To The Members of IIFL Securities Limited (formerly known as India Infoline Limited)
Report on the Audit of the Standalone Ind AS financial statements Opinion
We have audited the standalone Ind AS financial statements of IIFL Securities Limited(formerly known as India Infoline Limited) ("the Company") which comprise theBalance Sheet as at 31st March 2019 the Statement of Profit and Loss Statement ofChanges in Equity and Statement of Cash Flows 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 our information and according to the explanationsgiven to us the aforesaid financial statements give the information required by theCompanies Act 2013 (the "Act") in the manner so required and give a true andfair view in conformity with Indian Accounting Standards prescribed under section 133 ofthe Act read with the Companies (Indian Accounting Standards) Rules 2015 as amended("Ind AS") and other accounting principles generally accepted in India of thestate of affairs of the Company as at March 31 2019 profit total comprehensive incomechanges in equity and cash flows for the year ended on that date.
Basis for Opinion
We conducted our audit of the financial statements in accordance with the Standards onAuditing (SAs) specified under section 143(10) of the Companies Act 2013. Ourresponsibilities under those Standards are further described in the Auditor'sResponsibilities for the Audit of the financial statements section of our report. We areindependent of the Company in accordance with the Code of Ethics issued by the Instituteof Chartered Accountants of India ("ICAI") together with the ethicalrequirements that are relevant to our audit of the financial statements under theprovisions of the Act and the Rules thereunder and we have fulfilled our other ethicalresponsibilities in accordance with these requirements and the ICAI's Code of Ethics. Webelieve that the audit evidence we have obtained is sufficient and appropriate to providea basis for our opinion on the financial statements.
Information Other than the Financial Statements and Auditor's Report Thereon
The Company's Board of Directors is responsible for the preparation of the otherinformation. The other information comprises the information included in the Board'sReport including Annexures to Board's Report but does not include the financial statementsand our auditor's report thereon.
Our opinion on the financial statements does not cover the other information and we donot express any form of assurance 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 on the other information obtained prior to thedate of this auditor's report we conclude that there is a material misstatement of thisother information we are required to report that fact. We have nothing to report in thisregard.
Responsibilities of Management and Those Charged with Governance for the FinancialStatements
The Company's Board of Directors is responsible for the matters stated in section134(5) of the Act with respect to the preparation of these financial statements that givea true and fair view of the financial position financial performance total comprehensiveincome changes in equity and cash flows of the Company in accordance with the Ind AS andother accounting principles generally accepted in India. This responsibility also includesmaintenance of adequate accounting records in accordance with the provisions of the Actfor safeguarding of the assets of the Company and for preventing and detecting frauds andother irregularities; selection and application of appropriate accounting policies; makingjudgments and estimates that are reasonable and prudent; and design implementation andmaintenance of adequate internal financial controls that were operating effectively forensuring the accuracy and completeness of the accounting records relevant to thepreparation and presentation of the financial statements that give a true and fair viewand are free from material misstatement whether due to fraud or error.
In preparing the financial statements the Board of Directors is responsible forassessing the Company's ability to continue as a going concern disclosing as applicablematters related to going concern and using the going concern basis of accounting unlessthe management either intends to liquidate the Company or to cease operations or has norealistic alternative but to do so.
Those Board of Directors are also responsible for overseeing the Company's financialreporting process.
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 financialstatements whether due to fraud or error design and perform audit procedures responsiveto those risks and obtain audit evidence that is sufficient and appropriate to provide abasis for our opinion. The risk of not detecting a material misstatement resulting fromfraud is higher than for one resulting from error as fraud may involve collusionforgery intentional omissions misrepresentations or the override of internal control.
Obtain an understanding of internal financial controls relevant to the audit inorder to design audit procedures that are appropriate in the circumstances. Under section143(3X0 of the Act we are also responsible for expressing our opinion on whether theCompany has adequate internal financial controls system in place and the operatingeffectiveness 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 ability ofthe Company to continue as a going concern. If we conclude that a material uncertaintyexists we are required to draw attention in our auditor's report to the relateddisclosures in the financial statements or if such disclosures are inadequate to modifyour opinion. Our conclusions are based on the audit evidence obtained up to the date ofour auditor's report. However future events or conditions may cause the Company to ceaseto continue as a going concern.
Evaluate the overall presentation structure and content of the financialstatements including the disclosures and whether the financial statements represent theunderlying transactions and events 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.
Matter of Emphasis
We draw attention Note No. 1.1 of the Financial Statements which describes theimplementation of the Composite Scheme of Arrangement amongst' the Company IIFL HoldingsLimited India Infoline Media and Research Services Limited IIFL Wealth ManagementLimited India Infoline Finance Limited IIFL Distribution Services Limited and theirrespective shareholders under Sections 230 - 232 and other applicable provisions of theCompanies Act 2013 (the "Scheme")in Parts based on the legal opinion obtainedby the Company. The Scheme has been approved by the National Company Law Tribunal vide itsorder dated 07 March 2019 and filed with the Registrar of Companies on 11 April 2019.
