To the Members of Fortis Healthcare Limited
REPORT ON THE AUDIT OF THE STANDALONE FINANCIAL STATEMENTS Qualified Opinion
We have audited the standalone financial statements of Fortis Healthcare Limited("the Company") which comprise the standalone balance sheet as at March 312021 and the standalone statement of profit and loss (including other comprehensiveincome) standalone statement of changes in equity and standalone statement of cash flowsfor the year then ended and notes to the standalone financial statements including asummary of the significant accounting policies and other explanatory information(hereinafter referred to as "the Standalone financial statements").
In our opinion and to the best of our information and according to the explanationsgiven to us except for the possible effects if any of the matter described in the"Basis for Qualified Opinion" paragraph of our report the aforesaid standalonefinancial statements give the information required by the Companies Act 2013("Act") in the manner so required and give a true and fair view in conformitywith the accounting principles generally accepted in India of the state of affairs of theCompany as at 31 March 2021 of its profit other comprehensive income changes in equityand its cash flows for the year ended on that date.
Basis for Qualified Opinion
Emphasis of Matter
(i) We draw attention to Note 27 and 28 of the standalone financial statements whichdeal with various matters including the ongoing investigation by Serious FraudInvestigation Office ("SFIO") and ongoing adjudication proceedings by Securitiesand Exchange Board of India ("SEBI") on Fortis Healthcare Limited ("theCompany") and its subsidiaries ("the Group") regarding alleged impropertransactions and non-compliances with laws and regulations including Companies Act 2013(including matters relating to remuneration paid to managerial personnel) and SEBI lawsand regulations. These transactions and non-compliances relate to or originated prior totake over of control by present board of directors in the year ended March 31 2018. Asmentioned in the note the Group has been submitting information required by SFIO and theCompany has responded to the SEBI notice and is also cooperating in the regulatoryinvestigations/ proceedings.
As explained in the said note the Group had recorded significant adjustments/provisions in its books of account during the year ended March 31 2018. The Company haslaunched legal proceedings and has also filed a complaint with the Economic Offences Wing(EOW') against erstwhile promoters and their related entities based on the findingsof the investigation conducted by the Group. Further based on management's detailedanalysis and consultation with external legal counsel a further provision has been madeand recognised in the current year for any contingency that may arise from the aforesaidissues. As per the management any further financial impact to the extent it can bereliably estimated as at present is not expected to be material.3
(ii) We draw attention to Note 26 of the standalone financial statements relating tothe order dated November 15 2019 of the Hon'ble Supreme Court where it is stated thatthe Hon'ble Supreme Court has issued suo- moto contempt notice to among others theCompany and directed its Registry to register a fresh contempt petition in regard toalleged violation of its order dated December 14 2018. In this respect the Hon'bleSupreme Court has sought an enquiry into
(i) whether the subscription by Northern TK Venture Pte Ltd. Singapore a wholly ownedsubsidiary of IHH Healthcare Berhad Malaysia to the shares of the Company was undertakenafter the status quo order was issued by the Hon'ble Court on December 14 2018 andaccordingly if such subscription was in violation of this status quo order; and
(ii) the consummation of the acquisition of healthcare assets from RHT Health Trust bythe Company. As also explained in the said note the management believes that it has astrong case on merits and as per the current position of the case the liability if anyarising out of this contingency cannot be determined at this stage. Accordingly atpresent no adjustment is required in the standalone financial statements.
(iii) As explained in Note 12 of the standalone financial statements a Civil Suitclaiming Rs.25344 lacs was filed by a third party against various entities including theCompany and certain entities within the Group relating to "Fortis SRL andLa-Femme" brands. Based on legal advice of external legal counsel the Managementbelieves that the claims are without legal basis and not tenable. Further as mentioned inNote 26 of the standalone financial statements the tenure of brand license agreemententered by the Company has expired and the Company has filed an application before theHon'ble Supreme Court of India seeking permission for change of company name brand andlogo. The matter is currently sub-judice.
(iv) We draw attention to Note 20 in the standalone financial statements whichdescribes the economic and social consequences the entity is facing as a result ofCOVID-19 which is impacting supply chains / demand / personnel available for work and orbeing able to access of offices/ hospitals. Our opinion is not modified in respect of theabove matters.
