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Hexaware Technologies Ltd.

BSE: 532129 Sector: IT
NSE: HEXAWARE ISIN Code: INE093A01033
BSE 00:00 | 30 Oct Hexaware Technologies Ltd
NSE 05:30 | 01 Jan Hexaware Technologies Ltd
OPEN 470.10
PREVIOUS CLOSE 470.75
VOLUME 21204
52-Week high 471.90
52-Week low 216.35
P/E 29.93
Mkt Cap.(Rs cr) 14,139
Buy Price 470.50
Buy Qty 500.00
Sell Price 470.75
Sell Qty 208.00
OPEN 470.10
CLOSE 470.75
VOLUME 21204
52-Week high 471.90
52-Week low 216.35
P/E 29.93
Mkt Cap.(Rs cr) 14,139
Buy Price 470.50
Buy Qty 500.00
Sell Price 470.75
Sell Qty 208.00

Hexaware Technologies Ltd. (HEXAWARE) - Auditors Report

Company auditors report

To the Members of

Hexaware Technologies Limited

Report on the Audit of the Standalone Ind AS Financial Statements

Opinion

We have audited the standalone Ind AS financial statements of Hexaware TechnologiesLimited ("the Company") which comprise the standalone balance sheet as at 31December 2019 and the standalone statement of profit and loss (including othercomprehensive income) standalone statement of changes in equity and standalone statementof cash flows for the year then ended and notes to the standalone financial statementsincluding a summary of the significant accounting policies and other explanatoryinformation.

In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone financial statements give the information requiredby the Companies Act 2013 ("Act") in the manner so required and give a true andfair view in conformity with the accounting principles generally accepted in India of thestate of affairs of the Company as at 31 December 2019 and profit and other comprehensiveincome changes in equity and its cash flows for the year ended on that date.

Basis for Opinion

We conducted our audit in accordance with the Standards on Auditing (SAs) specifiedunder sub-section (10) of Section 143 of the Act. Our responsibilities under those SAs arefurther described in the Auditor's Responsibilities for the Audit of the StandaloneFinancial Statements section of our report. We are independent of the Company inaccordance with the Code of Ethics issued by the Institute of Chartered Accountants ofIndia together with the ethical requirements that are relevant to our audit of thestandalone financial statements under the provisions of the Act and the Rules thereunderand we have fulfilled our other ethical responsibilities in accordance with theserequirements and the Code of Ethics. We believe that the audit evidence we have obtainedis sufficient and appropriate to provide a basis for our opinion.

Key audit matters

Key audit matters are those matters which in our professional judgment were of mostsignificance in our audit of the standalone financial statements. These matters wereaddressed in the context of our audit of the standalone financial statements as a wholeand in forming our opinion thereon. We do not provide a separate opinion on these matters.

The key audit matter How the matter was addressed in our audit
Revenue recognition
Revenue from operations is recognised based on the application of the new revenue standard Ind AS 115 - Revenue from Contracts with Customers (‘Ind AS 115') which became applicable from 1 January 2019. Our key audit procedures included:
The standard establishes a comprehensive framework for recognition of revenue. This involves making judgments relating to: • Obtained an understanding of the systems processes and controls implemented by the Company for recognizing revenue and the associated contract assets and liabilities.
• identification of performance obligations; • Evaluated the internal controls relating to recording of contract value / rates capturing of time/ efforts incurred estimation of unbilled revenue and efforts required to complete the performance obligations as applicable.
• estimating the transaction price; • Involved our Information Technology (IT) specialists to assess the design and operating effectiveness of key IT controls related to the revenue process.
• allocation of the transaction price to identified performance obligation; and • On selected sample of contracts tested revenue recognition. Key procedures included:
• basis used to recognize revenue. - evaluating the identification of performance obligations;
It also prescribes additional disclosure requirments (Refer note 18 to the standalone Financial Statments.) - considering the terms of the contracts to determine the transaction price;
Due to the variety and nature of contractual terms judgments involved and nature of disclosures revenue recognition is a key audit matter. - testing the allocation of transaction price for performance obligations;
- testing the unbilled revenue efforts incurred estimation of cost to complete;
- testing the estimation of onerous obligation;
- compare the efforts incurred with estimated efforts and analyse variance.
• Assessed the adequacy of disclosures in the standalone financial
statements.

The Company operates in multiple tax jurisdictions and is subjected to periodicchallenges / demands by local tax authorities on account of tax deductions/ allowanceavailed by the Company.

