The Members of
DATAMATICS GLOBAL SERVICES LIMITED
Report on the Audit of the Standalone Financial Statements
We have audited the accompanying standalone financial statements of DATAMATICSGLOBAL SERVICES LIMITED ("the Company") which comprise the StandaloneBalance Sheet as at March 31 2020 the Standalone Statement of Profit and Loss (includingOther Comprehensive Income) the Standalone Statement of Changes in Equity the StandaloneStatement of Cash Flows for the year then ended and notes to the standalone financialstatements including a summary of significant accounting policies and other explanatoryinformation ("the standalone financial statements").
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone financial statements give the information requiredby the Companies Act 2013 ("the Act") in the manner so required and give a trueand fair view in conformity with the accounting principles generally accepted in India ofthe state of affairs of the Company as at March 312020 the profit other comprehensiveincome changes in equity 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 ("SAs") specified under section 143(10) of the Act. Ourresponsibilities under those Standards are further described in the 'Auditor'sResponsibility for the Audit of the Standalone Financial Statements' section of ourreport. We are independent of the Company in accordance with the Code of Ethics issued bythe Institute of Chartered Accountants of India (ICAI) together with the ethicalrequirements that are relevant to our audit of the standalone financial statements underthe provisions of the Act and the Rules thereunder and we have fulfilled our otherethical responsibilities in accordance with these requirements and the Code of Ethics. Webelieve that the audit evidence we have obtained is sufficient and appropriate to providea basis for our 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 ||Auditor's Response |
|A. Revenue recognition in respect of fixed price contract || |
|The Company inter alia engages in fixed price contracts wherein revenue is recognized using the percentage of completion method based on the company's estimate of contract cost. We identified revenue recognition of fixed price contract as a Key Audit Matter since: ||Our audit procedures included discussion with the management to obtain an understanding of the systems processes and controls implemented by the Company for recording and computing the costs revenue and other estimates associated with such contracts. |
| ||Our audit approach was a combination of test of internal controls and substantive procedures which included the following: |
| accuracy and existence of revenues and onerous obligations in respect of fixed price contracts involves critical estimates. || we evaluated the design of internal controls relating to recording of costs incurred and estimate of costs required to complete the performance obligations. |
| these estimates have high inherent uncertainty as it requires determination of the progress of the contract costs incurred till date and future costs required to complete the remaining contract and performance obligations. || we tested the access and application controls pertaining to time recording allocation and budgeting systems which prevents unauthorised changes to recording of costs incurred. |
| estimate of costs is a critical estimate to determine the revenues and liability for a contract and these contracts may involve onerous obligations which require critical assessment of future costs. || we selected a sample of contracts and tested the operating effectiveness of the internal controls relating to costs incurred and estimate of costs through the inspection of performance of these controls. |
| at the year-end significant amount of unbilled revenue is recognized on the balance sheet date. || we selected a sample of contracts and performed a retrospective review of costs incurred with estimate of costs to identify significant variations and verify whether those variations have been considered in estimating the future costs required to complete the contract. |
| || we reviewed a sample of contracts with unbilled revenue to identify possible delays in achieving milestones which require change in estimated costs to complete the remaining performance obligations. |
| || we performed analytical procedures and test of details for reasonableness of incurred and estimated costs. |
|B. Transactions with Related Parties || |
|The company has material related party transactions during the year. Related party transactions impose limitations on the auditor's ability to obtain audit evidence that all other aspects of related party transactions (other than price) are equivalent to those of a similar arm's length transaction. Further the nature and complexity of such transactions and the involvement of management with respect to the roles and responsibilities of the entities involved in the transactions makes it subjective. ||Our audit procedures on transactions with related parties included the following: |
| || we obtained a comfort letter issued by the independent professional who is in charge of Transfer Pricing matters of the Company which states that the transactions are conducted at arm's length price. |
| || we also reviewed the income tax assessments of earlier years to corroborate whether the methodology adopted by the Company has been accepted by the income tax authorities in previous years. |
| || we also compared the pricing model and other terms of the current agreements with agreements of the previous years. |
The Company's management and Board of Directors are responsible for the otherinformation. The other information comprises the information included in the Company'sAnnual Report but does not include the standalone financial statements and our Auditors'Report thereon. Our opinion on the standalone financial statements does not cover theother information and 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 material misstatementof this other information we are required to report that fact. We have nothing to reportin this regard.
