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GIC Housing Finance Ltd.

BSE: 511676 Sector: Financials
NSE: GICHSGFIN ISIN Code: INE289B01019
BSE 00:00 | 14 Nov 152.80 -4.35
(-2.77%)
OPEN

158.95

HIGH

158.95

LOW

152.30

NSE 00:00 | 14 Nov 152.85 -4.35
(-2.77%)
OPEN

157.20

HIGH

159.50

LOW

152.15

OPEN 158.95
PREVIOUS CLOSE 157.15
VOLUME 5235
52-Week high 281.90
52-Week low 128.50
P/E 5.52
Mkt Cap.(Rs cr) 823
Buy Price 152.50
Buy Qty 15.00
Sell Price 152.80
Sell Qty 100.00
OPEN 158.95
CLOSE 157.15
VOLUME 5235
52-Week high 281.90
52-Week low 128.50
P/E 5.52
Mkt Cap.(Rs cr) 823
Buy Price 152.50
Buy Qty 15.00
Sell Price 152.80
Sell Qty 100.00

GIC Housing Finance Ltd. (GICHSGFIN) - Auditors Report

Company auditors report

To the Members of GIC Housing Finance Limited Report on the Audit of FinancialStatements Opinion

We have audited the financial statements of GIC Housing Finance Limited("the Company") which comprise the balance sheet as at 31 March 2019 and thestatement of profit and loss (including other comprehensive income) the statement of cashflows and statement of changes in equity for the year then ended and a summary ofsignificant accounting policies and other explanatory information (hereinafter referred toas "the Financial Statements"). In our opinion and to the best of ourinformation and according to the explanations given to us the aforesaid financialstatements give the information required by the Companies Act 2013 (the "Act")in the manner so required and give a true and fair view in conformity with the IndianAccounting Standards prescribed under section 133 of the Act read with the Companies(Indian Accounting Standards) Rules 2015 as amended ("Ind AS") and otheraccounting principles generally accepted in India of the state of affairs of the Companyas at 31 March 2019 its profit and total comprehensive income its cash flows and changesin equity for the year ended on that date.

Basis for Opinion

We conducted our audit in accordance with the Standards on Auditing (SAs) specifiedunder section 143(10) of the Act. Our responsibilities under those SAs 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 together with the ethicalrequirements that are relevant to our audit of the financial statements under theprovisions of the Act and the Rules there under and we have fulfilled our other ethicalresponsibilities in accordance with these requirements and the Code of Ethics. We believethat the audit evidence we have obtained is sufficient and appropriate to provide a basisfor our opinion.

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 year. These matterswere addressed in the context of the audit of the Financial Statements as a whole and informing auditor's opinion thereon and we do not provide a separate opinion on thesematters. We have determined the matters described below to be the key audit matters to becommunicated in our report.

Key audit matter description How the matter was addressed in our audit
A) Impairment on financial instrument
The impairment of the loans is based on expected credit loss (ECL) model as per Ind AS-109- Financial Instruments. The Company's impairment allowance is based on certain management estimates including the historical default rates and loss ratios.

The recognition and measurement of impairment of loans and advances involve significant management judgement. The areas where the management has exercised significant judgements are:

• Segmentation of loan book

• Loan staging criteria

• Calculation of probability of default / Loss given default

• Consideration of forward looking macro-economic factors

Our audit procedures included understanding and assessing the design and implementation of controls in respect of the Company's loan impairment process such as the timely recognition of impairment provisions the completeness and accuracy of reports used in the loan impairment process and management review processes over the calculation of impairment provisions.

We have understood the process and system for calculation of impairment allowance. We have evaluated the appropriateness of the impairment principles based on the requirements of Ind AS 109 our business understanding and industry practice.

Further we evaluated the loan impairment methodology to confirm it was consistent with the Ind AS 109 requirements and then confirmed that the calculations are performed in accordance with the approved methodology.

