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Embassy Office Parks REIT.

BSE: 542602 Sector: Infrastructure
NSE: EMBASSY ISIN Code: INE041025011
BSE 00:00 | 19 Apr 304.89 -4.74
(-1.53%)
OPEN

306.60

HIGH

308.80

LOW

304.00

NSE 00:00 | 19 Apr 304.57 -4.98
(-1.61%)
OPEN

308.79

HIGH

309.00

LOW

304.00

OPEN 306.60
PREVIOUS CLOSE 309.63
VOLUME 59000
52-Week high 397.70
52-Week low 304.00
P/E 70.74
Mkt Cap.(Rs cr) 28,900
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 306.60
CLOSE 309.63
VOLUME 59000
52-Week high 397.70
52-Week low 304.00
P/E 70.74
Mkt Cap.(Rs cr) 28,900
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 statements of EmbassyOffice Parks REIT (the "REIT") which comprise the Balance Sheet as at March 312020 the Statement of Profit and Loss including Other Comprehensive Income the Statementof Cash Flows and the Statement of Changes in Unitholders' equity for the year then endedand the Statement of Net Assets at fair value as at March 31 2020 and the Statement ofTotal Returns at fair value and the Statement of Net Distributable Cash Flows of the REITfor the year then ended and notes to the standalone Ind AS financial statements includinga summary of significant accounting policies and other explanatory information(hereinafter referred to as "standalone Ind AS financial statements").

In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone Ind AS financial statements give the informationrequired by the Securities and Exchange Board of India (Real Estate Investment Trusts)Regulations 2014 as amended from time to time including any guidelines and circularsissued thereunder read with SEBI Circular No. CIR/IMD/ DF/146/2016 dated December 29 2016(the "REIT regulations") in the manner so required and give a true and fair viewin conformity with the accounting principles generally accepted in India to the extentnot inconsistent with REIT regulations of the state of affairs of the REIT as at March31 2020 its profit including other comprehensive income its cash flows its statementof changes in Unitholders' equity for the year ended March 31 2020 its net assets atfair value as at March 31 2020 its total returns at fair value and the net distributablecash 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 in accordance withthe Standards on Auditing (SAs) issued by the Institute of Chartered Accountants ofIndia. Our responsibilities under those Standards are further described in the Auditor'sResponsibilities for the Audit of the Standalone Ind AS Financial Statements' section ofour 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 have fulfilled ourethical responsibilities in accordance with the Code of Ethics. We believe that the auditevidence we have obtained is sufficient and appropriate to provide a basis for our auditopinion on the standalone Ind AS financial statements.

Key Audit Matters

Key audit matters are those matters that in our professional judgement were of mostsignificance in our audit of the standalone Ind AS financial statements for the financialyear ended March 31 2020. These matters were addressed in the context of our audit of thestandalone Ind AS financial statements as a whole and in forming our opinion thereon andwe do not provide a separate opinion on these matters. For each matter below ourdescription of how our audit addressed the matter is provided in that context.

We have determined the matters described below to be the key audit matters to becommunicated in our report. We have fulfilled the responsibilities described in theAuditor's responsibilities for the audit of the standalone Ind AS financial statementssection of our report including in relation to these matters. Accordingly our auditincluded the performance of procedures designed to respond to our assessment of the risksof material misstatement of the standalone Ind AS financial statements. The results of ouraudit procedures including the procedures performed to address the matters below providethe basis for our audit opinion on the accompanying standalone Ind AS financialstatements.

Key audit Matter 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 5 and 7 of the standalone Ind AS financial statements
As at March 31 2020 the carrying values of REIT's investment in subsidiaries and joint venture entity amounted to Rs.187586.56 million. Further the REIT has granted loans to its subsidiaries amounting to Rs.65762.57 million. Our audit procedures included among others the following:
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 recognised. We assessed the REIT's valuation methodology applied in determining the recoverable amount.
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. We involved valuation specialists to:
Considering the impairment assessment involves significant assumptions and judgement we regard this as a key audit matter. (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.
We compared the recoverable amount of the investment to the carrying value in books as at March 31 2020.
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 financial statements)
The REIT is required to distribute to its Unitholders not less than ninety percent of its net distributable cash flows for each financial year. Accordingly a portion of the Unitholders' funds contains a contractual obligation of the REIT to pay cash distributions to its Unitholders. The Unitholders' funds could have been classified as compound financial instrument which contains both equity and liability components in accordance with Ind AS 32 - Financial Instruments: Presentation. However in accordance with 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 the REIT Regulations the Unitholders' funds have been classified as equity in order to comply with the mandatory requirements of Section H of Annexure A to the SEBI Circular dated December 26 2016 dealing with the minimum disclosures for key financial statements. Our audit procedures included evaluating the requirements for classification of financial liability and equity under Ind AS 32 and evaluating the provisions of SEBI Circulars for classification/presentation of Unitholders' funds in the standalone Ind AS financial statements of the REIT.
Based on the above the classification of Unitholders' funds as equity involved considerable management judgement. Accordingly it is considered as a key audit matter. We assessed the disclosures in the standalone Ind AS financial statements for compliance with the relevant requirements of REIT regulations.
Computation and disclosures as prescribed in the REIT regulations relating to Statement of Net Assets and Total Returns at Fair Value
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. Our audit procedures include the following-
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) capitalisation rates rental growth rates etc. 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.
Accordingly the aforementioned computation and disclosures are determined to be a key audit matter in our audit of the standalone Ind AS financial statements. 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.
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.
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:
We identified the accuracy and completeness of 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 2020 and regulatory compliance thereon. 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 tested on a sample basis related party transactions with the underlying contracts and other supporting documents for appropriate authorisation 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 Private Limited ("theManager") acting in its capacity as the manager of Embassy Office Parks REIT isresponsible for the other information. The other information comprises the informationincluded in the Annual report but does not include the standalone Ind AS financialstatements and our auditor's report thereon.