Management's Responsibility for the Standalone Financial Statements
The Company's Management and Board of Directors are responsible for the matters statedin Section 134(5) of Act with respect to the preparation and presentation of thesestandalone financial statements that give a true and fair view of the financial positionfinancial performance including other comprehensive income changes in equity and cashflows of the Company in accordance with the accounting principles generally accepted inIndia including Accounting Standards specified under Section 133 of the Act ("IndAS"). This responsibility also includes maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding the assets of the Company andfor preventing and detecting frauds and other irregularities; selection and application ofappropriate accounting policies; making judgments and estimates that are reasonable andprudent; and design implementation and maintenance of adequate internal financialcontrols that were operating effectively for ensuring the accuracy and completeness ofthe accounting records relevant to the preparation and presentation of the standalonefinancial statements that give a true and fair view and are free from materialmisstatement whether due to fraud or error.
In preparing the standalone financial statements management and Board of Directors areresponsible for assessing the Company's ability to continue as a going concerndisclosing as applicable matters related to going concern and using the going concernbasis of accounting unless management either intends to liquidate the Company or to ceaseoperations or has no realistic alternative but to do so.
The management and Board of Directors are responsible for overseeing the Company'sfinancial reporting process.
Auditor's 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 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 these standalone financial statements.
As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the standalonefinancial statements whether due to fraud or error design and perform audit proceduresresponsive to those risks and obtain audit evidence that is sufficient and appropriate toprovide a basis for our opinion. The risk of not detecting a material misstatementresulting from fraud is higher than for one resulting from error as fraud may involvecollusion forgery intentional omissions misrepresentations or the override of internalcontrol.
Obtain an understanding of internal financial control relevant to the audit inorder to 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 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 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 ourauditor's 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 standalonefinancial statements including the disclosures and whether the standalone financialstatements represent the underlying transactions and events in a manner that achieves fairpresentation.
We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have compliedwith relevant ethical requirements regarding independence and to communicate with themall relationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safeguards.
From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the standalone financial statementsof the current period and are therefore the key audit matters. We describe these mattersin our auditor's 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.
Emphasis of Matter
Attention is drawn to Note No. 41 to the standalone financial statements; the Companyhas an investment of Rs.646.30 million in two wholly owned subsidiaries and has alsoextended loans and advances of Rs.13.14 million to these subsidiaries as on March 312020. The total net worth of these subsidiaries as on March 312020 is Rs.539.57 millionwhich is lower than the amount of investment. The investment is for long term and ofstrategic nature. As the management is confident of turning around these subsidiaries inthe near future hence no provision for diminution in the value of investment has beenconsidered necessary by the management.
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 sub-section (11) of Section 143 ofthe Act we give in the "Annexure A" a statement on the matters specified inparagraphs 3 and 4 of the Order to the extent applicable.
2. 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 relating to preparationof the aforesaid standalone financial statements have been kept by the Company so far asit appears from our examination of those books.
(c) The Standalone Balance Sheet the Standalone Statement of Profit and Loss includingOther Comprehensive Income Standalone Statement of Changes in Equity and the StandaloneStatement of Cash Flow dealt with by this Report are in agreement with the books ofaccount.
(d) In our opinion the aforesaid standalone financial statements comply with theAccounting Standards specified under Section 133 of the Act read with Rule 7 of theCompanies (Accounts) Rules 2014.
(e) On the basis of the written representations received from the directors as on March312020 taken on record by the Board of Directors none of the directors is disqualifiedas on March 312020 from being appointed as a director in terms of Section 164(2) of theAct.
