To The Members of IIFL Wealth Management Limited Report on the Audit of the StandaloneFinancial Statements Opinion
We have audited the accompanying standalone financial statements of IIFL WealthManagement Limited ("the Company") which comprise the Balance Sheet as at31st March 2020 and the Statement of Profit and Loss (including OtherComprehensive Income) the Statement of Cash Flows and the Statement of Changes in Equityfor the year then ended and a summary of significant other explanatory information.
In our opinion and to the best of our information and according to the explanationsgiven to us and based on the consideration of reports of other auditors referred to in theOther Matters section below the aforesaid standalone financial statements Companies Act2013 ("the Act") in the manner so required and give a true and fair view inconformity with the Indian Accounting Standards prescribed under section 133 of the Actread with the Companies (Indian Accounting Standards) Rules 2015 as amended ("IndAS") and other accounting principles generally accepted in India of the state ofaffairs of the Company as at 31st March 2020 and its profit totalcomprehensive income its cash flows and the changes in equity for the year ended on thatdate.
Basis for Opinion
We conducted our audit of the standalone financial statements in accordance with theStandards on Auditing specified under section 143(10) of the Act (SAs). Ourresponsibilities under those Standards are further described in the Auditor'sResponsibility for the Audit of the Standalone Financial Statements section of our report.We are independent of the Company in accordance with the Code of Ethics issued by theInstitute of Chartered Accountants of India (ICAI) together with the ethical requirementsthat are relevant to our audit of the standalone financial statements under the provisionsof the Act and the Rules made 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 obtained by us and the audit evidence obtained by theother auditors in terms of their reports referred to in the Other Matters section below issufficient and appropriate to provide a basis for our audit opinion on the standalonefinancial statements.
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. We have determined the matters described below to bethe key audit matters to be communicated in our report.
|Key Audit Matter ||Auditor's Response |
|Business Combination: ||Principal audit procedure performed |
|Accounting for this amalgamation was done in accordance with Ind AS 103 which requires the Management the information required by the to account for such transaction using the acquisition method. The Company acquired 100% stake in IIFL Wealth Advisors (India) Limited (the Transferee Company) on November 22 2018. Thereafter on January 29 2019 the Board of Directors of the Company approved a draft scheme of amalgamation with the Transferee Company in terms of the provisions of Section 230 to 232 read with other applicable provisions of the Companies Act 2013 (the "Scheme"). Such Scheme was approved by the NCLT Mumbai and Chennai benches on October 24 2019 and December 27 2019 respectively. ||We obtained and read the Scheme. |
|Accounting for business amalgamation is considered to be a key audit matter because the transaction and its accounting is non-routine and involves significant management judgements. ||We obtained and read the NCLT order of Mumbai and Chennai benches on October 24 2019 and December 27 2019 respectively approving the Scheme. |
|Refer Note 33A of the Financial Statements. ||We obtained management's workings for accounting of amalgamation. |
| ||We evaluated the management's conclusions on the accounting for the amalgamation of IIFL Wealth Advisors (India) Limited with the Company. |
| ||We performed procedures to verify the amalgamation accounting done by the Company including the measurement and presentation is in accordance with IND AS 103 and the Scheme. |
Information Other than the Financial Statements and Auditor's Report Thereon
The Company's Board of Directors is responsible for the other information. The otherinformation comprises the information included in the Directors' report includingAnnexures to Directors' report but does not include the standalone financial statementsand our auditor's report thereon. The Directors report including Annexures to Directors'report is expected to be made available to us after the date of this auditor's report.
Our opinion on the standalone financial statements does not cover the other informationand we do not and will 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 during the course of our audit or otherwise appears to be materially misstated.
When we read the Directors' report including Annexures to Directors report if weconclude that there is a material misstatement therein we are required to communicate thematter to those charged with governance as required under SA 720 The Auditor'sresponsibilities Relating to Other Information'
Management's Responsibility for the Standalone Financial Statements
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 standalone financial statementsthat give a true and fair view of the financial position financial performance includingother comprehensive income cash flows and changes in equity of the Company in accordancewith the Ind AS and other accounting principles generally accepted in India. Thisresponsibility also includes maintenance of adequate accounting records in accordance withthe provisions of the Act for safeguarding the assets of the Company and for preventingand detecting frauds and other irregularities; selection and application of appropriateaccounting policies; making judgments and estimates that are reasonable and prudent; anddesign implementation and maintenance of adequate internal financial controls that wereoperating effectively for ensuring the accuracy and completeness of the accountingrecords relevant to the preparation and presentation of the standalone financialstatements that give a true and fair view and are free from material misstatement whetherdue to fraud or error.
In preparing the standalone financial statements management 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 unlessmanagement 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 Responsibility 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 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 standalone 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 control relevant to the audit in order todesign audit procedures that are appropriate in the circumstances. Under section 143(3)(i)of the Act 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 the 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 as a going concern. If weconclude that a material uncertainty exists we are required to draw attention in ourauditor's report to the related disclosures in the standalone financial statements or ifsuch disclosures are inadequate to modify our opinion. Our conclusions are based on theaudit evidence obtained up to the date of our auditor's report. However future events orconditions may cause the Company to cease to continue as a going concern.