Such challenges/ demands involve significant use of judgment to determine the possibleoutcome of the uncertain tax positions consequently having an impact on relatedaccounting and disclosures.

Refer Note 7 to the standalone financial statements.

Given the inherent complexity and magnitude of potential tax exposures and the judgmentnecessary to estimate the amount of provisions required or to determine requireddisclosures this is a key audit matter.

Our key audit procedures included:

• Obtained details of outstanding tax litigations as at 31 December 2019.

• Read and analysed select key correspondences external legal opinions/consultations by Company and internal assessment for key uncertain tax positions.

• Involved our tax specialists and held inquiry with Company to ascertain theirviews and approaches on significant cases as well as the technical grounds relating totheir conclusions based on applicable tax laws.

• Our tax specialists also considered legal precedence and other rulings inevaluating the position taken by the Company on such uncertain tax positions.

• Assessed Company's estimate of the possible outcome of the disputed cases.

• Assessed the adequacy of related disclosures on uncertain tax positions in thestandalone financial statements.

Information Other than the Standalone Financial Statements and Auditor's Report Thereon("Other Information")

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 standalone financial statements and our auditor'sreport thereon. Our opinion on the standalone financial statements does not cover theother information 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.

Management's Responsibility for the Standalone Financial Statements

The Company's management and Board of Directors are responsible for the matters statedin sub-section (5) of Section 134 of the Act with respect to the preparation of thesestandalone financial statements that give a true and fair view of the state of affairsprofit/loss and other comprehensive income changes in equity and cash flows of theCompany in accordance with the accounting principles generally accepted in Indiaincluding the Indian Accounting Standards (Ind AS) specified under Section 133 of the Act.This responsibility also includes maintenance of adequate accounting records in accordancewith the provisions of the Act for safeguarding of the assets of the Company and forpreventing and detecting frauds and other irregularities; selection and application ofappropriate accounting policies; making judgments and estimates that are reasonable andprudent; and design implementation and maintenance of adequate internal financialcontrols that were operating effectively for ensuring the accuracy and completeness of theaccounting records relevant to the preparation and presentation of the standalonefinancial statements that give a true and fair view and are free from materialmisstatement whether due to fraud or error.

In preparing the standalone financial statements management and Board of Directors areresponsible 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 management either intends to liquidate the Company or to ceaseoperations or has no realistic alternative but to do so.

Board of Directors is also responsible for overseeing the Company's financial reportingprocess.

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:

• identify and assess the risks of material misstatement of the standalonefinancial 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. Under clause (i) ofsub-section (3) of Section 143 of the Act we are also responsible for expressing ouropinion on whether the company has adequate internal financial controls with reference tofinancial statements in place and the operating effectiveness of such controls;

• 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 Company'sability to continue as a going concern. If we conclude that a material uncertainty existswe are required to draw attention in our auditor's report to the related disclosures inthe standalone financial statements or if such disclosures are inadequate to modify ouropinion. Our conclusions are based on the audit evidence obtained up to the date of ourauditor's report. However future events or conditions may cause the Company to cease tocontinue as a going concern; and

• evaluate the overall presentation structure and content of the standalonefinancial statements including the disclosures and whether the standalone financialstatements represent the underlying transactions and events in a manner that achieves fairpresentation.

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 auditor's 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 sub-section (11) of Section 143 of the Actwe give in the "Annexure A" a statement on the matters specified inparagraphs 3 and 4 of the Order to the extent applicable.

  1. As required by sub-sections (3) of Section 143 of the Act we report that:
    1. we have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit;
    2. in our opinion proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books;
    3. the standalone balance sheet the standalone statement of profit and loss (including other comprehensive income) the standalone statement of changes in equity and the standalone statement of cash flows dealt with by this Report are in agreement with the books of account;
    4. in our opinion the aforesaid standalone financial statements comply with the Ind AS specified under Section 133 of the Act;
    5. on the basis of the written representations received from the directors as on 31 December 2019 taken on record by the Board of Directors none of the directors is disqualified as on 31 December 2019 from being appointed as a director in terms of sub-section (2) of Section 164 of the Act; and
    6. with respect to the adequacy of the internal financial controls with reference to financial statements of the Company and the operating effectiveness of such controls refer to our separate Report in "Annexure B".
  2. With respect to the other matters to be included in the Auditor's Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinion and to the best of our information and according to the explanations given to us:
      1. the Company has disclosed the impact of pending litigations as at 31 December 2019 on its financial position - refer Note 31 to the standalone financial statements;
      2. the Company has made provision as required under the applicable law or accounting standards for material foreseeable losses if any on long-term contracts including derivative contracts - refer Note 33 to the standalone financial statements; and
      3. the Company has been regular in transferring amounts to the Investor Education and Protection Fund except there was a delay in transferring H390643 subsequently transferred during the year ended 31 December 2019.

