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Dharani Finance Ltd.

BSE: 511451 Sector: Financials
NSE: N.A. ISIN Code: INE899D01011
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NSE 05:30 | 01 Jan Dharani Finance Ltd
OPEN 7.00
PREVIOUS CLOSE 6.98
VOLUME 6440
52-Week high 8.04
52-Week low 3.73
P/E 17.02
Mkt Cap.(Rs cr) 3
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 7.00
CLOSE 6.98
VOLUME 6440
52-Week high 8.04
52-Week low 3.73
P/E 17.02
Mkt Cap.(Rs cr) 3
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Dharani Finance Ltd. (DHARANIFINANCE) - Auditors Report

Company auditors report

To the members of Dharani Finance Limited

Report on the audit of the Standalone Financial Statements Qualified Opinion

We have audited the accompanying financial statements of Dharani Finance Limited("the Company") which comprise of the balance sheet as at March 31 2020 andthe statement of profit and loss (including other comprehensive income) the statement ofchanges in equity and the statement of cash flows for the year then ended and notes tothe standalone financial statements including a summary of significant accountingpolicies and other explanatory information.

In our opinion and to the best of our information and according to the explanationsgiven to us except for the effects of the matter described in theBasis for QualifiedOpinion section of our report the aforesaid standalone financial statements give theinformation required by the Companies Act 2013 ("the Act") in the manner sorequired and give a true and fair view in conformity with the Indian Accounting Standardsprescribed under section 133 of the Act read with the Companies (Indian AccountingStandards) Rules 2015 as amended ("Ind AS") and other accounting principlesgenerally accepted in India of the state of affairs of the Company as at March 31 2020and its profits total comprehensive income the changes in equity and its cash flows forthe year ended as on that date.

Basis for Qualified Opinion

We draw attention to the following matters: a) As morefully explained in note 38 to thestandalone financial statements subsequent to the reporting date a corporate insolvencyresolution process (CIRP) and the appointment of an interim resolution professional wereadmitted in the case of one of the major customers of the Company by the Hon'ble NationalCompany Law Tribunal Chennai Bench vide its order dated May 5 2020. The total amount duefrom the above referred major customerto the Company as at March 31 2020 is Rs. 534.20Lakhs.

In the opinion of the management the major part of the assets of the customercomprises of land and commercial buildings (including a well-known brand name in the hotelindustry) whose liquidation value is much more than the total dues to its financial andoperating creditors (including that of the Company) and accordingly the Company will beable to recover the entire outstanding dues from the customer even in the aforesaid CIRPconditions.

Based on the above estimate and based on the fact that the customer's account was afully performing asset before the admission of the CIRP no provision towards allowancefor expected credit loss in respect of the dues from the aforesaid customer and thepossible impact on the carrying value of the Minimum Alternate Tax Credit of Rs.43.74Lakhs have been considered by the Company in these financial statements. In the absence ofa comprehensive external valuation/ appraisal report of the interim resolutionprofessional of the customer contrary to the management's estimate of possible fullrecovery of the dues and due to the other uncertainties related to the CIRP process of theaforesaid major customer we are unable to comment on the appropriateness of not makingany provision in these financial statements.

Due to uncertainties involved in the CIRP process the impact if any on the financialstatements are not presently determinable in respect of the above matter.

b) Had the Company considered making provision for the outstanding balance referred toin (a) above the net owned funds of the Company as at March 31 2020 will be lower thanthe limits prescribed under Section 45-IA of the Reserve Bank of India Act 1934 for aNon-Banking Financial Services Company (NBFC). Thus the Company's ability to continue asan NBFC and as a going concernmay depend on infusion of further capital to meet theminimum net owned funds criteria as per RBI norms within the prescribed time limit and onidentification of alternative business plans.

c) The matters referred to in (a) and (b) also cast a significant doubt on theCompany's ability to continue as a going concern and accordingly we are unable to commenton the appropriateness of management's assumption of preparing the financial statements ona going concern basis.

Our opinion on the financial statements is qualified in respect of the matters (a) to(c) referred above.