Key audit matter description How the matter was addressed in our audit
The ECL requires a large variety of data as an input to the model. This increases the risk of completeness and accuracy of the data that has been used to create assumptions in the model. The Company has evaluated loans for impairment on a collective basis grouping loans by product into similar exposure groups. For collective impairment provisions we identified that the key judgment areas which could result in a material misstatement are the determination of probabilities of default (‘PDs') and loss given default (‘LGD') and the periods considered for capturing the underlying data as base to the PD and LGD calculations in calculating the provision.

The determination of loan impairment provisions is inherently judgmental and relies on managements' best estimate of a variety of inputs. The impact of the impairment provision is one of the significant items in of an Auditor's Expert. the financial statement and hence we have considered this as a Key Audit Matter.

On test check basis we have verified the accuracy of key inputs used in the calculation and independently evaluated the reasonableness of the assumptions made.

We have also tested the periods considered for capturing underlying data as base to PD and LGD calculations are in line with the past observed trends of the portfolio.

We tested the PD and LGD calculation workings performed by management including testing the data used in the assessment and evaluation of whether the results support the appropriateness of the PDs at the portfolio level.

We have also reviewed the work done by other experts like Independent valuers Lawyers Legal Experts and other such professionals who have rendered services to the company in accordance with SA 620 Using the Work

B) Information Technology (IT) Systems and controls over financial reporting
The Company financial accounting and reporting systems are highly dependent on the effective working of the operating and accounting system. Extensive volume variety and complexity of transactions are processed daily and there is a risk that automated accounting procedures and related internal controls may not be accurately designed and operating effectively. Particular areas of focus relate to the logic that is fed into the system sanctity and reliability of the data access management and segregation of duties.

These underlying principles are important because they ensure that changes to applications and data are appropriate authorized cleansed and monitored so that the system generates accurate and reliable reports/ returns and other financial and non-financial information that is used for the preparation and presentation of the financial statements.

We have relied on the consistent and accurate functioning of System for the following:

• Recording Interest and Fees Income on Loan Portfolio:

• Identification of Loan Portfolio and its maturity pattern in various brackets;

• Recording the Expenses i.e. Legal Fees Commission Valuer Fees and other such related expenses;

Our audit procedures included verifying testing and reviewing the design and operating effectiveness of the IT system by verifying the reports/returns and other financial and non-financial information generated from the system on a test check basis. Our audit procedures included:

• Ensuring that deficiencies noticed in our verification on test check basis were informed to the management for corrective action;

• Carrying out independent alternative audit procedures like substantive testing in areas were deficiencies were noticed;

• Analytical procedures like ratio analysis trend analysis reasonable tests comparative analysis;

• Reviewed the reliability effectiveness and accuracy of manual interventions on test check basis. Our audit procedures also included the assessment of controls over the approval disbursements and monitoring of loans and reviewing the logic and assumptions used in the operating systems and other related IT systems for compliance of the NHB Directions 2010.

Key audit matter description How the matter was addressed in our audit
• Various Report Generated including the report for Asset Classification & Provision for onwards Submission to National Housing Bank As per the requirement of Housing Finance Companies (NHB) Directions 2010
C) Changes to the financial statements due to transition to Ind AS
On 1 April 2018 the Company adopted the Indian Accounting Standard ("Ind AS") notified by the Ministry of Corporate Affairs with effect from 1 April 2017 being transition date. The Company has followed Ind AS notified under Section 133 of the Companies Act 2013 (‘the Act') read with the relevant rules for preparation of the Financial Statement. As a part of the transition from previous GAAP to Ind AS the major areas of impact for the Company are:

? Impairment on financial instruments

? Fair valuation of financial instruments

? Recognition of deferred tax liabilities

? Presentation and disclosures of the Financial Statements

Our audit procedures included the following:

• Understood the methodology planned by the management to give impact to the transition adjustments.

• Assessed that the adjustments made for the financial statements are in lines with the Ind AS requirements.

• Tested the accuracy of key inputs used in the calculation and independently evaluated the reasonableness of the assumptions made for the adjustments.

• We assessed the accuracy of the computations.

• Verified the appropriateness of the disclosures required for the first-time adoption of Ind AS.

• Tested management review controls over completeness and measurement of disclosures in Financial Statements.

Other Information

The Company's management and Board of Directors are responsible for 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 auditors' report thereon. Our opinion on thefinancialstatements does not cover the other information and we do not express any form ofassurance conclusion thereon.