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.
In addition to the matter described in the "Basis for Qualified Opinion"paragraph we have determined that the following are the key audit matters:
|The key audit matter ||How the matter was addressed in our audit |
|Legal matters || |
|The Company is involved in several legal proceedings. ||Our audit procedures included on all significant legal cases assessment of correspondence with the Company's legal counsel (internal and / or external) accompanied by discussions and formal confirmations from that legal counsel. |
|In some of these cases the Company has counter claims against the other party. Management judgement is involved in assessing the accounting for claims and in particular in considering the probability of a claim being successful. The risk related to the claims is mainly associated with the adequacy of disclosure and the completeness of the provisions in the standalone financial statements. ||We read the minutes of the board meetings and inspected the Company's legal expenses. |
|Accordingly we have designated this as key audit matter. ||We also assessed whether the Company's disclosures in note 11 12 26 27 and 28 of the standalone financial statements detailing significant legal proceedings adequately disclose the potential liabilities of the Company. Also refer note 2(j) of the standalone financial statements for the related accounting policy. |
|Impairment of Goodwill and Investments || |
|The Company is required to annually test the amount of goodwill for impairment. Investments in subsidiary companies associates and joint ventures are tested for impairment in case an indicator of potential impairment is identified. There are inherent uncertainties involved in forecasting and discounting future cash flows which are the basis of the assessment of recoverability. Accordingly this is one of the key judgmental areas in our audit. ||In this area our audit procedures included testing of the Company's budgeting procedures upon which the forecasts are based; and the principles and integrity of the Company's discounted cashflow model. We used our valuation specialist to assist us in evaluating the assumptions and methodologies used by the Company. In particular this included those relating to the forecast revenue growth profit margins and discount rates. We compared the Company's assumptions to externally derived data as well as our own assessment in relation to key inputs such as projected economic growth cost inflation and discount rates. We also performed sensitivity analysis of the key assumptions. We also assessed the adequacy of related disclosures in note 5(ii) 5(iv) and note 5(v) of standalone financial statements and sensitivities of key assumptions. Also refer note 2(e)(ii) and 2(g) of the standalone financial statements for the related accounting policy. |
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 financial statements and our auditors' reportthereon. Our opinion on the standalone 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 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 in the audit or otherwise appears to be materially misstated. If based on thework we have performed we conclude that there is a material misstatement of this otherinformation we are required to report that fact. As described in the Basis for QualifiedOpinion paragraph above pending resolution of the matter with RBI of registration as aNBFC we are unable to comment on the impact thereof if any on the standalone financialstatements for the year ended March 31 2021. Accordingly we are unable to concludewhether or not the other information is materially misstated with respect to this matter.
Management's and Board of Directors' Responsibility for the Standalone FinancialStatements
The Company's Management and Board of Directors are responsible for the matters statedin section 134(5) of the Act with respect to the preparation of these standalone financialstatements that give a true and fair view of the state of affairs profit/loss and othercomprehensive income changes in equity and cash flows of the Company in accordance withthe accounting principles generally accepted in India including the Indian AccountingStandards (Ind AS) specified under section 133 of the Act. This responsibility alsoincludes maintenance of adequate accounting records in accordance with the provisions ofthe Act for safeguarding of the assets of the Company and for preventing and detectingfrauds and other irregularities; selection and application of appropriate accountingpolicies; making judgments and estimates that are reasonable and prudent; and designimplementation and maintenance of adequate internal financial controls that were operatingeffectively for ensuring accuracy and completeness of the accounting records relevant tothe preparation and presentation of the standalone financial statements that give a trueand fair view and are free from material misstatement whether due to fraud or error.
In preparing the standalone financial statements the Management and Board of Directorsare responsible 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 the Board of Directors either intends to liquidate the Companyor to cease operations or has no realistic alternative but to do so.
The Board of Directors is also responsible for overseeing the Company's financialreporting process.