(f) With respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate report in "Annexure B"
(g) With respect to the other matters to be included in the Auditor's Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 as amended inour opinion and to the best of our information and according to the explanations given tous:
i. The Company has disclosed the impact of pending litigations on its financialposition in its standalone financial statements - Refer Note No. 44 to the standalonefinancial statements;
ii. The Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses; and
iii. There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company.
(h) With respect to the other matters to be included in the Auditor's Report inaccordance with the requirements of section 197(16) of the Act as amended:
In our opinion and according to the information and explanations given to us theremuneration paid by the Company to its directors during the current year is in accordancewith the provisions of section 197 of the Act. The remuneration paid to any director isnot in excess of the limit laid down under section 197 of the Act. The Ministry ofCorporate Affairs has not prescribed other details under section 197(16) which arerequired to be commented upon by us.
For M L BHUWANIA AND CO LLP
Membership No. 109931
Date: May 14 2020
TO THE INDEPENDENT AUDITOR'S REPORT
Referred to in paragraph 1 of 'Report on Other Legal and Regulatory Requirements' inthe Independent Auditor's Report on the standalone financial statements of the company forthe year ended March 312020 we report the following:
i. (a) The Company is generally maintaining proper records showing full particularsincluding quantitative details and situation of fixed assets.
(b) The fixed assets are physically verified by the management in accordance with aregular programme of verification which in our opinion provides for physicalverification of all the fixed assets at reasonable intervals. Pursuant to the programcertain fixed assets were physically verified during the year and no materialdiscrepancies were noticed on such verification.
(c) According to the information and explanations given to us and on the basis of ourexamination of the records of the Company the title deeds of immovable propertiesincluded in property plant and equipment are held in the name of the Company. In respectof immovable properties taken on lease and disclosed as right-of-use- assets in thestandalone financial statements the lease agreements are in the name of the Company.
ii. According to the information and explanations provided to us the Company's natureof operations does not require it to hold inventories. Consequently clause 3(ii) of theorder is not applicable.
iii. According to the information and explanations provided to us the Company has notgranted any loans secured or unsecured to companies firms limited liabilitypartnerships or other parties covered in the register maintained under Section 189 of theAct. Hence sub clauses (a) to (c) of clause 3(iii) of the order are not applicable to theCompany.
iv. In our opinion and according to information and explanations provided to us inrespect of loans investments guarantees and securities the company has complied withthe provisions of Section 185 and 186 of the companies Act 2013.
v. According to the information and explanations provided to us the Company has notaccepted any deposits from the public within the meaning of Sections 73 74 75 and 76 ofthe Act and the rules framed there under to the extent notified and therefore clause 3(v)of the order is not applicable.
vi. The Central Government has not prescribed maintenance of cost records under subsection (1) of section 148 of the Companies Act 2013 for any of the products of thecompany.
vii. (a) According to the information and explanations provided to us and on the basisof our examination of the records the Company is generally regular in depositing withappropriate authorities undisputed statutory dues including provident fund employees'state insurance income tax sales tax service tax custom duty excise duty value addedtax cess goods and services tax and any other material statutory dues applicable to it.According to the information and explanations given to us no undisputed arrears ofstatutory dues were outstanding as at March 31 2020 for a period of more than six monthsfrom the date they became payable.
(b) According to the information and explanations given to us and on the basis of ourexamination of the records there are no dues of sales tax service tax custom dutyexcise duty value added tax cess and goods and services tax which have not beendeposited on account of any dispute. The disputed amounts that have not been deposited inrespect of income tax are as under:
|Name of the Statute ||Nature of the dues ||Financial Year to which it relates ||Forum where the dispute is pending ||Rs. in million |
|Income Tax Act 1961 ||Income Tax dues ||2011-12 ||Assistant Commissioner of Income Tax ||17.49 |
viii. In our opinion and according to information and explanations provided to us theCompany has not defaulted in repayment of dues to banks during the year. The company hasnot taken any loans or borrowings from government financial institution and has notissued debentures during the year.
