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Chalet Hotels Ltd.

BSE: 542399 Sector: Services
NSE: CHALET ISIN Code: INE427F01016
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VOLUME 24512
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OPEN 182.00
CLOSE 181.25
VOLUME 24512
52-Week high 215.25
52-Week low 125.05
P/E
Mkt Cap.(Rs cr) 3,684
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Chalet Hotels Ltd. (CHALET) - Auditors Report

Company auditors report

To the Members of Chalet Hotels Limited

Report on the Audit of the Standalone financial statements

Opinion

We have audited the standalone financial statements of Chalet Hotels Limited (the Company) which comprise the standalone balance sheet as at 31 March 2020 the standalone Statement of Profit and Loss (including other comprehensive income) the standalone statement of changes in equity and the standalone statement of cash flows for the year then ended and notes to the standalone financial statements including a summary of the significant accounting policies and other explanatory information.

In our opinion and to the best of our information and according to the explanations given to us the aforesaid standalone financial statements give the information required by the Companies Act 2013 (Act) in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India of the state of affairs of the Company as at 31 March 2020 its profit and other comprehensive income 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) specified under Section 143(10) of the Act. Our responsibilities under those SAs are further described in the Auditor's Responsibilities 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 the Institute of Chartered Accountants of India together with the ethical requirements that are relevant to our audit of the standalone financial statements under the provisions of the Act and the Rules thereunder and we

have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion on the standalone financial statements.

Emphasis of Matter

We draw attention to Note 42(c) of the standalone financial statements in respect of the entire building comprising of the hotel and apartments therein purchased together with a demarcated portion of the leasehold rights to land at Vashi (Navi Mumbai) from K. Raheja Corp Private Limited on which the Company's Four Points by Sheraton Hotel has been built. The allotment of land by City & Industrial Development Corporation of Maharashtra Limited ('CIDCO') to K. Raheja Corp Private Limited has been challenged by two public interest litigations and the matter is currently pending with the Honorable Supreme Court of India. Pending the outcome of proceedings and a final closure of the matter no adjustments have been made in the standalone Ind AS financial Statements as at and for the year ended 31 March 2020 to the carrying value of the leasehold rights (reflected as prepayments) and the hotel assets thereon aggregating to Rs 479.33 million and Rs 489.98 million as at 31 March 2020 and 31 March 2019 respectively.

Our opinion is not modified in respect of this matter.

Key Audit Matters

Key audit matters are those matters that in our professional judgement were of most significance 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 financial statements as a whole and in forming our opinion thereon and we do not provide a separate opinion on these matters :-

Impact of COVID 19 on Going concern (refer note 57 to the standalone financial statements)

The Key Audit MatterHow the matter was addressed in our audit
On 11 March 2020 the World Health Organisation declared the Novel Coronavirus (COVID-19) outbreak to be a pandemic.Our audit procedures included:
 Obtained understanding of the key controls relating to the Company's forecasting process.
The Indian Government has taken a series of measures to contain the outbreak which included imposing multiple 'lock-downs' across the country from 22 March 2020 onwards. The lockdowns and restrictions imposed on various activities due to COVID-19 pandemic have posed challenges to the businesses of the Company.  Obtained an understanding of key assumptions adopted by the Company in preparing the cash flow forecast including revenue fixed and operating costs capital expenditure including commitments to subsidiaries. Assessed the key assumptions based on our understanding of the Company's business.
The impact of the COVID-19 pandemic and the measures put in place to control the spreading of the virus have created a number of events and conditions which may have indicated uncertainties related to going concern for the Company.  Compared the future expected cash flows in the cash flow forecast with the Company's business plan approved by the Board of Directors
 Performed sensitivity analysis to the cash flow forecast by considering plausible changes to the key assumptions adopted by the Company and its impact on the going concern assumption
The Company has assessed the impact of existing and anticipated effects of COVID-19 on the future cash flow projections and has prepared a range of scenarios to estimate cash flows from operating activities and the financing requirements. Based on the above the financial statements of the Company for the year ended March 31 2020 have been prepared on a going concern basis.  Obtained details of borrowing disbursed subsequent to the year end and tested with underlying documentation
 Assessed compliance with the loan covenants during the year and subsequent to the year end
In view of uncertainties identified outlined above we identified a key audit matter related to going concern due to the significant judgement required to conclude on the going concern assumption. Considered the adequacy of the Company's disclosure in respect of management's assessment of going concern assumption.