Our report is not modified in respect of this matter.
The comparative financial information of the Company for the year ended 31st March2018 and the transition date opening balance sheet as at 1st April 2017 included in thesefinancial statements are based on the previously issued statutory financial statementsprepared in accordance with Companies (Accounting Standards) Rules 2016 audited by us forthe year ended 31st March 2018 our report dated 1st May 2018 and audited by thepredecessor auditor for the year ended 31st March 2017 whose report dated 3rd May 2017expressed an unmodified opinion on those financial statements as adjusted for thedifferences in accounting principles adopted by the company on transition to the Ind ASwhich have been audited by us except for the figures relating to Securities BusinessUndertaking included in these financial statements which have been audited by otherauditors whose reports have been furnished to us by the management.
We did not audit the financial statements of Securities Business Undertaking includedin the financial statements (consequent to the Composite Scheme of Arrangement as referredto in Note 1.1 of the financial statements) whose financial statements reflect totalassets of Rs 1444.73 Millions and net assets of Rs 1414.99 Millions as at 31st March2019 total revenues of Rs 406.77 Millions and net cash outflows/(inflows) amounting to Rs140.75 Millions for the year ended on that date as considered in the financialstatements. These financial statements have been audited by other auditors whose reportshave been furnished to us by the management and our opinion on the in so far as itrelates to the amounts and disclosures included in respect of the said undertaking and ourreport in terms of sub-sections (3) of Section 143 of the Act in so far as it relates tothe said undertaking is based solely on the reports of the other auditors.
As required by Ind AS 103 on Business Combinations under Appendix C - BusinessCombinations of Entities under Common Control the financial information for the yearended 31st March 2018 and as on 1st April 2017 are restated for giving effect of thecomposite scheme of arrangement referred to in Note 1.1 to the financial statements.
Our opinion on the standalone financial statements and our report on Other Legal andRegulatory Requirements below is not modified in respect of the above matters.
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 we give in"Annexure A" a statement on the matters specified in paragraphs 3 and 4 of theOrder.
2. As required by Section 143(3) of the Act we report that:
a) We have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purposes of our audit of the financialstatements.
b) In our opinion proper books of account as required by law have been kept by theCompany so far as it appears from our examination of those books
c) The Balance Sheet the Statement of Profit and Loss (including Other ComprehensiveIncome) the Statement of changes in Equity and the Statement of Cash Flows dealt with bythis Report are in agreement with the books of account maintained for the purpose orpreparation of the financial statements.
d) In our opinion the aforesaid financial statements comply with the Ind AS specifiedunder section 133 of the Act read with Rule 7 of the Companies (Accounts) Rules 2014.
e) On the basis of the written representations received from the directors as on 31stMarch 2019 taken on record by the Board of Directors none of the directors isdisqualified as on 31st March 2019 from being appointed as a director in terms of Section164(2) of the Act.
f) With respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate report in "Annexure B".
g) With respect to the other matters to be included in the Auditor's Report inaccordance with the requirements of section 197(16) of the Act as amended: In our opinionand to the best of our information and according to the explanations given to us theremuneration paid by the Company to its managing director during the year is in accordancewith the provisions of section 197 of the Act.
h) With respect to the other matters to be included in the Auditor's Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand to the best of our information and according to the explanations given to us:
i. The Company has disclosed the impact of pending litigations on its financialposition in its financial statements- Refer Note No 29 of the financial statements.
ii. The Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses.
iii. There were no amounts which were required to be transferred to the InvestorEducation and Protection Fund by the Company.
For V Sankar Aiyar & Co.
(Firms Registration No. 109208W)
(Membership No. 46050)
Date: May 13 2019
ANNEXURE A To The Independent Auditor's Report
Annexure referred to in our report of even date to the members of IIFL SecuritiesLimited (formerly known as India Infoline Limited) on the accounts for the year ended 31stMarch 2019
(i) (a) The company is maintaining proper records showing full particulars includingquantitative details and situation of fixed assets.
(b) As explained to us the assets have been physically verified by the management inaccordance with a phased programme of verification which in our opinion is reasonableconsidering the size of the Company and nature of its fixed assets. According to theinformation and explanations given to us no material discrepancies have been noticed onsuch physical 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 deeds of immovable properties whichare freehold are held in the name of the Company.
(ii) The Company is not carrying on any trading or manufacturing activity. ThereforeParagraph 3(ii) of the Order is not applicable to the Company
(iii) Company has granted loan to 2 companies covered in the register maintained underSection 189 of the Companies Act 2013 ("the Act") in respect of which:
(a) In our opinion the rate of interest and other terms and conditions on which theloans had been granted to the Companies were not prima facie prejudicial to theinterests of the Company;
(b) The borrowers have been regular in the payment of the principal and interest asstipulated;
(c) There are no overdue amounts as at the balance sheet date in respect of theseloans.
