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Embassy Office Parks REIT.

BSE: 542602 Sector: Infrastructure
NSE: EMBASSY ISIN Code: INE041025011
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OPEN 351.00
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VOLUME 31567
52-Week high 394.70
52-Week low 302.10
P/E 48.17
Mkt Cap.(Rs cr) 33,010
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 351.00
CLOSE 351.07
VOLUME 31567
52-Week high 394.70
52-Week low 302.10
P/E 48.17
Mkt Cap.(Rs cr) 33,010
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Embassy Office Parks REIT. (EMBASSY) - Auditors Report

Company auditors report

To the Unitholders' of Embassy Office Parks REIT

Report on the Audit of the Standalone Ind AS Financial Statements

Opinion

We have audited the accompanying standalone Ind AS financial statementsof Embassy Office Parks REIT (the "REIT") which comprise the Balance Sheet asat March 31 2021 the Statement of Profit and Loss including Other Comprehensive Incomethe Statement of Cash Flows and the Statement of Changes in Unitholders' equity for theyear then ended and the Statement of Net Assets at fair value as at March 31 2021 and theStatement of Total Returns at fair value and the Statement of Net Distributable Cash Flowsof the REIT for the year then ended and notes to the standalone Ind AS financialstatements including a summary of significant accounting policies and other explanatoryinformation (hereinafter referred to as "standalone Ind AS financialstatements").

In our opinion and to the best of our information and according to theexplanations given to us the aforesaid standalone Ind AS financial statements give theinformation required by the Securities and Exchange Board of India (Real Estate InvestmentTrusts) Regulations 2014 as amended from time to time including any guidelines andcirculars issued thereunder read with SEBI Circular No. CIR/IMD/ DF/146/2016 datedDecember 29 2016 (the "REIT regulations") in the manner so required and give atrue and fair view in conformity with the accounting principles generally accepted inIndia to the extent not inconsistent with REIT regulations of the state of affairs ofthe REIT as at March 31 2021 its profit including other comprehensive income its cashflows its statement of changes in Unitholders' equity for the year ended March 31 2021its net assets at fair value as at March 31 2021 its total returns at fair value and thenet distributable cash flows of the REIT for the year ended on that date.

Basis for Opinion

We conducted our audit of the standalone Ind AS financial statements inaccordance with the Standards on Auditing (SAs) issued by the Institute of CharteredAccountants of India. Our responsibilities under those Standards are further described inthe 'Auditor's Responsibilities for the Audit of the Standalone Ind AS FinancialStatements' section of our report. We are independent of the REIT in accordance with the'Code of Ethics' issued by the Institute of Chartered Accountants of India and we havefulfilled our ethical responsibilities in accordance with the Code of Ethics. We believethat the audit evidence we have obtained is sufficient and appropriate to provide a basisfor our audit opinion on the standalone Ind AS financial statements.

Key Audit Matters

Key audit matters are those matters that in our professional judgmentwere of most significance in our audit of the standalone Ind AS financial statements forthe financial year ended March 31 2021. These matters were addressed in the context ofour audit of the standalone Ind AS financial statements as a whole and in forming ouropinion thereon and we do not provide a separate opinion on these matters. For eachmatter below our description of how our audit addressed the matter is provided in thatcontext.

We have determined the matters described below to be the key auditmatters to be communicated in our report. We have fulfilled the responsibilities describedin the Auditor's responsibilities for the audit of the standalone Ind AS financialstatements section of our report including in relation to these matters. Accordingly ouraudit included the performance of procedures designed to respond to our assessment of therisks of material misstatement of the standalone Ind AS financial statements. The resultsof our audit procedures including the procedures performed to address the matters belowprovide the basis for our audit opinion on the accompanying standalone Ind AS financialstatements.