Valuation/Impairment of Investment in Subsidiaries (refer note 7 to the standalone financial statements)

The Key Audit MatterHow the matter was addressed in our audit
The carrying amount of investment in subsidiaries representing 3.26% of the Company's total assets.Our audit procedures included:
 Evaluated design and implementation and testing operating effectiveness of controls over the Company's process of impairment assessment and approval of forecasts.
During the year ended 31 March 2020 the Company has recorded provision for impairment for investments in respect of one subsidiary representing full value of the investment. Assessed the valuation methods used financial position of the subsidiaries to identify excess of their net assets over their carrying amount of investment by the Company and assessing history of profit / losses of those subsidiaries.
Recoverability of investment in subsidiaries
 For the investments where the carrying amount exceeded the net asset value understanding from the Company regarding the basis and assumptions used for the projections.
The Company's investments in subsidiaries are associated with significant risk in respect of valuation of such investments. These investments are carried at cost less any diminution in value. The investments are assessed for impairment at each reporting date. This assessment is based on the projected cash flows which involve significant estimates and judgement due to the inherent uncertainty involved in forecasting future cash flows. There is significant judgement involved in estimating the timing of the cash flows and discount rate used by the Company.  Assessed the key assumptions of valuation performed by the Company. Involving valuation expert who assisted us to evaluate the model and assumptions used around the key drivers of the valuations. Compared the previous forecast to actual results to assess the Company's ability to forecast accurately.
Accordingly this was an area of focus for our audit. Performed sensitivity analysis on key assumptions including discount rates and estimated future growth.
 Considered the adequacy of disclosures in respect of the impairment of investment in subsidiaries.

Deferred Tax Assets (refer note 23 to the standalone financial statements)

The Key Audit MatterHow the matter was addressed in our audit
The carrying amount of the Deferred Tax Assets represents 2.20 % of the Company's total assets.Our audit procedures included:
 Obtained the approved business plans projected profitability statements.
Recognition and measurement of deferred tax assets
 Evaluated the design and testing the operating effectiveness of controls over quarterly assessment of deferred tax balances and underlying data.
Under Ind AS the Company is required to reassess recognition of deferred tax asset at each reporting date. The Company has deferred tax assets in respect of expenditure on specified business under Section 35AD of the Income-tax Act 1961 brought forward losses and other temporary differences as set out in note 23 to the standalone financial statements.  Evaluated the projections of future taxable profits. Testing the underlying data and assumptions used in the profitability projections and performing sensitivity analysis.
 Assessed the recoverability of deferred tax assets by evaluating profitability Company's forecasts and fiscal developments.
The Company's deferred tax assets in respect of brought forward deduction of expenditure on specified business under Section 35AD brought forward house property loss and brought forward business losses are based on the projected profitability determined based on approved business plans to demonstrate availability of sufficient taxable income to utilise such Section 35AD deduction house property loss and brought forward tax loss.  Considered the adequacy of the Company's disclosures on deferred tax and assumptions used. The Company's disclosures concerning income taxes are included in note 23 to the standalone financial statements.
We focused on this area as recognition of deferred tax requires significant judgement in estimating future taxable income and accordingly recognition of deferred tax.

Litigations and Claims (refer note 36 and 42(c) to the standalone financial statements)

The Key Audit MatterHow the matter was addressed in our audit
As at 31 March 2020 the Company has two key litigations pertaining to Bengaluru Residential project carried under inventories and leasehold rights to land at Vashi (Navi Mumbai) from K. Raheja Corp Private Limited.Our procedures included amongst others:
 Evaluated the design and implementation of the Company's controls over the assessment of litigations and completeness of disclosures and tested operating effectiveness of these controls.
We focused on this area as a key audit matter due to the amounts involved as well as the inherent uncertainty in the application of the measurement aspects of accounting standards to determine the amount to be provided for and the disclosures to be made in respect of this matter. Read correspondence from the Company's external lawyers in response to our requests for significant litigations and assessed the competence and objectivity of the external lawyers; and
 Additionally considered effect of new information in respect of litigation and claims post 1 April 2020 till the date of signing of the report to evaluate any change required in the Company's position on the litigation and claims as at 31 March 2020.
 Assessed the Company's disclosures adequately reflect the quantitative and qualitative considerations in relation to the matters in accordance with auditing standards.