We conducted our audit in accordance with the standards on auditing (SAs) specifiedunder section 143(10) of the Act. Our responsibilities under those standards are furtherdescribed in the Auditor's responsibilities for the audit of the financial statementssection of our report. We are independent of the Company in accordance with the code ofethics issued by the Institute of Chartered Accountants of India ("ICAI")together with the ethical requirements that are relevant to our audit of the financialstatements under the provisions of the Act and the Rules thereunder and we have fulfilledour other ethical responsibilities in accordance with these requirements and the ICAI'scode of ethics.We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our opinion.

Material Uncertainty Related to Going Concern

The matters more fully explained in the Basis for Qualification Section of our opinioncast a significant doubt on the Company's ability to continue as a going concern.Considering the management estimate of recovering the entire outstanding from the majorcustomer we were informed that these financial statements have been prepared on a goingconcern basis. This is a matter of qualification in our opinion on these financialstatements.

Key audit matters

Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the financial statements of the current period. These matterswere addressed in the context of our audit of the financial statements as a whole and informing our opinion thereon and we do not provide a separate opinion on these matters.

Dues from a major customer

In our opinion and based on the information and explanations given to us there are noother key audit matters to be communicated in our report other than those morefullydescribed in the basis of qualified opinion paragraph of our report which describes theuncertaintiesarising from the admission of CIRP for a major customer.

Emphasis of Matters

Without qualifying our report we draw attention to the following matters: (a) Note 2to the financial statements which states that the Company has adopted Ind AS for thefinancial year commencing from April 1 2018 and accordingly the financial statementshave been prepared by the Company's Management in compliance with Ind AS;and (b) Note 3 tothe Statement which describes the uncertainties and the impact of Covid-19 pandemic on theCompany's operations and results as assessed by the management.

Information other than the financial statements and auditors' report thereon

The Company's board of directors is responsible for the preparation of the otherinformation. The other information comprises the information included in the ManagementDiscussion and Analysis Board's Report including Annexures to Board's Report BusinessResponsibility Report Corporate Governance and Shareholder's Information but does notinclude the financial statements and our auditor's report thereon.

Our opinion on the financial statements does not cover the other information and we donot express any form of assurance conclusion thereon In connection with our audit of thefinancial statements our responsibility is to read the other information and in doingso consider whether the other information is materially inconsistent with the standalonefinancial statements or our knowledge obtained during the course of our audit or otherwiseappears to be materially misstated.

If based on the work we have performed we conclude that there is a materialmisstatement of this other information we are required to report that fact. We havenothing to report in this regard.

Management's responsibility for the financial statements

The Company's board of directors is responsible for the matters stated in Section 134(5) of the Companies Act 2013 ("the Act") with respect to the preparation ofthese financial statements that give a true and fair view the financial positionfinancial performance including other comprehensive income cash flows and changes inequity of the Company in accordance with the Indian Accounting Standards (Ind AS)prescribed under section 133 of the Act read with the Companies (Indian AccountingStandards) Rules 2015 as amended and other accounting principles generally accepted inIndia.

Further the management is also responsible to ensure that the accounting policies usedin preparation of the financial statements are consistent with those used in thepreparation of the Company's opening unaudited balance sheet as at April 1 2018 preparedin accordance with the Companies (Indian Accounting Standards) Rules 2015 (Ind AS) asamended from time to time prescribed under Section 133 of the Companies Act 2013 andother recognised accounting practices and policies.

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 financialstatements that give a true and fair view and are free from material misstatement whetherdue to fraud or error.

In preparing the financial statements management is responsible for assessing theCompany's ability to continue as a going concern disclosing as applicable mattersrelated to going concern and using the going concern basis of accounting unless managementeither intends to liquidate the Company or to cease operations or has no realisticalternative but to do so. The board of directors are also responsible for overseeing theCompany's financial reporting process.