In connection with our audit of the financial statements our responsibility is to readthe other information and in doing so consider whether the other information ismaterially inconsistent with the financial statements or our knowledge obtained in theaudit or otherwise appears 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 management and Board of Directors are responsible for the matters statedin section 134(5) of the Act with respect to the preparation of these financial statementsthat give a true and fair view of the state of affairs profit/lossand other comprehensiveincome changes in equity and cash flows of the Company in accordance with the accountingprinciples generally accepted in India including the Ind AS specified under Section 133of the Act. This responsibility also includes maintenance of adequate accounting recordsin accordance with the provisions of the

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 the accuracy and completeness of the accounting records relevantto the preparation and presentation of the financial statements that give a true and fairview and are free from material misstatement whether due to fraud or error. statementsmanagement and the Board of Directors is responsible for assessing the In preparing thefinancial Company's ability to continue as a going concern disclosing as applicablematters related to going concern and using the going concern basis of accounting unlessmanagement either intends to liquidate the Company or to cease operations or has norealistic alternative but to do so.

Auditor's Responsibilities 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 control relevant to the audit in order to designaudit procedures that are appropriate in the circumstances. Under section 143(3)(i) of theAct we are also responsible for expressing our opinion on whether the Company hasadequate internal financial controls system in place and the operating effectiveness ofsuch 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 uncertainty exists we are required to drawattention in our auditor's report to the related disclosures in the financial statementsor if such disclosures are inadequate to modify our opinion. Our conclusions are basedon the audit evidence obtained up to the date of our auditor's report. However futureevents or conditions may cause the Company to cease to continue as a going concern.

Evaluate the overall presentation structure and content ofthefinancialstatementsincluding 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 be influenced. We considerquantitative materiality and qualitative factors in (i) planning the scope of our auditwork and in evaluating the results of our work;and(ii) effect of any identifiedmisstatements in the evaluatethe 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 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 in with those charged with governance we determine thosematters that were of most significance in the audit of the financial statements of thecurrent period matters. We describe these matters in our auditor's report unless law orregulation precludes public disclosure about the matter or when in extremely rarecircumstances we determine that a matter should not be communicated in our report becausethe adverse consequences of doing so would reasonably be expected to outweigh the publicinterest benefits of such communication.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor's Report) Order 2016 ("the Order")issued by the Central Government in terms of Section 143 (11) of the Act (hereinafterreferred to as the "Order") and on the basis of such checks of the books andrecords of the Company as we considered appropriate and according to the information andexplanations given to us we give in the Annexure a statement on themattersspecifiedinparagraphs 3 and 4 of the Order.

2. As required by section 143 (3) of the Act we report that: a) We have sought andobtained all the information and explanations which to the best of our knowledge andbelief were necessary for the purpose of our audit. b) In our opinion proper books ofaccount as required by law have been kept by the Company so far as appears from ourexamination of those books. c) The Balance Sheet Statement of Profit and Loss Cash FlowStatement and statement of changes in equity dealt with by this Report are in agreementwith the books of account. d) In our opinion the aforesaid financial statements complywith the Accounting Standards Section 133 of the Act read with Rule 7 of the Companies(Accounts) Rules 2015 as amended by the Companies (Indian Accounting Standards) Rules2016. e) On the basis of written representations received from the directors as on March31 2019 and taken on record by the Board of Directors none of the directors isdisqualified as on March 31 2019 from being appointed as a director in terms of section164 (2) of the Act. f) With respect to adequacy of the internal financial controls overfinancial reporting of the company and the operating effectiveness of such controls referto our separate Report in "Annexure A". g) With respect to the other matters tobe included in the Auditor's Report in accordance with the requirements of section 197(16)of the Act as amended: In our opinion and according to the information and explanationsgiven to us the remuneration paid by the Company to its directors during the current yearis in accordance with the provisions of section 197 of the Act. h) With respect to theother matters to be included in the Auditor's 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 disclosedthe impact of pending litigations on its financial position in its statements Refer Note35 (1) to the financial statements. ii. The company did not have any long-term contractsincluding derivative contracts for which there were any material foreseeable losses as atMarch 31 2019. iii. There has been no delay in transferring amounts required to betransferred to the Investor Education and Protection Fund by the Company during the yearended March 31 2019.