Other Information

The Board of Directors are responsible for the other information. The other information comprises the information included in the Company's annual report but does not include the financial statements and our auditors' report thereon.

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

In connection with our audit of the standalone financial statements our responsibility is to read the other information and in doing so consider whether the other information is materially inconsistent with the standalone financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If based on the work we have performed we conclude that there is a material misstatement of this other information we are required to report that fact. We have nothing to report in this regard.

Management's and Board of Directors' Responsibility for the Standalone Financial Statements

The Company's Management and Board of Directors are responsible for the matters stated in Section 134(5) of the Act with respect to the preparation of these standalone financial statements that give a true and fair view of the state of affairs profit/loss and other comprehensive income changes in equity and cash flows of the Company in accordance with the accounting principles generally accepted in India including the Indian Accounting Standards (Ind AS) specified under Section 133 of the Act. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgement and estimates that are reasonable and prudent; and design implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring accuracy and completeness of the accounting records relevant to the preparation and presentation of the standalone financial statements that give a true and 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 Directors are responsible for assessing the Company's ability to continue as a going concern disclosing as applicable matters related to going concern and using the going concern basis of accounting unless the Board of Directors either intends to liquidate the Company or to cease operations or has no realistic alternative but to do so.

The Board of Directors is also responsible for overseeing the Company's financial reporting process.

Auditor's Responsibilities for the Audit of the Standalone Financial Statements

Our objectives are to obtain reasonable assurance about whether the standalone financial statements as a whole are free from material misstatement whether due to fraud or error and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if individually or in the aggregate they could reasonably be expected to influence the economic decisions of users taken on the basis of these standalone financial statements.

As part of an audit in accordance with SAs we exercise professional judgement and maintain professional skepticism throughout the audit. We also:

 Identify and assess the risks of material misstatement of the standalone financial statements whether due to fraud or error design and perform audit procedures responsive to those risks and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error as fraud may involve collusion forgery intentional omissions misrepresentations or the override of internal control;

 Obtain an understanding of internal control relevant to the audit in order to design 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 Company has adequate internal financial controls with reference to financial statements in place and the operating effectiveness of such controls;

 Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures in the standalone financial statements made by the Management and Board of Directors;

 Conclude on the appropriateness of the Management and Board of Directors use of the going concern basis of accounting and based on the audit evidence obtained whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists we are required to draw attention in our auditor's report to the related disclosures in the standalone financial statements or if such disclosures are inadequate to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However future events or conditions may cause the Company to cease to continue as a going concern; and

 Evaluate the overall presentation structure and content of the standalone financial statements including the disclosures and whether the standalone financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance regarding among other matters the planned scope and timing of the audit and significant audit findings including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence and where applicable related safeguards.

From the matters communicated with those charged with governance we determine those matters that were of most significance in the audit of the standalone financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors' report unless law or regulation precludes public disclosure about the matter or when in extremely rare circumstances we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Report on Other Legal and Regulatory Requirements

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 give in the Annexure A a statement on the matters specified in paragraphs 3 and 4 of the Order to the extent applicable.

(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 best of 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 the Company so far as it appears from our examination of those books;

(c) the standalone balance sheet the standalone Statement of Profit and Loss (including other comprehensive income) the standalone statement of changes in equity and the standalone statement of cash flows dealt with by this report are in agreement with the books of account;

(d) in our opinion the aforesaid standalone financial statements comply with the Indian Accounting Standards (Ind AS) specified under Section 133 of the Act;

(e) on the basis of the written representations received from the directors as on 31 March 2020 taken on record by the Board of Directors none of the directors is disqualified as on 31 March 2020 from being appointed as a director in terms of Section 164(2) of the Act; and

(f) with respect to the adequacy of the internal financial controls with reference to the financial statements of the Company and the operating effectiveness of such controls refer to our separate Report in Annexure B.

(B) With respect to the other matters to be included in the Auditors' Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinion and 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 2020 on its financial position in its standalone financial statements - Refer Note 36 and 42 to the standalone financial statements;

ii. the Company has made provision as required under the applicable law or Ind AS for material foreseeable losses if any on long-term contracts including derivative contracts Refer notes 12 and 29 to the standalone financial statements;

iii. there were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company; and

iv. the disclosures in the standalone financial statements regarding holdings as well as dealings in Specified Bank Notes during the period from 8 November 2016 to 30 December 2016 have not been made in these standalone financial statements since they do not pertain to the financial year ended 31 March 2020.