Auditor's Responsibilities 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 inaccordance with SAs we exercise professional judgment and maintain professionalskepticism throughout the audit. We also:
based on the audit evidence obtained whether a material uncertainty exists related toevents or conditions that may cast significant doubt on the Company's ability to continueas a going concern. If we conclude that a material uncertainty exists we are required todraw attention in our auditor's report to the related disclosures in the standalonefinancial statements or if such disclosures are inadequate to modify our opinion. Ourconclusions 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.
whether the standalone financial statements represent the underlying transactions andevents in a manner that achieves 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 financial statementsof the current period and are therefore the key audit matters. We describe these mattersin our auditors' 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.
REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS
1. As required by the Companies (Auditors' Report) Order 2016 ("the Order")issued by the Central Government in terms of section 143 (11) of the Act we give in the"Annexure A" a statement on the matter specified in paragraphs 3 and 4 of theOrder which is subject to the effects/ possible effects of the matter described in the"Basis for Qualified Opinion" paragraph of our Audit Report.
2. (A) As required by Section 143(3) of the Act we report that:
a) We have sought and except for the matter described in the "Basis for QualifiedOpinion" paragraph above obtained all the information and explanations which to thebest of our knowledge and belief were necessary for the purposes of our audit.
b) Except for the possible effects of the matter described in the "Basis forQualified Opinion" paragraph above in our opinion proper books of account asrequired by law have been kept by the Company so far as it appears from our examination ofthose books.
c) The standalone balance sheet the standalone statement of profit and loss (includingother comprehensive income) the standalone statement of changes in equity and thestandalone statement of cash flows dealt with by this Report are in agreement with thebooks of account.
d) Except for possible effects of the matter described in the "Basis for QualifiedOpinion" paragraph above in our opinion the aforesaid standalone financialstatements comply with the Ind AS specified under section 133 of the Act.
e) The matter described in the "Basis for Qualified Opinion" paragraph andthe "Emphasis of Matter" paragraphs above in our opinion may have an adverseeffect on the functioning of the Company.
f) On the basis of the written representations received from the directors as on March31 2021 taken on record by the Board of Directors none of the directors is disqualifiedas on March 31 2021 from being appointed as a director in terms of Section 164(2) of theAct.
g) The qualification relating to maintenance of accounts and other matters connectedtherewith are as stated in the "Basis for Qualified Opinion" paragraph above.
h) With respect to the adequacy of the internal financial controls with reference tostandalone financial statements of the Company and the operating effectiveness of suchcontrols refer to our separate Report in "Annexure B". (B) With respect to theother matters to be included in the Auditors' Report in accordance with Rule 11 of theCompanies (Audit and Auditors) Rules 2014 in our opinion and to the best of ourinformation and according to the explanations given to us:
i. The Company has disclosed the impact of pending litigations as at March 31 2021 onits financial position in its standalone financial statements - Refer Note 11 12 26 27and 28 to the standalone financial statements; ii. The Company did not have any long-termcontracts including derivative contracts for which there were any material foreseeablelosses;
iii. There were no amounts which were required to be transferred to the InvestorEducation and Protection Fund by the Company;
iv. The disclosures in the standalone financial statements regarding holdings as wellas dealings in specified bank notes during the period from November 8 2016 to December30 2016 have not been made in these standalone financial statements since they do notpertain to the financial year ended March 31 2021.
(C) With respect to the matter to be included in the Auditors' Report under section197(16): 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.
ANNEXURE A TO THE INDEPENDENT AUDITOR'S REPORT ON THE STANDALONE FINANCIAL STATEMENTSOF FORTIS HEALTHCARE LIMITED FOR THE YEAR ENDED MARCH 31 2021 (Referred to in paragraph(1) under Report on Other Legal and Regulatory Requirements' section of our AuditReport of even date and except for the effects/possible effects of the matter described inthe "Basis for Qualified Opinion" paragraph of our Audit Report)
(i) (a) According to the information and explanations given to us and on the basis ofour examination of the records of the Company the Company has maintained proper recordsshowing full particulars including quantitative details and situation of fixed assets(Property plant and equipment).
(b) According to the information and explanations given to us and on the basis of ourexamination of the records of the Company the Company has a regular programme of physicalverification of its fixed assets by which fixed assets are verified in a phased mannerover a period of three years. In accordance with this programme certain fixed assets werephysically verified during the year. In our opinion this periodicity of physicalverification is reasonable having regard to the size of the Company and the nature of itsassets. As informed to us no material discrepancies 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 deed and lease deed of immovableproperties are held in the name of the Company.