(C) With respect to the matter to be included in the Auditor's Report under sub-section(16) of Section 197: In our opinion and according to the information and explanationsgiven to us the remuneration paid / payable by the company to its directors during thecurrent year is in accordance with the provisions of Section 197 of the Act. Theremuneration paid / payable to any director is not in excess of the limit laid down underSection 197 of the Act. The Ministry of Corporate Affairs has not prescribed other detailsunder sub-section (16) of Section 197 which are required to be commented upon by us.

‘Annexure A' to the Independent Auditor's Report

on the standalone financial statements of Hexaware Technologies Limited for the yearended 31 December 2019

Referred to in paragraph (1) under ‘Report on Other Legal and RegulatoryRequirements' section of our report of even date we report the following:

(i) (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.

  1. The Company has a regular program of physical verification of its fixed assets by which all the items of fixed assets are covered in a phased manner over a period of three years. In our opinion this periodicity of physical verification is reasonable having regard to the size of the Company and the nature of its assets. Pursuant to the program certain fixed assets were physically verified by the Management during the year and no material discrepancies were noticed on such verification.

(c) According to the information and explanations given to us and on the basis ofexamination of the records the title deeds and lease agreements as applicable ofimmovable properties as disclosed in Note 4 and included in Note 10A to the standalonefinancial statements relating to leasehold land are held in the name of the Companyexcept as disclosed in footnote to Note 10A to the standalone financial statements.

  1. The Company is a service company primarily engaged in providing information technology and related services. Accordingly it does not hold any physical inventories. Thus paragraph 3
  2. of the Order are not applicable to the Company.
  3. According to the information and explanations given to us the Company has not granted any loans secured or unsecured to companies firms limited liability partnerships or other parties covered in the register maintained under Section 189 of the Act. Accordingly paragraph 3(iii) (a) (b) and (c) of the Order are not applicable to the Company.
  4. (iv) In our opinion and according to the information and explanations given to us the Company has complied with the provisions of Section 185 and 186 of the Act with respect to the investments made and guarantees given. The Company had not granted any loan or security to the parties covered under the provisions of Section 185 and 186 of the Act. Accordingly compliance under section 185 and 186 of the Act in respect of pending loan or securities are not applicable to the Company.

  5. According to the information and explanations given to us the Company has not accepted any deposits from the public within the meaning of the directives issued by the Reserve Bank of India provisions of Section 73 to 76 of the Act any other relevant provisions of the Act and the relevant rules framed thereunder. Accordingly paragraph 3(v) of the Order are not applicable to the Company.
  6. (vi) The Central Government has not prescribed the maintenance of cost records under Section 148 of the Act for any of the services rendered by the Company. Accordingly paragraph 3
  7. (vi) of the Order are not applicable to the Company.
  8. (vii) (a) According to the information and explanations given to us and on the basis of our examination of the records of the Company amounts deducted/ accrued in the books of account in respect of undisputed statutory dues including Provident fund Professional tax Employees' State Insurance Income-tax Goods and Services tax duty of Customs and other material statutory dues have been generally regularly deposited during the year by the Company with the appropriate authorities.

    As explained to us the Company did not have any dues on account of wealth tax duty of excise and cess. According to the information and explanations given to us no undisputed amounts payable in respect of Provident fund Employees' State Insurance Income-tax Goods and Services tax duty of Customs and other material statutory dues were in arrears as at 31 December 2019 for a period of more than six months from the date they became payable.

    (b) According to the information and explanations given to us except as mentioned below there are no dues of Income-tax or Sales tax or Service tax or Goods and Services tax or duty of Customs or Value added tax and other material statutory dues which have not been deposited with appropriate authorities on account of disputes:

    Name of the Act Nature of Dues Amount (J in million) Period to which amount relates Forum where dispute is pending
    Income Tax Act 1961 Income Tax 1.10 Financial year 2008-09 Assessing Officer
    Income Tax Act 1961 Income Tax 2.76 Financial year 2010-11 Commissioner of Income Tax (Appeals)
  9. In our opinion and according to the information and explanations given to us the Company did not have any outstanding loans or borrowings from any financial institution bank or Government and there are no dues to debenture holders during the year.
  10. In our opinion and according to the information and explanations given to us the Company did not raise any money by way of initial public offer or further public offer (including debt instruments) and term loans during the year. Accordingly paragraph 3
  11. of the Order is not applicable to the Company.