ix. In our opinion and according to information and explanations provided to us theCompany did not raise any money by way of initial public offer or further public offer(including debt instruments) and through term loans during the year. Accordingly clause3(ix) of the order is not applicable to the Company.
x. To the best of our knowledge and according to the information and explanationsprovided to us no fraud by the Company and no 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 provided to usmanagerial remuneration has been paid or provided in accordance with the requisiteapprovals mandated by the provisions of Section 197 read with Schedule V to the Act.
xii. According to the information and explanations provided to us the nature of theactivities of the Company does not attract any special statue applicable to Nidhi Company.Accordingly clause 3(xii) of the order is not applicable to the company.
xiii. According to the information and explanations provided to us and based on ourexamination of the records of the Company transactions with the related parties are incompliance with Section 177 and Section 188 of the Act where applicable and details ofsuch transactions have been disclosed in the standalone financial statements as requiredby the applicable accounting standards.
xiv. According to the information and explanations provided to us and based on ourexamination of the records of the Company the Company has not made any preferentialallotment or private placement of shares or fully or partly convertible debentures duringthe year. Accordingly clause 3(xiv) of the order is not applicable to the Company.
xv. According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not entered into any non-cashtransactions with directors or persons connected with him. Accordingly clause 3(xv) ofthe Order is not applicable to the Company.
xvi. According to information and explanations provided to us the Company is notrequired to be registered under Sec 45- IA of the Reserve Bank of India Act 1934.Accordingly clause 3(xvi) of the Order is not applicable to the Company.
For M L BHUWANIA AND CO LLP
Membership No. 109931
Date: May 14 2020.
TO THE INDEPENDENT AUDITORS' REPORT
Report on the Internal Financial Controls under Clause (i) of SubSection 3 of Section143 of the Companies Act 2013 ("the Act")
Referred to in paragraph 2(f) of 'Report on Other Legal and Regulatory Requirements'in the Independent Auditor's Report on the standalone financial statements of thecompany for the year ended March 312020.
We have audited the internal financial controls over financial reporting of DATAMATICSGLOBAL SERVICES LIMITED ("the Company") as of March 312020 in conjunction withour audit of the standalone financial statements of the Company for the year ended on thatdate.
In our opinion to the best of our knowledge and according to the information andexplanations provided to us the Company has in all material respects an adequateinternal financial controls system over financial reporting and such internal financialcontrols over financial reporting were operating effectively as at March 312020 based onthe criteria for internal financial control over financial reporting established by theCompany considering the essential components of internal control stated in the GuidanceNote on Audit of Internal Financial Controls Over Financial Reporting issued by theInstitute of Chartered Accountants of India.
Management's Responsibility for Internal Financial Controls
The Company's management and Board of Directors are responsible for establishing andmaintaining internal financial controls based on the internal control over financialreporting criteria established by the Company considering the essential components ofinternal control stated in the Guidance Note on Audit of Internal Financial Controls overFinancial Reporting issued by the Institute of Chartered Accountants of India ('ICAI').These responsibilities include the design implementation and maintenance of adequateinternal financial controls that were operating effectively for ensuring the orderly andefficient conduct of its business including adherence to Company'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 on Audit of Internal Financial Controls overFinancial Reporting (the "Guidance Note") and the Standards on Auditing issuedby ICAI and deemed to be prescribed under Section 143(10) of the Act to the extentapplicable to an audit of internal financial controls and both issued by the ICAI. ThoseStandards and the Guidance Note require that we comply with ethical requirements and planand perform the audit to obtain reasonable assurance about whether adequate internalfinancial controls 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 control based on the assessed risk. The proceduresselected depend on the auditor's judgment including the assessment of the risks ofmaterial misstatement of the Standalone financial statements whether due to fraud orerror.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's internal financial controls systemover financial reporting.
Meaning of Internal Financial Controls over Financial Reporting
A Company's internal financial control 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 control 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 authorizations ofmanagement and directors of the Company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorized 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.
For M L BHUWANIA AND CO LLP
Membership No. 109931
Date: May 14 2020