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

In connection with our audit of the standalone Ind AS financial statements ourresponsibility is to read the other information and in doing so consider whether suchother information is materially inconsistent with the standalone Ind AS financialstatements or our knowledge obtained in the audit or otherwise appears to be materiallymisstated. If based on the work we have performed we conclude that there is a materialmisstatement of this other information we are required to report that fact. We havenothing to report in this regard.

Responsibilities of Management for the Standalone Ind AS Financial Statements

The Management of the Manager (‘the Management') is responsible for thepreparation of these standalone Ind AS financial statements that give a true and fair viewof the financial position as at March 31 2020 financial performance including othercomprehensive income cash flows the movement of the unit holders' equity for the yearended March 31 2020 its net assets at fair value as at March 31 2020 its total returnsat fair value and the net distributable cash flows of the REIT for the year ended March31 2020 in accordance with the requirements of the REIT regulations; Indian AccountingStandards as defined in Rule 2(l)(a) of the Companies (Indian Accounting Standards) Rules2015 (as amended) and other accounting principles generally accepted in India to theextent not inconsistent with REIT regulations. This responsibility also includes thedesign implementation and maintenance of adequate controls for ensuring the accuracy andcompleteness of the accounting records relevant to the preparation and presentation ofthe standalone Ind AS financial statements that give a true and fair view and are freefrom material misstatement whether due to fraud or error.

In preparing the standalone Ind AS financial statements the Management is responsiblefor assessing the ability of the REIT to continue as a going concern disclosing asapplicable matters related to going concern and using the going concern basis ofaccounting unless Management either intends to liquidate the REIT or to cease operationsor has no realistic alternative but to do so.

The Management is also responsible for overseeing the financial reporting process ofthe REIT.

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

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

Independent Auditor's Report

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

• Identify and assess the risks of material misstatement of the standalone Ind ASfinancial statements whether due to fraud or error design and perform audit proceduresresponsive to those risks and obtain audit evidence that is sufficient and appropriate toprovide a basis for our opinion. The risk of not detecting a material misstatementresulting from fraud is higher than for one resulting from error as fraud may involvecollusion forgery intentional omissions misrepresentations or the override of internalcontrol.

• Obtain an understanding of internal control relevant to the audit in order todesign audit procedures that are appropriate in the circumstances but not for the purposeof expressing an opinion on the effectiveness of the entity's internal control.

• 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 ability ofthe REIT to continue as a going concern. If we conclude that a material uncertaintyexists we are required to draw attention in our auditor's report to the relateddisclosures in the standalone Ind AS financial statements or if such disclosures areinadequate 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 the standalone IndAS financial statements including the disclosures and whether the standalone Ind ASfinancial statements represent the underlying transactions and events in a manner thatachieves fair presentation.

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

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

From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the standalone Ind AS financialstatements for the financial year ended March 31 2020 and are therefore the key auditmatters. We describe these matters in our auditor's report unless law or regulationprecludes public disclosure about the matter or when in extremely rare circumstances wedetermine that a matter should not be communicated in our report because the adverseconsequences of doing so would reasonably be expected to outweigh the public interestbenefits of such communication.

Other Matter

The Ind AS financial statements of the REIT for the year ended March 31 2019 and thetransition date opening balance sheet as at April 1 2018 prepared in accordance with IndAS included in these standalone Ind AS financial statements have been audited by thepredecessor auditor. The report of the predecessor auditor on the comparative financialinformation and the opening balance sheet dated August 12 2019 expressed an unmodifiedopinion.

Report on Other Legal and Regulatory Requirements

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) The Balance Sheet and the Statement of Profit and Loss including the Statement ofOther Comprehensive Income dealt with by this Report are in agreement with the books ofaccount of the REIT; and

(c) In our opinion the aforesaid standalone Ind AS financial statements comply withthe Indian Accounting Standards as defined in Rule 2(1) (a) of the Companies (IndianAccounting Standards) Rules 2015 (as amended) to the extent not inconsistent with REITregulations.

For S.R. Batliboi & Associates LLP

Chartered Accountants

ICAI Firm Registration Number: 101049W/E300004

Sd/-

per Adarsh Ranka

Partner

Membership Number: 209567

UDIN: 20209567AAAABX3303

Place: Bengaluru India

Date: May 19 2020.

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