Auditors' responsibility for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financialstatements as a whole are free from material misstatement whether due to fraud or errorand to issue an auditor's report that includes our opinion. Reasonable assurance is a highlevel of assurance but is not a guarantee that an audit conducted in accordance with SAswill always detect a material misstatement when it exists. Misstatements can arise fromfraud or error and are considered material if individually or in the aggregate theycould reasonably be expected to influence the economic decisions of users taken on thebasis of these 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 financial statementswhether due to fraud or error design and perform audit procedures responsive to thoserisks and obtain audit evidence that is sufficient and appropriate to provide a basis forour opinion. The risk of not detecting a material misstatement resulting from fraud ishigher than for one resulting from error as fraud may involve collusion forgeryintentional omissions misrepresentations or the override of internal control.

Obtain an understanding of internal controls relevant to the audit in order to designaudit procedures that are appropriate in the circumstances. Under section 143(3)(i) of theCompanies Act 2013 we are also responsible for expressing our opinion on whether thecompany has adequate internal financial controls system in place and the operatingeffectiveness of such controls

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

Conclude on the appropriateness of management's use of the going concern basis ofaccounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the Company'sability to continue as a going concern. If we conclude that a material uncertainty existswe are required to draw attention in our auditor's report to the related disclosures inthe 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'sreport. However future events or conditions may cause the Company to cease to continue asa going concern.

Evaluate the overall presentation structure and content of the financial statementsincluding the disclosures and whether the financial statements represent the underlyingtransactions and events in a manner that achieves fair presentation.

Materiality is the magnitude of misstatements in the financial statements thatindividually or in aggregate makes it probable that the economic decisions of areasonably knowledgeable user of the financial statements may beinfluenced. We considerquantitative materiality and qualitative factors in (i) planning the scope of our auditwork and in evaluating the results of our work; and (ii) to evaluate the effect of anyidentified misstatements in the financial statements.

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

We 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 financial statements of thecurrent period and are therefore the key audit matters. We describe these matters in ourauditor's report unless law or regulation precludes public disclosure about the matter orwhen in extremely rare circumstances we determine that a matter should not becommunicated in our report because the adverse consequences of doing so would reasonablybe expected to outweigh the public interest benefits of such communication.

Report on Other Legal and Regulatory Requirements

As required by the Companies (Auditor's Report) Order 2016 ("the Order")issued by the Central Government in terms of Section 143 (11) of the Act we give inAnnexure "A" a statement on the matters specified in clauses 3 and 4 of theOrder.

As required by Section 143 (3) of the Act based on our audit we report that:

a) We have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purposes of our audit;

b) In our opinion proper books of account as required by law have been kept by theCompany so far as it appears from our examination of those books;

c) In our opinion the balance sheet the statement of profit and loss (including othercomprehensive income) the statement of changes in equity and the statement of cash flowscomply with the Companies (Indian Accounting Standards) Rules 2015 (Ind AS) as amendedfrom time to time prescribed under Section 133 of the Companies Act 2013;

d) The balance sheet the statement of profit and loss (including other comprehensiveincome) the statement of changes in equity and the statement of cash flows dealt with bythis report are in agreement with the books of account;

e) On the basis of the written representations received from the directors of theCompany as on March 31 2020 taken on record by the board of directors none of thedirectors are disqualified as on March 31 2020 from being appointed as a director interms of Section 164 (2) of the Act;

f) With respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate report in Annexure "B". Our report expresses an unmodified opinion onthe adequacy and operating effectiveness of the Company's internal financial controls overfinancial reporting;

g) With respect to the other matters to be included in the Auditor's Report inaccordance with the requirements of section 197 (16) of the Act as amended 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; and

h) With respect to the other matters to be included in the auditors' report inaccordance with rule 11 of the Companies (Audit and Auditors) Rules 2014 as amended inour opinion and to the best of our information and according to the explanations given tous:

i. The Company does not have any pending litigation which would impact its financialposition;

ii. The Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses; and iii. There has been no delay intransferring amounts required to be transferred to the investor education and protectionfund by the Company.