(C) With respect to the matter to be included in the Auditors' Report under Section 197(16) of the Act we report that:

In our opinion and according to the information and explanations given to us the remuneration paid by the Company to its directors during the current year is in accordance with the provisions of Section 197 read with Schedule V to the Act. The remuneration paid to any director is as per the limit laid down under Section 197 read with Schedule V to the Act and as approved by the shareholder's through special resolution in the Annual General Meeting held on 13 August 2019. The Ministry of Corporate Affairs has not prescribed other details under Section 197(16) of the Act which are required to be commented upon by us.

For B S R & Co. LLP
Chartered Accountants
Firm's Registration No: 101248W/W-100022
Mansi Pardiwalla
Partner
MumbaiMembership No: 108511
8 June 2020UDIN: 20108511AAAADM5039

Annexure A to the Independent Auditors' Report - 31 March 2020

With reference to the Annexure A referred to in the Independent Auditors' Report to the members of the Company on the standalone financial statements for the year ended 31 March 2020 we report the following:

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

(b) The Company has a regular programme of physical verification of its fixed assets and investment properties by which the fixed assets and investment properties are verified by the management according to a phased programme designed to cover all the items over a period of three years. In our opinion this periodicity of physical verification

is reasonable having regard to the size of the Company and the nature of its assets. In accordance with the policy the Company has physically verified certain fixed assets and investment properties during the year and no discrepancies were noticed in respect of assets verified during the year.

(c) According to the information and explanations given to us and on the basis of our examination of the records of the Company the title deeds of immovable properties comprising of freehold land and buildings and lease agreement in respect of the leasehold land and building as listed in Note 2 of the standalone financial statements are held in the name of the Company except as stated in the table below:

Land / buildingNumber of casesFreeholdNote in the standalone financial statementsGross block (Rs in million)Net block (Rs in million)Remarks
Building1Freehold2542.93345.03Refer note 42 (c) in the standalone Ind AS financial statements in respect of the matter which is presently under litigation

Further in respect of the leasehold land acquired by the Company attention is invited to the table below:

Land / buildingNumber of casesLease holdNote in the standalone financial statementsGross block (Rs in million)Net block (Rs in million)Remarks
Land1Lease hold1165.0652.13Refer note 42 (c) in the standalone Ind AS financial statements in respect of the matter which is presently under litigation

(ii) The inventory has been physically verified by the management during the year. In our opinion the frequency of such verification is reasonable. The Company does not have any stock lying with third parties at the year-end. The discrepancies noticed on verification between the physical stocks and the book records were not material and have been dealt with in books of account.

(iii) The Company has granted unsecured loans to one company covered in the register maintained under Section 189 of the Companies Act 2013 ('the Act'). The Company has not granted any loans secured or unsecured to firms or other parties covered in the register required to be maintained under Section 189 of the Act.

i) According to the information and explanations given to us and based on the audit procedures conducted by us we are of the opinion that the rate of interest and other terms and conditions of unsecured loans granted by the Company to company covered in the register required to be maintained under Section 189 of the Act are not prima facie prejudicial to the interest of the Company.

ii) According to the information and explanations given to us and based on the audit procedures conducted by us the unsecured loans granted to the company are repayable on demand. The borrowers have been regular in payment of principal and interest as demanded or as per contractual terms as applicable.

iii) There are no overdue amounts of more than 90 days in respect of the unsecured loans granted to companies and limited liability partnerships by the Company.

(iv) In our opinion and according to the information and explanations given to us and based on the audit procedures conducted by us the Company has complied with the provisions of Sections 185 of the Act. According to the information and explanations given to us the provisions of Section 186 of the Act in respect of the loans given guarantees given and security provided are not applicable to the Company since it is covered as a Company engaged in infrastructural facilities. The Company has complied with the provisions of Section 186 of the Act in respect of investments made during the year. The Company has not provided any guarantee or security during the year. Accordingly compliance under Sections 186 of the Act in respect of providing guarantees and securities are not applicable to the Company.

(v) In our opinion and according to the information and explanations given to us the Company has not accepted deposits as per the directives issued by the Reserve Bank of India and the provisions of Sections 73 to 76 or any other relevant provisions of the Act and the rules framed thereunder. Accordingly paragraph 3(v) of the Order is not applicable to the Company.