Key audit matters How our audit addressed the key audit matter
Assessing impairment of Investments and loans made by the REIT in subsidiaries and joint venture entity
(as described in note 3 4 and 7 of the standalone Ind AS financial statements)
As at March 31 2021 the carrying values of REIT's investment in subsidiaries and joint venture entity amounted to Rs. 241739.54 million. Further the REIT has granted loans to its subsidiaries amounting to Rs. 100473.92 million. Our audit procedures included among others the following:
- We assessed the REIT's valuation methodology applied in determining the recoverable amount.
Management reviews regularly whether there are any indicators of impairment of such investments/ loans by reference to the requirements under Ind AS. Management performs its impairment assessment by comparing the carrying value of these investments/ loans made to their recoverable amount to determine whether an impairment needs to be recognized. - We involved valuation specialists to:
(a) Assess the valuation reports issued by the independent valuer engaged by the management and compared key property related data used as input with actual data.
(b) Assess the key assumptions included in the cash flow forecasts by management and independent valuer including considerations due to current economic and market conditions including effects of COVID-19 pandemic.
For the purpose of the above impairment testing value in use has been determined by forecasting and discounting future cash flows. Significant judgements are required to determine the key assumptions used in determination of value in use.
(c) Discussed changes in key drivers as compared to actual performance with management in order to evaluate whether the inputs and assumptions used in the valuation models by management and independent valuer were reasonable including considerations due to current economic and market conditions including effects of COVID- 19 pandemic.
Considering the impairment assessment involves significant assumptions and judgement we regard this as a key audit matter.
- We compared the recoverable amount of the investment to the carrying value in books as at March 31 2021.
- As regards loans granted we obtained and considered management evaluation of recoverability of loans and advances granted to its subsidiaries and joint venture entity.
- We read/assessed the disclosures in the standalone Ind AS financial statements for compliance with the relevant accounting standards requirements.

Classification of Unitholders' funds as equity

(as described in note 10(a)(i) of the standalone Ind AS financialstatements)

The REIT is required to distribute to its Unitholders not less thanninety percent of its net distributable cash flows for each financial year. Accordingly aportion of the Unitholders' funds contains a contractual obligation of the REIT to paycash distributions to its Unitholders. The Unitholders' funds could have been classifiedas compound financial instrument which contains both equity and liability components inaccordance with Ind AS 32 - Financial Instruments: Presentation. However in accordancewith SEBI Circulars No. CIR/IMD/DF/141/2016 dated December 26 2016 and No.CIR/IMD/DF/146/2016 dated December 29 2016 ("SEBI Circulars") issued under theREIT Regulations the Unitholders' funds have been classified as equity in order to complywith the mandatory requirements of Section H of Annexure A to the SEBI Circular datedDecember 26 2016 dealing with the minimum disclosures for key financial statements.

Based on the above the classification of Unitholders' funds as equityinvolved considerable management judgement. Accordingly it is considered as a key auditmatter.

Our audit procedures included evaluating the requirements forclassification of financial liability and equity under Ind AS 32 and evaluating theprovisions of SEBI Circulars for classification/ presentation of Unitholders' funds in thestandalone Ind AS financial statements of the REIT.

We assessed the disclosures in the standalone Ind AS financialstatements for compliance with the relevant requirements of REIT regulations.