For CNGSN & ASSOCIATES LLP
Chartered Accountants
Firm Registration No.004915S/ S200036
(CHINNSAMY GANESAN)
Partner
Place : Chennai Membership No. 027501
Date : 28th July 2020 UDIN: 20027501AAAABL2620

ANNEXURE "A" TO THE INDEPENDENT AUDITORS' REPORT

(Referred to in paragraph 1 under ‘Report on Other Legal and RegulatoryRequirements' section of our report to the members of Dharani Finance Limited of evendate)

1. In respect of the Company's fixed assets: (a) The Company has maintained properrecords showing full particulars including quantitative details and situation of fixedassets. The Company is in the process of updating certain particulars regarding the fixedassets. In our opinion this will not have any material impact on the financialstatements.

(b) The Company has physically verified all the items of fixed assets during the year.

According to the information and explanations given to us no material discrepancieswere noticed on such verification. (c) According to the information and explanations givento us the company does not possess any immovable property. Accordingly paragraph 3(i)(c)of the order is not applicable.

2. The company is a non-deposit accepting Non-Banking Finance Company (NBFC) andaccordingly does not hold any inventories. Accordingly paragraph 3(ii) of the order isnot applicable.

3. According to information and explanation given to us the company hasgranted intercorporate loans to a Company covered in the register required to be maintained undersection 189 of the Companies Act 2013. The Company has not granted any other loanssecured or unsecured to firms limited liability partnerships or other parties covered inthe register required to be maintained under section 189 of the Companies Act 2013 andaccordingly the provisions of paragraph 3 (iii) of the Order are not applicable to theCompany. In respect of such deposits we report that

(a) the terms and conditions of the acceptances of such deposits are in our opinionprima facie not prejudicial to the Company's interest;

(b) the schedule of repayment of principal and payment of interest has been stipulatedand repayments of principal amounts and interest have been regular as per stipulations;and (c) there is no overdue amount remaining receivable as at the year-end

CIRP was admitted in respect of the above party during the last quarter of the year andan interim resolution professional was appointed by the Hon'ble National Company LawTribunal Chennai Bench. Due to the uncertainties involved in the CIRP related mattersthe subsequent recoverability or otherwise of the dues from the above party is notpresently determinable. This is a matter of qualification in our opinion on the financialstatements.

4. In our opinion and according to the information and explanations given to us theCompany has complied with the provisions of Sections 185 and 186 of the Act in respect ofgrant of loans making investments and providing guarantees and securities as applicable.

5. In our opinion and according to the information and explanations given to us theCompany has not accepted public deposits during the year and does not have any unclaimeddeposits as at March 31 2020 and accordingly the provisions of the paragraph 3 (v) ofthe Order are not applicable to the Company.

6. According to the information and explanation given to us the Central Government hasnot prescribed the maintenance of cost records under sub section (1) of section 148 of theCompanies Act 2013. Accordingly paragraph 3 (vi) of the Order is not applicable.

7. According to the information and explanations given to us in respect of statutorydues: (a) The Company has generally been regular in depositing undisputed statutory duesincluding provident fund employees' state insurance income tax sales tax service taxvalue added tax goods and services tax customs duty excise duty cess and othermaterial statutory dues applicable to it with the appropriate authorities;

(b) There were no undisputed amounts payable in respect of provident fund employees'state Insurance income tax sales tax service tax value added tax goods and servicestax customs duty excise duty cess and other material statutory dues in arrears as atMarch 31 2020 for a period of more than six months from the date they became payable.;and

(c) There are no dues of income tax sales tax service tax excise duty value addedtax and goods and services tax which have not been deposited as at March 31 2020 onaccount of dispute.

8 The Company has not defaulted in repayment of loans or borrowing from banks. TheCompany did not have any outstanding dues to any financial institutions government ordebenture holders during the year.

9 In our opinion and according to the information and explanations given to us theterm loans taken by the Company have been applied for the purpose for which they wereraised. The Company has not raised any money by way of initial public offer or furtherpublic offer (including debt instruments) during the year.

10 To the best of our knowledge and according to the information and explanations givento us no fraud by the Company or no material fraud on the Company by its officers oremployees has been noticed or reported during the year.