(vi) We have broadly reviewed the books of accounts maintained by the Company pursuant to the rules prescribed by the Central Government for the maintenance of cost records under Section 148(1) of the Act and are of the opinion that prima facie the prescribed accounts and records have been made and maintained. However we have not made a detailed examination of the records.

(vii) (a) According to the information and explanations given to us and on the basis of our examination of records of the Company amounts deducted / accrued in the books of account in respect of undisputed statutory dues including Provident fund Employees' State Insurance Goods and Service tax Labour cess Profession tax Property tax Cess and other material statutory dues have been regularly deposited during the year by the Company with the appropriate authorities after considering the extension of due date granted for Goods and Service tax Income-tax and Profession tax for payment of such dues for the month of March 2020.Amounts deducted / accrued in the books of account in respect of undisputed statutory dues of Income-tax have generally been regularly deposited during the year by the Company with the appropriate authorities though there have been slight delays in a few cases. As explained to us the Company did not have any dues on account of wealth tax.

According to the information and explanations given to us no undisputed amounts payable in respect of Provident fund Employees' State Insurance Income-tax Goods and Services tax Labour cess Profession tax Property tax Cess and other material statutory dues were in arrears as at 31 March 2020 for 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 of Income-tax Sales tax Service tax Value added tax and Goods and Service tax as at 31 March 2020 which have not been deposited with the appropriate authorities on account of any dispute except as stated below:

Name of the statuteNature of the duesAmount not deposited on account of demand Rs in millionAmount paid Rs in millionFinancial year (F.Y.) to which the amount relatesForum where dispute is Pending
Finance Act 1994Denial of CENVAT credit of service tax paid on Marriott fees paid57.912004-05 to 2010-11CESTAT Mumbai
Finance Act 1994Demand for service tax on Telephone services and Laundry wet cleaning service as accommodation services4.24May 2011 to June 2012Commissioner (appeals) Hyderabad
Finance Act 1994Service tax demand on treating7.22-2012-13 toCommissioner
In-room dining and Mini-bar services as 'Accommodation' instead of 'Restaurant Services' by Service tax Department.2014-15(appeals) Hyderabad
MVAT Act 2002VAT demand on Sale of cocktail1.590.40FY 2010-11 to 2012-16Deputy Commissioner Hyderabad
MVAT Act 2002VAT demand on sale of cocktail and others1.761.41FY 2013-14 to FY 15-16Deputy Commissioner Hyderabad
Income Tax Act 1961Section 14A of Income-tax Act 1961 disallowance190.71FY 2013-14 FY2015-16 to FY 2017-18Commissioner of Income tax (Appeals)
Income Tax Act 1961Depreciation disallowance23.98-FY 2012-13 to FY 2017-18Commissioner of Income tax (Appeals)
Income Tax ActDeemed rental income on22.95-FY 2013-14Commissioner of
1961house propertyFY 2015-16Income tax (Appeals)
FY 2016-17
Name of the statuteNature of the duesAmount not deposited on account of demand Rs in millionAmount paid Rs in millionFinancial year (F.Y.) to which the amount relatesForum where dispute is Pending
Foreign Trade Policy (Duty of Customs)Recovery of SFIS benefits granted to foreign brands5.74-2017Karnataka High Court
Foreign Trade Policy (Duty of Customs)Foreign brands not eligible for SFIS duty credit scripts218.332009-14Gujarat High Court

(viii) In our opinion and according to the information and explanations given to us the Company has not defaulted during the year in repayment of loans or borrowings to banks or financial institutions. The Company does not have any loans or borrowings from government and dues to debenture holders during the year.

(ix) According to the information and explanations given to us and based on our examination of the records of the Company the Company has not raised any moneys by way of initial public offer or further public offer (including debt instruments) during the year. In our opinion and according to the information and explanations given to us the term loans taken by the Company has been applied for the purpose for which they are raised.

(x) During the course of our examination of the books and records of the Company carried out in accordance with the generally accepted auditing practices in India and according to the information and explanations given to us we have neither come across any instance of material fraud by the Company or on the Company by its officers or employees noticed or reported during the year nor have we been informed of any such case by the management.

(xi) According to the information and explanations given to us and based on our examination of the records of the Company during the current year the Company has paid / provided for managerial remuneration in accordance with the requisite approvals mandated by the provisions of Section 197 of the Act read with Schedule V to the Act.

