to financial statements is aprocess designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles. A company's internal financial control withreference to financial statements includes 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 financialstatements in accordance with generally accepted accounting principles and that receiptsand expenditures 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 with reference to FinancialStatements
Because of the inherent limitations of internal financial controls with reference tofinancial statements including the possibility of collusion or improper managementoverride of controls material misstatements due to error or fraud may occur and not bedetected. Also projections of any evaluation of the internal financial controls withreference to financial statements to future periods are subject to the risk that theinternal financial controls with reference to financial statements may become inadequatebecause of changes in conditions or that the degree of compliance with the policies orprocedures may deteriorate.
In our opinion the Company has in all material respects adequate internal financialcontrols with reference to financial statements and such internal financial controls withreference to financial statements were operating effectively as at March 31 2020 basedon the internal control with reference to financial statements criteria established by theCompany considering the essential components of internal controls stated in the GuidanceNote issued by the ICAI.