11 In our opinion and according to the information and explanations given to us theCompany has paid/provided managerial remuneration in accordance with the requisiteapprovals mandated by the provisions of section 197 read with Schedule V to the Act.

12 The Company is not a Nidhi Company and accordingly reporting under clause3 (xii) ofthe Order is not applicable to the Company.

13 According to the information and explanations given to us and based on ourexamination of the records of the company transactions with the related parties are incompliance with section 177 and 188 of the Act. Where applicable the details of suchtransactions have been disclosed in the financial statements as required by the applicableaccounting standards.

14 According to the information and explanations given 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 paragraph 3(xiv) of the order is not applicable.

15 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 non-cashtransactions with directors or persons connected with them. Accordingly paragraph 3(xv)of the order is not applicable.

16 According to the information and explanations given to us and based on ourexamination of the records of the company the company is required to be registered undersection 45-IA of the Reserve Bank of India Act 1934.

Accordingly registration has been obtained.

Had the Company considered making provision for the outstanding balance referred to inthe basis for qualification section of our report on financial statements the net ownedfunds of the Company as at March 31 2020 will be lower than the limits prescribed underSection 45-IA of the Reserve Bank of India Act 1934 for a Non-Banking Financial ServicesCompany (NBFC). Thus the Company's ability to continue as an NBFC may depend on infusionof further capital to meet the minimum net owned funds criteria as per RBI norms withinthe prescribed time limit.

For CNGSN & ASSOCIATES LLP
Chartered Accountants
Firm Registration No.004915S/ S200036
(CHINNSAMY GANESAN)
Partner
Place : Chennai Membership No. 027501
Date : 28th July 2020 UDIN: 20027501AAAABL2620

Annexure "B" to the Independent Auditor's Report

(Referred to in paragraph 2 (f) under ‘Report on Other Legal and RegulatoryRequirements' section of our report to the Members of Dharani Finance Limited of evendate)

Report on the Internal Financial Controls Over Financial Reporting under Clause (i) ofSub- section 3 of Section 143 of the Companies Act 2013 ("the Act")

We have audited the internal financial controls over financial reporting of DharaniFinance Limited ("the Company") as of March 31 2020 in conjunction with ouraudit of the financial statements of the Company for the year ended on that date.

Management's Responsibility for Internal Financial Controls

The board of directors of the Company is responsible for establishing and maintaininginternal financial controls based on the internal control over financial reportingcriteria established by the Company considering the essential components of internalcontrol stated in the Guidance Note on Audit of Internal Financial Controls Over FinancialReporting issued by the Institute of Chartered Accountants of India.

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 the safeguarding of its assets the prevention anddetection of frauds and errors the accuracy and completeness of the accounting recordsand the timely preparation of reliable financial information as required under theCompanies Act 2013.

Auditors' Responsibility

Our responsibility is to express an opinion on the internal financial controls overfinancial reporting of the Company based on our audit. We conducted our audit inaccordance with the Guidance Note on Audit of Internal Financial Controls Over FinancialReporting (the "Guidance Note") issued by the Institute of Chartered Accountantsof India and the Standards on Auditing prescribed under Section 143(10) of the CompaniesAct 2013 to the extent applicable to an audit of internal financial controls. 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 judgement including the assessment of the risks ofmaterial misstatement in the financial statements whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's internal financial control 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 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.

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 of 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.

Opinion

In our opinion to the best of our information and accordingto the explanations givento us the Company has in all material respects an adequate internal financial controlsystem over financial reporting and such internal financial controls over financialreporting were operating effectively as at March 31 2020 based on the internal controlover financial reporting criteria established by the Company considering the essentialcomponents of internal control stated in the Guidance Note on Audit of Internal FinancialControls Over Financial Reporting issued by the Institute of Chartered Accountants ofIndia.

For CNGSN & ASSOCIATES LLP
Chartered Accountants
Firm Registration No.004915S/ S200036
(CHINNSAMY GANESAN)
Partner
Place : Chennai Membership No. 027501
Date : 28th July 2020 UDIN: 20027501AAAABL2620

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