(ii) The inventories have been physically verified by the management during the year.In our opinion the frequency of such verification is reasonable. According to theinformation and explanations given to us the discrepancies noticed on verificationbetween the physical stocks and the book records were not material.
(iii) According to the information and explanations given to us and on the basis of ourexamination of the records of the Company the Company has granted loans secured orunsecured to companies covered in the register maintained under Section 189 of theCompanies Act 2013 in respect of which:
(a) The terms and conditions of the grant of such loans are in our opinion primafacie not prejudicial to the Company's interest.
(b) The schedule of repayment of principal and payment of interest has been stipulatedand repayments or receipts of principal amounts and interest have been as perstipulations.
(c) There is no amount overdue for more than 90 days in respect of above mentionedloans.
(iv) According to the information and explanations given to us and on the basis of ourexamination of the records of the Company we are of the opinion that the Company hascomplied with the provisions of Sections 185 and 186 of the Companies Act 2013 in respectof grant of loans making investments and providing guarantees and securities asapplicable.
(v) According to the information and explanations given to us and on the basis of ourexamination of the records of the Company the Company has not accepted any deposits asmentioned in the directives issued by the Reserve Bank of India and provisions ofSections373 to 76 or any other relevant provisions of the Companies Act 2013 and rulesframed there under. Accordingly the provisions of clause 3(v) of the Order are notapplicable.
(vi) The Central Government has prescribed the maintenance of cost records undersub-section (1) of Section 148 of the Act for activities carried out by the Company. Wehave broadly reviewed the books of account maintained by the Company pursuant to the Rulesmade by the Central Government for the maintenance of cost records under Section 148 ofthe Act and are of the opinion that prima facie the prescribed accounts and records havebeen made and maintained. However we have not made a detailed examination of such recordswith a view to determine whether they are accurate or complete.
(vii) (a) According to the information and explanations given to us and on the basis ofour examination of the records of the Company amounts deducted/ accrued in the books ofaccount in respect of undisputed statutory dues including Provident Fund Employees' StateInsurance Income-tax Duty of Customs Goods and Services tax Cess and other materialstatutory dues have generally been regularly deposited during the year by the Company withthe appropriate authorities though there has been slight delay in few cases of deposit ofGoods and Services tax.
We are informed that the operations of the Company during the period did not give riseto any liability for Duty of Excise Sales tax Value added tax and Service tax.
According to the information and explanations given to us no undisputed amountspayable in respect of Provident Fund Employees' State Insurance Income-tax Duty ofcustoms Goods and Services Tax Cess and other material statutory dues were in arrears asat March 31 2021 for a period of more than six months from the date they became payable.(b) According to the information and explanations given to us the following dues ofIncome-tax Value added tax and Service tax have not been deposited by the Company withthe appropriate authorities on account of disputes:
|Name of Statute ||Nature of dues ||Forum where dispute is pending ||Period to which the amount relates ||Amount involved (Rupees in lacs) ||Amount paid under protest (Rupees in lacs) |
|Income Tax Act 1961 ||Income Tax and Interest thereon ||Income Tax Appellate Tribunal Delhi ||AY 2016-17 and AY 2017-18 ||1183.00 ||- |
|Income Tax Act 1961 ||Income Tax and Interest thereon ||Commissioner of Income Tax (Appeals) ||AY 2012-13 ||2641.41 ||2487.61 |
|Income Tax Act 1961 ||Income Tax and Interest thereon ||Commissioner of Income Tax (Appeals) ||AY 2013-14 and AY 2014-15 ||505.17 ||- |
|Income Tax Act 1961 ||Income Tax and Interest thereon ||Commissioner of Income Tax (Appeals) ||AY 2018-19 ||146.00 ||146.00 |
|Central Excise Act 1944 ||Value Added Tax ||Supreme Court ||FY 2009-10 ||1412.35 ||- |
|Central Excise Act 1944 ||Value Added Tax ||Supreme Court ||FY 2010-11 ||2208.82 ||- |
|Finance Tax 1994 ||Service Tax and penalty ||Custom Excise & Service Tax Appellate Tribunal ||FY 2012-13 ||50.00 ||- |
|Finance Tax 1994 ||Service Tax and penalty ||Custom Excise & Service Tax Appellate Tribunal ||FY 2008-09 to FY 2012-13 ||294.00 ||- |
|Finance Tax 1994 ||Service Tax and penalty ||Custom Excise & Service Tax Appellate Tribunal ||FY 2015-16 to FY 17-18 ||193.00 ||13.26 |
We are informed that there are no dues in respect of Duty of Customs Duty of ExciseSales tax and Goods and Services tax as at March 31 2021 which have not been deposited onaccount of any dispute.