Key audit matters How our audit addressed the key audit matter
Computation and disclosures of Net Assets and Total Returns at Fair Value
(as described in note 2.2(c) and in Statement of Net assets at fair value and Statement of total returns at fair value of the standalone Ind AS financial statements)
As per the provisions of REIT Regulations the REIT is required to disclose Statement of Net Assets at Fair Value and Statement of Total Returns at Fair Value which requires fair valuation of assets. For this purpose fair value is determined by forecasting and discounting future cash flows. The determination of fair value involves judgement due to inherent uncertainty in the underlying assumptions and it is highly sensitive to changes in some of the inputs used e.g. the discounting rate (WACC) capitalization rates rental growth rates etc. Our audit procedures include the following-
- Read the requirements of SEBI REIT regulations for disclosures relating to Statement of Net Assets at Fair Value and Statement of Total Returns at Fair Value.
- Assessed the appropriateness of independent valuer's and management's valuation methodology applied in determining the fair values.
- Tested controls implemented by management to determine inputs for fair valuation as well as assumptions used in the fair valuation.
Accordingly the aforementioned computation and disclosures are determined to be a key audit matter in our audit of the standalone Ind AS financial statements.
- We involved valuation specialists to:
(a) Assess the valuation reports issued by the independent valuer engaged by the management and compared key property related data used as input with actual data.
(b) Assess the key assumptions included in the cash flow forecasts by management and independent valuer including considerations due to current economic and market conditions including effects of COVID-19 pandemic.
(c) Discussed changes in key drivers as compared to actual performance with management in order to evaluate whether the inputs and assumptions used in the valuation models by management and independent valuer were reasonable including considerations due to current economic and market conditions including effects of COVID-19 pandemic.
- Tested the arithmetical accuracy of computation in the Statement of Net Assets and Total Returns at Fair Value.
- Read/Assessed the disclosures in the standalone financial statements for compliance with the relevant requirements of REIT Regulations.
Key audit matters How our audit addressed the key audit matter
Related party transactions and disclosures
(as described in note 25 of the standalone Ind AS financial statements)
The REIT has undertaken transactions with its related parties in the normal course of business. These include making new or additional investments; lending of loans to SPVs interest and dividend income on such loans/ investments fees for services provided by related parties to REIT etc as disclosed in Note 25 of the standalone Ind AS financial statements. Our audit procedures included the following:
- Obtained read and assessed the REIT's policies processes and procedures in respect of identifying related parties evaluation of arm's length obtaining necessary approvals recording and disclosure of related party transactions including compliance of transactions and disclosures in accordance with REIT regulations.
We identified the recording of all possible related party transactions and its disclosure as set out in respective notes to the standalone Ind AS financial statements as a key audit matter due to the significance of transactions with related parties during the year ended March 31 2021 and regulatory compliance thereon.
- We tested on a sample basis related party transactions with the underlying contracts and other supporting documents for appropriate authorization and approval for such transactions.
- We read minutes of Unitholder meetings Board and its relevant committee meetings and minutes of meetings of those charged with governance of the Manager in connection with transactions with related parties effected during the year and REIT's assessment of related party transactions being in the ordinary course of business at arm's length and in accordance with the REIT regulations.
- Assessed and tested the disclosures made in accordance with the requirements of Ind AS and REIT regulations.

Other Information

The Management of Embassy Office Parks Management Services PrivateLimited ("the Manager") acting in its capacity as the manager of Embassy OfficeParks REIT is responsible for the other information. The other information comprises theinformation included in the Annual report but does not include the standalone Ind ASfinancial statements and our auditor's report thereon.

Our opinion on the standalone Ind AS financial statements does notcover the other information and we do not express any form of assurance conclusionthereon.

In connection with our audit of the standalone Ind AS financialstatements our responsibility is to read the other information and in doing so considerwhether such other information is materially inconsistent with the standalone Ind ASfinancial statements or our knowledge obtained in the audit or otherwise appears to bematerially misstated. If based on the work we have performed we conclude that there is amaterial misstatement of this other information we are required to report that fact. Wehave nothing to report in this regard.

Responsibilities of Management for the Standalone Ind AS FinancialStatements

The Management of the Manager ('the Management') is responsible for thepreparation and presentation of these standalone Ind AS financial statements that give atrue and fair view of the financial position as at March 31 2021 financial performanceincluding other comprehensive income cash flows the movement of the unit holders' equityfor the year ended March 31 2021 its net assets at fair value as at March 31 2021 itstotal returns at fair value and the net distributable cash flows of the REIT for the yearended March 31 2021 in accordance with the requirements of the REIT regulations; IndianAccounting Standards as defined in Rule 2(1)(a) of the Companies (Indian AccountingStandards) Rules 2015 (as amended) and other accounting principles generally accepted inIndia to the extent not inconsistent with REIT regulations. This responsibility alsoincludes the design implementation andmaintenance of adequate controls for ensuring theaccuracy and completeness of the accounting records relevant to the preparation andpresentation of the standalone Ind AS financial statements that give a true and fair viewand are free from material misstatement whether due to fraud or error.