For CNK & Associates LLP
Chartered Accountants
Firm Registration No.: 101961W/W-100036
Manish Sampat
Date : May 24 2019 Partner
Place : Mumbai Membership No. 101684

ANNEXURE TO THE INDEPENDENT AUDITORS' REPORT

The Annexure referred to in Independent Auditors' Report to the members of the Companyon the financial statements for the year ended 31 March 2019 we report that: i) (a)The Company has maintained proper records showing full particulars including quantitativedetails and situation of fixed assets.

(b) The fixed assets of the Company have been physically verified by the Managementduring the year. The discrepancies noticed on such verification are not material and havebeen properly dealt with in the books of accounts. In our opinion the frequency ofverification is reasonable.

(c) According to the information and explanations given to us and on the basis of ourexamination of the records of the Company the title deeds of immovable properties areheld in the name of the Company. ii) The Company is in the business of rendering servicesand consequently does not hold any inventory. Therefore the provisions of clause 3(ii)of the said Order are not applicable to the Company. iii) (a) According to the informationand explanations given to us during the year the Company has not granted any loanssecured or unsecured to Companies Firms Limited Liability Partnerships or other partiescovered in the register maintained under section 189 of the Companies Act 2013.Therefore the provision of Clause 3(iii)(a) of the said order is not applicable to theCompany.

(b) In case of the Housing loan granted in the earlier financial year to a party listedin the register maintained under Section 189 of the Act the borrower is regular in thepayment of the principal and interest as stipulated.

(c ) There is no overdue amount for more than ninety days in respect of the Housingloan granted in the earlier financial year to a party listed in the register maintainedunder Section 189 of theAct. iv) The Company has not advanced any loan or given anyguarantee or provided any security or made any investment covered under section 185 and186 of the Act. Consequently requirements of clause (iv) of paragraph 3 of the order arenot applicable. v) According to the information and explanations given to us Company hasnot accepted any deposits to which directives of National Housing Bank and provisions ofsection 73 to 76 or other relevant provisions of the Companies Act 2013 and rules framedthereunder apply. Accordingly the provisions of clause 3(v) of the said Order are notapplicable to the Company. vi) The Central Government has not prescribed the maintenanceof cost records under section 148(1) of the Act for any of the services rendered by theCompany. vii) (a) The Company is regular in depositing with appropriate authoritiesundisputed statutory dues including provident fund Employee's State Insuranceincome-tax sales tax value added tax cess duty of customs service tax cess and othermaterial statutory dues applicable to it. According to the information and explanationsgiven to us no undisputed amounts payable in respect of outstanding statutory dues werein arrears as at March 31 2019 for a period of more than six months from the date theybecame payable. (b) According to the information and explanations given to us there areno dues of income tax sales tax service tax duty of customs duty of excise and valueadded tax which have not been deposited with the appropriate authorities on account of anydispute. viii) According to the records of the company examined by us and the informationand explanations given to us the Company has not defaulted in repayment of loans orborrowings to a financial institution bank National Housing Bank or debenture holdersduring the year. ix) The Company did not raise any money by way of initial publicofferorfurther public offer instruments) during the year. According to the information andexplanations provided to us the Company has applied term loans for the purpose for whichthe loans were obtained.