(viii) According to the information and explanations given to us and on the basis ofour examination of the records of the Company the Company has not defaulted in repaymentof loans or borrowings to banks and financial institutions. The Company has neither takenany loans or borrowings from government nor has it issued any debentures during the year
(ix) According to the information and explanations given to us and on the basis of ourexamination of the records of the Company in our opinion and according to the informationand explanations given to us the term loans taken by the Company during the year havebeen applied for the purpose for which they were raised.
According to the information and explanations given to us and on the basis of ourexamination of the records of the Company the Company has not raised any moneys by way ofinitial public offer or further public offer (including debt instruments).
(x) As explained in Note 27 and 28 of the standalone financial statements:
a) The investigation and additional procedures / inquiries carried out by the Companynoted certain findings in relation to past transactions concerning Fortis HealthcareLimited and its subsidiaries with companies whose current and/ or past promoters/directors were known to/ connected with the erstwhile promoters. All such identifiedtransactions emanating out of the investigation and additional procedures/ enquiries hadbeen previously provided for or expensed in the financial statements of the Company or itssubsidiaries. Refer Note 27 (C) of the standalone financial statements for the keyfindings.
b) SEBI has issued a show cause notice to various entities including the Companyinter-alia alleging that the consolidated financials of Fortis Healthcare Limited forcertain period were untrue and misleading for the shareholders and the Company hascircumvented certain provisions of the SEBI Act Securities Contracts (Regulation) Act1956 and certain SEBI regulations. Further as stated in the said note SEBI has alsoalleged misuse and/or diversion of funds from the Company and its subsidiaries. Variousother regulatory authorities including Serious Fraud Investigation Office (SFIO')are also undertaking their own investigations which are currently ongoing.
According to the information and explanations given to us no other fraud by theCompany and on the Company by its officers or employees has been noticed or reportedduring the year.
(xi) According to the information and explanations given to us and based on ourexamination of the records of the Company managerial remuneration has been paid /provided by the company during the current year in accordance with the requisite approvalsmandated by the provisions of Section 197 of the Act read with Schedule V to the Act.
(xii) According to the information and explanations given to us the Company is not aNidhi Company. Accordingly paragraph 3(xii) of the Order is not applicable.
(xiii) According to the information and explanations given to us and on the basis ofour examination of the records of the Company all transactions with the related partiesare in compliance with Section 177 and 188 of the Act where applicable and the detailsof such transactions have been disclosed in the standalone financial statements asrequired by the applicable accounting standards.
(xiv) 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.
(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 them. Accordingly paragraph 3(xv)of the Order is not applicable.
(xvi) As described in the "Basis for Qualified Opinion" section that due toa significant amount of dividend received during the previous year ended March 31 2020from a wholly owned overseas subsidiary the income from financial assets' of theCompany was more than 50 percent of the gross income for the year then ended. Further inview of the investments in subsidiaries and financing provided to them the Company'sfinancial assets as at that date are also more than 50 percent of its total assets.Consequently the Company technically meets the "principal business test"criteria for classification as a Non-Banking Financial Company (NBFC) as per press releaseby Reserve Bank of India (RBI) vide No. 1998-99/1269 dated April 8 1999 as at 1 April2020 and is required to obtain a certificate of registration as a NBFC. As per theCompany such dividend is non-recurring in nature and does not represent income fromordinary activities of the Company and the Company does not intend to carry on thebusiness as a NBFC. Accordingly the Company vide its letter dated November 8 2019 hadmade a representation to the RBI that keeping in view the objective behind the principalbusiness test criteria its registration as a NBFC should not be required. Subsequent tothe completion of audit of the standalone financial statements of the Company for the yearended March 31 2020 we as statutory auditors have also intimated the RBI regarding theCompany technically meeting the Principal Business Test and regarding the above referredrepresentation by the company to the RBI which inter alia stated that the Company isprimarily engaged in the healthcare business and that the Company has represented to theRBI that it does not presently or in future intend to undertake the business ofnon-banking financial institution. Further during the previous quarter the Company haswritten another letter to RBI with a request to confirm that no such registration as aNBFC is required. RBI advised the Company to submit to it the financial results for thequarter ended June 30 2020 September 30 2020 and December 31 2020 which were dulysubmitted by the Company. Pending resolution of the matter with RBI we are unable tocomment on the impact thereof if any. 3Also refer to note 32 of the standalone financialstatements.