Independent Auditor's Report

In preparing the standalone Ind AS financial statements the Managementis responsible for assessing the ability of the REIT 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 REIT or to ceaseoperations or has no realistic alternative but to do so.

The Management is also responsible for overseeing the financialreporting process of the REIT.

Auditor's Responsibilities for the Audit of the Standalone Ind ASFinancial Statements

Our objectives are to obtain reasonable assurance about whether thestandalone Ind AS financial statements as a whole are free from material misstatementwhether 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 auditconducted in accordance with SAs will always detect a material misstatement when itexists. Misstatements can arise from fraud or error and are considered material ifindividually or in the aggregate they could reasonably be expected to influence theeconomic decisions of users taken on the basis of these standalone Ind AS financialstatements.

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

• Identify and assess the risks of material misstatement of thestandalone Ind AS financial statements whether due to fraud or error design and performaudit procedures responsive to those risks and obtain audit evidence that is sufficientand appropriate to provide a basis for our opinion. The risk of not detecting a materialmisstatement resulting from fraud is higher than for one resulting from error as fraudmay involve collusion forgery intentional omissions misrepresentations or the overrideof internal control.

• Obtain an understanding of internal control relevant to theaudit in order to design audit procedures that are appropriate in the circumstances butnot for the purpose of expressing an opinion on the effectiveness of the entity's internalcontrol.

• Evaluate the appropriateness of accounting policies used and thereasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management's use of the goingconcern basis of accounting and based on the audit evidence obtained whether a materialuncertainty exists related to events or conditions that may cast significant doubt on theability of the REIT to continue as a going concern. If we conclude that a materialuncertainty exists we are required to draw attention in our auditor's report to therelated disclosures in the standalone Ind AS financial statements or if such disclosuresare inadequate to modify our opinion. Our conclusions are based on the audit evidenceobtained up to the date of our auditor's report. However future events or conditions maycause the REIT to cease to continue as a going concern.

• Evaluate the overall presentation structure and content of thestandalone Ind AS financial statements including the disclosures and whether thestandalone Ind AS financial statements represent the underlying transactions and events ina manner that achieves fair presentation.

We communicate with those charged with governance regarding amongother matters the planned scope and timing of the audit and significant audit findingsincluding any significant deficiencies in internal control that we identify during ouraudit.

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

From the matters communicated with those charged with governance wedetermine those matters that were of most significance in the audit of the standalone IndAS financial statements for the financial year ended March 31 2021 and are therefore thekey audit matters. We describe these matters in our auditor's report unless law orregulation precludes public disclosure about the

matter or when in extremely rare circumstances we determine that amatter should not be communicated in our report because the adverse consequences of doingso would reasonably be expected to outweigh the public interest benefits of suchcommunication.

Report on Other Legal and Regulatory Requirements

Based on our audit we report that:

(a) We have sought and obtained all the information and explanationswhich to the best of our knowledge and belief were necessary for the purposes of ouraudit;

(b) The Balance Sheet and the Statement of Profit and Loss includingthe Statement of Other Comprehensive Income dealt with by this Report are in agreementwith the books of account of the REIT; and

(c) In our opinion the aforesaid standalone Ind AS financialstatements comply with the Indian Accounting Standards as defined in Rule 2(1)(a) of theCompanies (Indian Accounting Standards) Rules 2015 (as amended) to the extent notinconsistent with REIT regulations.

For S.R. Batliboi & Associates LLP

Chartered Accountants

ICAI Firm Registration Number: 101049W/E300004

Sd/-

per Adarsh Ranka

Partner

Membership Number: 209567

UDIN: 21209567AAAACF7210

Place: Bengaluru India

Date: April 29 2021

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