x) According to the information and explanations given to us no fraud by the Companyor on the Company by its other officers or employees has been noticed or reported duringthe course of our xi) According to the information and explanations given to us and basedon our examination of the records of the Company the Company has paid/provided formanagerial remuneration in accordance with the requisite approvals mandated by theprovisions of section 197 read with Schedule V to the Act. xii) In our opinion andaccording to the information and explanations given to us the Company is not a Nidhicompany. Accordingly paragraph 3(xii) of the Order is not applicable. xiii) According tothe information and explanations given to us and based on our examination of the recordsof the Company transactions with the related parties are in compliance with sections 177and 188 of the Act where applicable and details of such transactions have been disclosedin the financial statements as required by the applicable accounting standards. xiv)According to the information and explanations given to us and based on our examination ofthe records of the Company the Company has not made any preferential allotment or privateplacement of shares or fully or partly convertible debentures during the year.Accordingly paragraph 3(xiv) of the Order is not applicable. xv) According to theinformation and explanations given to us and based on our examination of the records ofthe Company the Company has not entered into non-cash transactions with directors orpersons connected with him. Accordingly paragraph 3(xv) of the Order is not applicable.xvi) The company is a Non-Banking Financial Institution; however it has been exemptedfrom the requirement of registration under section 45 IA of the Reserve Bank of India Act1934. Since the Company is registered under National Housing Bank (NHB) Act 1987 andregulated by the directions issued by the National Housing Bank.

For CNK & Associates LLP

Chartered Accountants

Firm Registration No.: 101961W/W-100036

Manish Sampat

Date : May 24 2019 Partner

Place : Mumbai Membership No. 101684

ANNEXURE – A TO THE INDEPENDENT AUDITOR'S REPORT OF EVEN DATE ON THE FINANCIALSTATEMENTS OF GIC HOUSING FINANCE LIMITED

Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section143 of the Companies Act 2013 ("the Act")

We have audited the internal financial controls over financial reporting of GIC HousingFinance Limited ("the Company") as of March 31 2019 in conjunction with ouraudit of the financial statements of the Company for the year ended on that date.

Opinion

In our opinion the Company has in all material respects an adequate internalfinancial controls system over financial reporting and such internal financial controlsover financial reporting were operating effectively 31 2019 based on the internalcontrol over financial reporting criteria established by the Company considering theessential components of internal control stated in the Guidance Note on Audit of InternalFinancial Controls over Financial Reporting issued by the Institute of CharteredAccountants of India.

Management's Responsibility for Internal Financial Controls

The Company's management is responsible for establishing and maintaining internalfinancial controls based on "the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal Financial Controls over Financial Reportingissued by the Institute of Chartered Accountants of India (ICAI)". Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of its business including adherence to company's policies the safeguarding ofits assets the prevention and detection of frauds and errors the accuracy andcompleteness of the accounting records and the timely preparation of reliable financialinformation as required under theAct.

Auditor's Responsibility

Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting based on our audit. We conducted our audit in accordancewith the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting(the "Guidance Note") and the Standards on Auditing issued by ICAI and deemedto be prescribed under section 143(10) of the Companies Act 2013 to the extentapplicable to an audit of internal financial controls both applicable to an audit ofInternal Financial Controls and both issued by the Institute of Chartered Accountants ofIndia. Those Standards and the Guidance Note require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetheradequate internal financial controls over financial reporting was established andmaintained and if such controls operated effectively in all Our audit involves performingprocedures to obtain audit evidence about the adequacy of the internal financial controlssystem over financial reporting and their operating effectiveness. Our audit of internalfinancial controls over financial reporting included obtaining an understanding ofinternal financial controls over financial reporting assessing the risk that a materialweakness exists and testing and evaluating the design and operating effectiveness ofinternal control based on the assessed risk. The procedures selected depend on theauditor's judgment including the assessment of the risks of material misstatement of thefinancial 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 controls systemover financial reporting.

Meaning of Internal Financial Controls over Financial Reporting

A company's internal financial control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial in accordance with generally accepted accounting principles. Acompany's internal financial control over financial reporting includes those policies andprocedures that (1) pertain to the maintenance of records that in reasonable detailaccurately and fairly reflect the transactions and dispositions of the assets of thecompany; (2) reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accountingprinciples and that receipts and expenditures of the company are being made only inaccordance with authorizations of management and directors of the company; and (3) providereasonable assurance regarding prevention or timely detection of unauthorized acquisitionuse or disposition of the company's assets that could have a material effect on thefinancial statements.

Inherent Limitations of Internal Financial Controls over Financial Reporting

Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.

For CNK & Associates LLP

Chartered Accountants

Firm Registration No.: 101961W/W-100036

Manish Sampat

Date : May 24 2019 Partner

Place : Mumbai Membership No. 101684