(iv) According to the information and explanations given to us the company hascomplied with the provisions of section 185 and 186 of the Act with respect to the loansinvestments guarantees and securities made as applicable.
(v) The Company has not accepted any deposits from the public within the meaning ofSection 73 to 76 or any other relevant provisions of the Act and Rules framed thereunder.We are informed that no order has been passed by the Company Law Board or National CompanyLaw Tribunal or Reserve Bank of India or any court or other tribunal.
(vi) According to the information and explanations given to us in respect of the classof industry the company falls under the Central Government has not prescribed themaintenance of cost records under Section 148(1) of the Act. Therefore paragraph 3(vi) ofthe Order is not applicable to the Company.
(vii) (a) According to the information and explanations given to us the Company isgenerally regular in depositing undisputed statutory dues including provident fundemployees state insurance income tax service tax sales tax value added tax goods andservices tax cess and other statutory dues as applicable to the Company with theappropriate authorities. Further as explained there are no undisputed statutory duesoutstanding for more than six months as at 31st March 2019 from the date they becamepayable.
(b) According to the information and explanations given to us and records of theCompany examined by us there are no cases of non-deposit of disputed dues of income taxor sales tax or goods and services tax or duty of customs or duty of excise. Howeveraccording to the information and explanations given to us the following dues of servicetax has not been deposited by the Company on account of dispute.
|Nature of the Statute ||Nature of the Disput- ed Dues ||Amount of Tax (Rs in Millions) ||Period to which amount relates ||Forum where dispute is pending |
|Service Tax 1994 ||Service Tax on Delayed Payment charges ||Rs. 233.58 outstanding out of total demand of Rs. 241.32 ||01.04.2014 to 31.03.2016 ||CESTAT |
|Service Tax 1994 ||Service Tax on FII Broker- age ||Rs. 90.50 outstanding out of total demand of Rs. 94.45 ||01.04.2014 to 30.09.2014 ||CESTAT |
(viii) According to the information and explanation given to us the company has notdefaulted in repayment of loans to banks. The Company has not taken any loans orborrowings from Government or financial institutions and did not have any dues todebenture holders.
(ix) According to the information and explanations given to us the Company has notraised any moneys by way of initial public offer or further public offer (including debtinstruments) and term loans during the year. However it has raised monies by way ofCommercial Papers and the monies raised were utilized for the purpose for which these wereraised.
(x) According to the information and explanations given to us and based on the auditprocedures performed and the representations obtained from the management we report thatno fraud by the company or on the Company by its officers or employees having a materialmisstatement on the financial statements has been noticed or reported during the periodunder audit.
(xi) According to the information and explanations given to us and based onverification of records the managerial remuneration has been paid in accordance with therequisite approvals mandated by the provisions of section 197 read with Schedule V of theCompanies Act 2013.
(xii) In our Opinion and according to the information and explanations given to us theCompany is not a Nidhi Company and hence clause (xii) of the order is not applicable tothe Company.
(xiii) According to the information and explanation given to us and based onverification of the records and approvals of the Audit Committee all transactions withthe related parties are in compliance with sections 177 and 188 of Companies Act 2013where applicable and the details have been disclosed in the Financial Statements etc. 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.
(xv) According to the information and explanations given to us the company has notentered into any non-cash transactions with directors or persons connected with him.Therefore paragraph 3(xv) of the Order is not applicable to the Company.
(xvi) According to the information and explanations given to us the company is notrequired to be registered under Sec 45-IA of the Reserve Bank of India Act 1934.
For V Sankar Aiyar & Co.
(Firms Registration No. 109208W)
(Membership No. 46050)
Date: May 13 2019
ANNEXURE B To The Independent Auditor's Report
Annexure referred to in our report of even date to the members of IIFL SecuritiesLimited (formerly known as India Infoline Limited) on the accounts for the year ended 31stMarch 2019 Report on the Internal Financial Controls under Clause (i) of Sub-section 3 ofSection 143 of the Companies Act 2013 ("the Act")
We have audited the internal financial controls over financial reporting of IIFLSecurities Limited (formerly known as India Infoline Limited) ("the Company") asof March 31st 2019 in conjunction with our audit of the financial statements of theCompany for the year ended on that date.
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.
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.
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 material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls over financial reporting includedobtaining an understanding of internal financial controls over financial reportingassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditor's judgement including the assessment of the risks ofmaterial misstatement of the financial 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 statements for external purposes in accordance with generallyaccepted accounting principles. A company's internal financial control over financialreporting includes those policies and procedures that (1) pertain to the maintenance ofrecords that in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the company; (2) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles and that receipts andexpenditures of the company are being made only in accordance with authorisations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorised acquisition use or disposition of thecompany's assets that could have a material effect on the financial 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.
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 as at March 31 2019 based on theinternal control over financial reporting criteria established by the Company consideringthe essential components of internal control stated in the Guidance Note on Audit ofInternal Financial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India.
For V Sankar Aiyar & Co.
(Firms Registration No. 109208W)
(Membership No. 46050)
Date: May 13 2019