(x) During the course of our examination of the books and records of the Companycarried out in accordance with the generally accepted auditing practices in India andaccording to the information and explanations given to us we have neither come across anyinstance of fraud by the Company or any material instances of fraud on the Company by itsofficers or employees noticed or reported during the year nor have we been informed ofany such case by the management.

(xi) In our opinion and according to the information and explanations given to us andbased on 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 and according to the information and explanations given to us theCompany is not a Nidhi Company. Accordingly paragraph 3(xii) of the Order is notapplicable to the Company.

(xiii) According to the information and explanations given to us and based on ourexamination of the records of the Company all transactions with the related parties arein compliance with Sections 177 and 188 of the Act where applicable and details of suchtransactions have been disclosed in the standalone financial statements as required by theapplicable 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 to the Company.

(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 non-cashtransactions with directors or persons connected with him. Accordingly paragraph 3 of theOrder is not applicable to the Company.

(xvi) In our opinion and according to the information and explanation given to us theCompany is not required to be registered under section 45-IA of the Reserve Bank of IndiaAct 1934. Accordingly paragraph 3 of the Order is not applicable to the Company.

‘Annexure B' to the Independent Auditor's Report

on the standalone financial statements of Hexaware Technologies Limited for the yearended 31 December 2019

Report on the internal financial controls with reference to the aforesaid standalonefinancial statements under clause (i) of Subsection 3 of Section 143 of the Companies Act2013 (Referred to in paragraph (2f) under ‘Report on Other Legal and RegulatoryRequirements' section of our report of even date)

Opinion

We have audited the internal financial controls with reference to financial statementsof Hexaware Technologies Limited ("the Company") as of 31 December 2019 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 financial statements and such internal financial controls wereoperating effectively as at 31 December 2019 based on the internal financial controlswith reference to financial statements 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 (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 financial statements criteria established by the Company considering theessential components of internal control stated in the Guidance Note. 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 the Companies Act 2013 (hereinafter referred to as"the Act").

Auditor's Responsibility

Our responsibility is to express an opinion on the Company's internal financialcontrols with reference to financial statements based on our audit. We conducted our auditin accordance with the Guidance Note and the Standards on Auditing prescribed undersub-section (10) of Section 143 of the Act to the extent applicable to an audit ofinternal financial controls with reference to financial statements. Those Standards andthe Guidance Note require that we comply with ethical requirements and plan and performthe audit to obtain reasonable assurance about whether adequate internal financialcontrols with reference to financial statements were established and maintained andwhether such controls operated effectively in all material respects. Our audit involvesperforming procedures to obtain audit evidence about the adequacy of the internalfinancial controls with reference to financialstatementsandtheiroperatingeffectiveness.Ourauditofinternalfinancial controls withreference to 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 financial statements.

Meaning of Internal Financial controls with Reference to Financial Statements

A company's internal financial controls with reference to financial statements is aprocess designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles. A company's internal financial controlswith reference to financial statements include those policies and procedures that (1)pertain to the maintenance of records that in reasonable detail accurately and fairlyreflect the transactions and dispositions of the assets of the company; (2) providereasonable assurance that transactions are recorded as necessary to permit preparation offinancial statements in accordance with generally accepted accounting principles and thatreceipts and expenditures of the company are being made only in accordance withauthorisations of management and directors of the company; and (3) provide reasonableassurance regarding prevention or timely detection of unauthorised acquisition use ordisposition of the company's assets that could have a material effect on the financialstatements.

Inherent Limitations of Internal Financial controls with Reference to FinancialStatements

Because of the inherent limitations of internal financial controls with reference tofinancial statements including the possibility of collusion or improper managementoverride of controls material misstatements due to error or fraud may occur and not bedetected. Also projections of any evaluation of the internal financial controls withreference to financial statements to future periods are subject to the risk that theinternal financial controls with reference to financial statements may become inadequatebecause of changes in conditions or that the degree of compliance with the policies orprocedures may deteriorate.

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