(xii) In our opinion and according to the information and explanations given to us the Company is not a Nidhi company and the Nidhi Rules 2014 are not applicable to it. Accordingly paragraph 3(xii) of the Order is not applicable to the Company.

(xiii) In our opinion and according to the information and explanations given to us the Company has entered into

transactions with related parties in compliance with the provisions of Sections 177 and 188 of the Act. The details of such related party transactions have been disclosed in the standalone financial statements as required by Indian Accounting Standard (Ind AS) 24 Related Party Disclosures specified under Section 133 of the Act.

(xiv) According to the information and explanations given to us and based on our examination of the records of the Company the Company has made preferential allotment of Zero% Non-cumulative Non-convertible redeemable preference shares during the year in compliance with the requirements of Section 42 of the Act. The total money aggregating to Rs 740 million raised has been utilised by the Company for the purpose for which it was raised. The Company has not made any other private placement or preferential allotment of shares or fully or partly convertible debentures during the year.

(xv) According to the information and explanations given to us and on the basis of our examination of the records of the Company the Company has not entered into any non-cash transactions with directors or persons connected with them. Accordingly paragraph 3(xv) of the Order is not applicable to the Company.

(xvi) In our opinion and according to the information and explanations given to us the Company is not required to be registered under Section 45-IA of the Reserve Bank of India Act 1934. Accordingly paragraph 3(xvi) of the Order is not applicable to the Company.

For B S R & Co. LLP
Chartered Accountants
Firm's Registration No: 101248W/W-100022
Mansi Pardiwalla
Partner
MumbaiMembership No: 108511
8 June 2020UDIN: 20108511AAAADM5039

Annexure B to the Independent Auditors' Report - 31 March 2020

Report on the Internal Financial Controls with reference to the aforesaid standalone financial statements under Clause (i) of Sub-section 3 of Section 143 of the Companies Act 2013 (the Act)

(Referred to in paragraph (A) (f) under 'Report on Other Legal and Regulatory Requirements' section of our report of even date)

Opinion

We have audited the internal financial controls with reference to financial statements of Chalet Hotels Limited (the Company) as of 31 March 2020 in conjunction with our audit of the standalone financial statements of the Company for the year ended on that date.

In our opinion the Company has in all material respects adequate internal financial controls with reference to financial statements and such internal financial controls were operating effectively as at 31 March 2020 based on the internal financial controls with reference to financial statements criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India (the Guidance Note).

Management's Responsibility for Internal Financial Controls

The Company's management and the Board of Directors are responsible for establishing and maintaining internal financial controls based on the internal financial controls with reference to financial statements criteria established by the Company considering the essential components of internal control stated in the Guidance Note. These responsibilities include the design implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business including adherence to the Company's policies the safeguarding of its assets the prevention and detection of frauds and errors the accuracy and completeness of the accounting records and the timely preparation of reliable financial information as required under the Companies Act 2013 (hereinafter referred to as the Act).

Auditors' Responsibility

Our responsibility is to express an opinion on the Company's internal financial controls with respect to financial statements based on our audit. We conducted our audit in accordance with the Guidance Note and the Standards on Auditing prescribed under Section 143(10) of the Act to the extent applicable to an audit of internal financial controls with reference to financial statements. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls with reference to financial statements were established and maintained and whether such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system with respect to financial statements and their operating effectiveness. Our audit of internal financial controls with respect to financial statements included obtaining an understanding of internal financial controls with respect to financial statements assessing the risk that a material weakness exists and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditors' judgement including the assessment of the risks of material misstatement of the standalone financial statements whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Company's internal financial controls system with reference to financial statements.

Meaning of Internal Financial Controls with reference to Financial Statements

A company's internal financial controls with reference to financial statements is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal financial controls with reference to financial statements include those policies and procedures that (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the company are being made only in accordance with authorisations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition use or disposition of the company's assets that could have a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls with reference to Financial Statements

Because of the inherent limitations of internal financial controls with reference to financial statements including the possibility of collusion or improper management override of controls material misstatements due to error or fraud may occur and not be detected. Also projections of any evaluation of the internal financial controls with reference to financial statements to future periods are subject to the risk that the internal financial control with reference to financial statements may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

For B S R & Co. LLP
Chartered Accountants
Firm's Registration No: 101248W/W-100022
Mansi Pardiwalla
Partner
MumbaiMembership No: 108511
8 June 2020UDIN: 20108511AAAADM5039