Evaluate the overall presentation structure and content of the standalone financialstatements including the disclosures and whether the standalone financial statementsrepresent the underlying transactions and events in a manner that achieves fairpresentation.
Obtain sufficient appropriate audit evidence regarding the financial information of theCompany to express an opinion on the standalone financial statements. We are responsiblefor the direction supervision and performance of the audit of the financial statements ofsuch entities or business activities included in the standalone financial statements ofwhich we are the independent auditors. For the other entities or business activitiesincluded in the standalone financial statements which have been audited by otherauditors such other auditors remain responsible for the direction supervision andperformance of the audits carried out by them. We remain solely responsible for our auditopinion.
Materiality is the magnitude of misstatements in the standalone financial statementsthat individually or in aggregate makes it probable that the economic decisions of areasonably knowledgeable user of the standalone financial statements may be influenced. Weconsider quantitative materiality and qualitative factors in
(i) planning the scope of our audit work and in evaluating the results of our work; and
(ii) to evaluate the effect of any identified misstatements in the standalone financialstatements.
We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant any significant identify during ouraudit.
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
The standalone financial statements include the financial information of erstwhilesubsidiary IIFL Wealth Advisors (India) Limited consequent to its amalgamation into theCompany. The NCLT order for the same was filed with the Registrar of Companies on 27December 2019 with appointed date of 22 November 2018 (Refer Note 33A to the standalonefinancial statements). We did not audit the financial information of erstwhile subsidiaryIIFL Wealth Advisors (India) Limited included in the standalone financial statements ofthe Company whose financial information reflect total revenues of Rs. 1767.88 lakhs forthe period from 1 April 2019 to 27 December 2019 as considered in the standalone financialstatements. This financial information of erstwhile subsidiary IIFL Wealth Advisors(India) Limited has been audited by other auditors whose report has been furnished to usby the Management and our opinion on the Standalone Financial Statements in so far as itrelates to the amounts and disclosures included in respect of this erstwhile subsidiaryIIFL Wealth Advisors (India) Limited is based solely on the report of such otherauditors.
Our opinion on the standalone financial statements andour report on Other Legal andRegulatory Requirements below is not modified in respect of this matter.
Report on Other Legal and Regulatory Requirements
1. As required by Section 143(3) of the Act based on our audit we report to theextent applicable that:
a) We have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purposes of our audit.
b) 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 and the reports of theother auditors.
c) The Balance Sheet the Statement of Profit and Loss including Other ComprehensiveIncome the Statement of Cash Flows and Statement of Changes in Equity dealt with by thisReport are in agreement with the relevant books of account.
d) In our opinion the aforesaid standalone financial statements comply with the IndAS.
e) On the basis of the written representations received from the directors as on 31stMarch 2020 taken on record by the Board of Directors none of the directors isdisqualified as on 31 st March 2020 from being appointed as a director interms of Section 164(2) of the Act. audit findings including deficiencies in internalcontrol that we
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 A". Our report expresses an unmodified opinion onthe adequacy and operating effectiveness of the Company's internal financial controls overfinancial reporting.
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 directors during the year is in accordance withthe 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 as amended inour opinion and to the best of our information and according to the explanations given tous:
i. The Company has disclosed the impact of pending litigations on its financialposition in its standalone 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.
2. As required by the Companies (Auditor's Report) Order
2016 ("the Order") issued by the Central Government in terms of Section143(11) of the Act we give in "Annexure B" a statement on the matters specifiedin paragraphs 3 and 4 of the Order.
Annexure "A" to the Independent Auditor's Report
(Referred to in paragraph 1 (f) under Report on Other Legal and RegulatoryRequirements' section of our report of even date) Report on the Internal FinancialControls Over Financial Reporting under Clause (i) of Sub-section 3 of Section 143 of theCompanies Act 2013 ("the Act")
We have audited the internal financial controls over financial reporting of IIFLWealth Management Limited ("the Company") as of 31 March 2020 in conjunctionwith our audit of the standalone Ind AS financial statements of the
Company 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 of the Company based on our audit. We conducted ouraudit in accordance with the Guidance Note on Audit of Internal Financial Controls OverFinancial Reporting (the "Guidance Note") issued by the Institute of CharteredAccountants of India and the Standards on Auditing prescribed under Section 143(10) of theCompanies Act 2013 to the extent applicable to an audit of internal financial controls.Those Standards and the Guidance Note require that we comply with ethical requirements andplan and perform the audit to obtain reasonable assurance about whether adequate internalfinancial controls over financial reporting was established and maintained and if suchcontrols 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 to the best of our information and according to the explanations givento us the Company has in all material respects an adequate internal financial controlssystem over financial reporting and such internal financial controls over financialreporting were operating effectively as at March 31 2020 based on the criteria forinternal financial control over financial reporting 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 Chartered Accountants ofIndia.