ANNEXURE B TO THE INDEPENDENT AUDITORS' REPORT ON THE STANDALONE FINANCIAL STATEMENTSOF FORTIS HEALTHCARE LIMITED FOR THE YEAR ENDED MARCH 31 2021 Report on the internalfinancial controls with reference to the aforesaid standalone financial statements underClause (i) of Sub-section 3 of Section 143 of the Companies Act 2013 (Referred to inparagraph (2)(A)(h) under Report on Other Legal and Regulatory Requirements' sectionof our report of even date) Opinion
We have audited the internal financial controls with reference to standalone financialstatements of Fortis Healthcare Limited ("the Company") as of March 31 2021 inconjunction with our audit of the standalone financial statements of the Company for theyear ended on that date.
In our opinion the Company has in all material respects adequate internal financialcontrols with reference to standalone financial statements and such internal financialcontrols were operating effectively as at March 31 2021 based on the internal financialcontrols with reference to standalone financial statements criteria 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 (the "Guidance Note").
Management's Responsibility for Internal Financial Controls
The Company's management and the Board of Directors are responsible for establishingand maintaining internal financial controls based on the internal financial controls withreference to standalone financial statements criteria established by the Companyconsidering the essential components of internal control stated in the Guidance Note.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 (hereinafterreferred to as "the Act").
Our responsibility is to express an opinion on the Company's internal financialcontrols with reference to standalone financial statements based on our audit. Weconducted our audit in accordance with the Guidance Note and the Standards on Auditingprescribed under section 143(10) of the Act to the extent applicable to an audit ofinternal financial controls with reference to standalone financial statements. 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 with reference to standalone financial statements were established andmaintained and whether such controls operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls with reference to standalone financial statements andtheir operating effectiveness. Our audit of internal financial controls with reference tostandalone financial statements included obtaining an understanding of such internalfinancial controls assessing the risk that a material weakness exists and testing andevaluating the design and operating effectiveness of internal control based on theassessed risk. The procedures selected depend on the auditor's judgement including theassessment of the risks of material misstatement of the standalone financial statementswhether 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 controls withreference to standalone financial statements.
Meaning of Internal Financial controls with Reference to Standalone FinancialStatements
A company's internal financial controls with reference to standalone financialstatements is a process designed to provide reasonable assurance regarding the reliabilityof financial reporting and the preparation of standalone financial statements for externalpurposes in accordance with generally accepted accounting principles. A company's internalfinancial controls with reference to standalone financial statements include thosepolicies and procedures that (1) pertain to the maintenance of records that in reasonabledetail accurately and fairly reflect the transactions and dispositions of the assets ofthe company; (2) provide reasonable assurance that transactions are recorded as necessaryto permit preparation of standalone financial statements in accordance with generallyaccepted accounting principles and that receipts and expenditures of the company arebeing made only in accordance with authorisations of management and directors of thecompany; and (3) provide reasonable assurance regarding prevention or timely detection ofunauthorised acquisition use or disposition of the company's assets that could have amaterial effect on the Standalone financial statements.
Inherent Limitations of Internal Financial controls with Reference to StandaloneFinancial Statements
Because of the inherent limitations of internal financial controls with reference tostandalone financial statements including the possibility of collusion or impropermanagement override of controls material misstatements due to error or fraud may occurand not be detected. Also projections of any evaluation of the internal financialcontrols with reference to the standalone financial statements to future periods aresubject to the risk that the internal financial controls with reference to the standalonefinancial statements may become inadequate because of changes in conditions or that thedegree of compliance with the policies or procedures may deteriorate.
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