Annexure "B" to the Independent Auditor's Report
(Referred to in paragraph 2 under Report on Other Legal and RegulatoryRequirements' section of our report of even date)
(i) (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.
(b) The fixed assets were physically verified during the year by the Management inaccordance with a regular programme of verification our opinion provides for physicalverification of all the fixed assets at reasonable intervals.
According to the information and explanation given to us no material discrepancieswere noticed on such verification
(c) According to the information and explanations given to us and the records examinedby us and based on the examination of the registered sale deed provided to us we reportthat the title deeds comprising all the immovable properties of land and buildings whichare freehold are held in the name of the Company as at the balance sheet date.
(ii) The Company did not have any inventory and hence reporting under clause (ii) ofthe CARO 2016 is not applicable.
(iii) According to the information and explanations given to us the Company hasgranted loans secured or unsecured to companies firms Limited Liability Partnershipsor other parties covered in the register maintained under section 189 of the CompaniesAct 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 regular as perstipulations.
(c) There is no overdue amount remaining outstanding as at the year end.
(iv) In our opinion and according to the information and explanations given to us theCompany has complied with the provisions of Sections 185 and 186 of the Companies Act2013 in respect of grant of loans making investments and providing guarantees andsecurities as applicable.
(v) According to the information and explanations which in given to us theCompany has not accepted any deposit during the year and hence reporting under clause (v)of the CARO 2016 is not applicable.
(vi) Having regard to the nature of the Company's business / activities reportingunder clause (vi) CARO 2016 is not applicable.
(vii) According to the information and explanations given to us in respect ofstatutory dues:
(a) The Company has been generally regular in depositing undisputed statutory duesincluding Provident Fund Income-Tax Goods and Service Tax cess and othermaterial statutory dues applicable to it to the appropriate authorities. According to theinformation and explanations given to us Custom Duty and Employees' State Insurance isnot applicable to the Company.
(b) There were no undisputed amounts payable in respect of Provident Fund Income-TaxGoods and Service Tax cess and other material statutory dues in arrears as at 31March 2020 for a period of more than six months from the date they became payable.
(c) There are no dues of Goods and Services Tax and Value Added Tax as on 31 March 2020on account of disputes. Details of income tax not deposited as on 31 March 2020 on accountof disputes are given below:
|Name of Statute ||Nature of Dues ||Forum where Dispute is Pending ||Period to which the Amount Relates ||Amount (Rs.) ||Amount Unpaid (Rs.) |
|Income Tax Act 1961 ||Income Tax ||Commissioner of Income-Tax (Appeal) ||Financial Year 2009-10 ||74369 ||74369 |
|Income Tax Act 1961 ||Income Tax ||Commissioner of Income-Tax (Appeal) ||Financial Year 2012-13 ||5308000 ||4808000 |
|Income Tax Act 1961 ||Income Tax ||Commissioner of Income-Tax (Appeal) ||Financial Year 2013-14 ||4068930 ||4068930 |
|Income Tax Act 1961 ||Income Tax ||Commissioner of Income-Tax (Appeal) ||Financial Year 2015-16 ||56005649 ||44004650 |
|Income Tax Act 1961 ||Income Tax ||Commissioner of Income-Tax (Appeal) ||Financial Year 2016-17 ||20769190 ||16715190 |
(viii) In our opinion and according to the information and explanations given to usthe Company has not defaulted in the repayment of loans or borrowings to financialinstitutions banks and government. The Company has not issued any debentures.
(ix) The Company has not raised moneys by way of initial public offer or further publicoffer (including debt instruments).In our opinion and according to the information andexplanations given to us money raised by way of term loans have been applied by theCompany during the year for the purposes for which they were raised.
(x) To the best of our knowledge and according to the information and explanationsgiven to us no fraud by the Company and no material fraud on the Company by its officersor employees has been noticed or reported during the year.
(xi) In our opinion and according to the information and explanations given to us theCompany has paid / provided managerial remuneration in accordance with the requisiteapprovals mandated by the provisions of section 197 read with Schedule V to the CompaniesAct 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules2014.
(xii) The Company is not a Nidhi Company and hence reporting under clause (xii) of theCARO 2016 is not applicable.
(xiii) In our opinion and according to the information and explanations given to us theCompany is in compliance with section 177 and 188 of the Companies Act 2013 whereapplicable for all transactions with the related parties and the details of related partytransactions have been disclosed in the financial statements etc. as required by theapplicable accounting standards.
(xiv) During the year the Company has not made any preferential allotment or privateplacement of shares or fully or partly convertible debentures and hence reporting underclause (xiv) of CARO 2016 is not applicable.
(xv) In our opinion and according to the information and explanations given to usduring the year the Company has not entered into any non-cash transactions with itsdirectors or directors of its subsidiaries or persons connected with them and henceprovisions of section 192 of the Companies Act 2013 are not applicable.
(xvi) The Company is not required to be registered under section 45-IA of the ReserveBank of India Act 1934.