to the Members of IL&FS INVESTMENT MANAGERS LIMITED
report on the Audit of the standalone financial statements
We have audited the standalone financial statements of IL&FS Investment ManagersLimited ("the Company") which comprise the standalone balance sheet as at 31March 2019 and the standalone statement of profit and loss (including other comprehensiveincome) standalone statement of changes in equity and standalone statement of cash flowsfor the year then ended and notes to the standalone financial statements including asummary of the significant accounting policies and other explanatory information.
In our opinion and to the best of our information and according to the explanationsgiven to us except for the possible effects of the matters described in the Basisfor Qualified Opinion' paragraph below the aforesaid standalone financial statements givethe information required by the Companies Act 2013 ("Act") in the manner sorequired and give a true and fair view in conformity with the accounting principlesgenerally accepted in India of the state of affairs of the Company as at 31 March 2019and profit and other comprehensive income changes in equity and its cash flows for theyear ended on that date.
Basis for Qualified Opinion
Attention is invited to Note 32 of the standalone financial statements which describesthe situation facing the Company in view of the investigation by Serious FraudInvestigation Office of Ministry of Company Affairs (SFIO) against Infrastructure Leasing& Financial Services Limited (IL&FS' or the Holding Company') and itssubsidiaries (including the Company). Further the National Company Law Tribunal (NCLT)has ordered re-opening of books of accounts of IL&FS and its two subsidiaries (otherthan this Company) for the past However the Supreme Court of India has stayed NCLT orderto reopen past books of IL&FS and its financial above referred two subsidiaries. Inview of the aforesaid ongoing investigations of the entire IL&FS Group (including theCompany) by the SFIO and re-opening of books of accounts of the Holding Company and itsabove referred two subsidiaries by the NCLT we are unable to comment on the consequentialimpact thereof on these standalone financial statements.
Attention is invited to Note 25 of the standalone financial statements which describesthat the Company has not been able to determine the accurate and complete list of relatedparties for the period 1 April 2017 to 31 March 2019 as defined under Ind AS 24 RelatedParty Disclosures and as per the Act. In the absence of the said information we areunable to obtain sufficient appropriate audit evidence with regard to completeness andaccuracy of related party disclosures made in the standalone financial statements and onthe Company's compliance with the provisions of the Act with regard to related partytransactions. We also qualified opinion draw attention to the paragraph of our report oninternal financial controls in Annexure B.
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 Standalone FinancialStatements 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 together with the ethical requirements thatare relevant to our audit of the standalone financial statements and the Rules thereunderand we have fulfilled our other ethical responsibilities in accordance Ethics. We believethat the audit evidence we have obtained is sufficient and appropriate to provide a basisfor our qualified opinion.
Material uncertainty related to going Concern
Attention is invited to Note 33 in the standalone financial statements regarding alikely significant reduction in the Company's future fee revenue and management'sexpectation of Company's ability to at least meet its existing and future obligations overthe next 12 months out of its earnings and liquid assets. As stated therein the Company'sbusiness plans for new fund raise have been kept on hold pending completion of stake saleand while there is material uncertainty with regard to the stake sale management believesthat use of the going concern assumption for preparation of the standalone financialstatements is appropriate. Our opinion is not modified in respect of this matter.
Key Audit Matters
Key audit matters are those matters that in our professional judgment were of mostsignificance statements of the current period. These matters were addressed in the contextof our audit of the standalone financial statements as a whole and in forming our opinionthereon and we do not provide a separate opinion on these matters.
|Description of Key Audit Matter || |
|Key audit matter ||How the matter was addressed in our audit |
|transition date accounting policies || |
|Refer to Note 2 Significant accounting policies' and Note 31 First time adoption of Ind AS' in the Standalone Financial Statements |
|Adoption of new accounting framework (Ind AS): ||Our audit procedures included: |
|Effective 1 April 2018 the Company adopted the Indian ||Design / controls |
|Accounting Standards ("Ind AS") notified by the Ministry of Corporate Affairs with the transition date of 1 April 2017. || Assessed the design implementation and operating effectiveness of internal controls over management's evaluation of transition date choices and exemptions availed in line with the principles under Ind AS 101. |
|The following are the major impact areas for the Company upon transition: || |
|Classification and measurement of financial assets and financial substantive tests liabilities || Evaluated management's transition date choices and exemptions for compliance/acceptability under Ind AS 101. |
|Measurement of expected credit losses on debtors || Understood the methodology implemented by management to give impact on the transition. |
|The migration to the new accounting framework (Ind AS) is a complicated process involving multiple decision points upon transition. Ind AS 101 First Time Adoption prescribes choices and exemptions for first time application of Ind AS principles at the transition date. || Test checked the computations associated with the transition adjustments. |
|We identified transition date accounting as a key audit matter because of significant degree of management judgment and application on the areas noted above. || Identified areas of significant estimates and management judgment to assess that they are in line with accounting principles under Ind AS. |
|Going Concern || |
|Refer to the Note 33 in the Standalone Financial Statements: Going Concern |
|We draw attention to Note 33 of the standalone financial statements which indicates that there is material uncertainty relating to the Company's ability to continue as a going concern as major portion of the existing funds being managed/advised are approaching their end of term over the next 12 months which is likely to result in significant reduction in the Company's fee revenue thereafter. ||Our audit procedures included: |
| || Evaluated management's future business plans for the Company for at-least 12 months from the end of the reporting period. |
| || Compared management's free cash flow forecast with information in revenue contracts assessed reasonableness of forecast for operating expenses for the next 12 months period. |
|Management expects that its future income from existing funds being managed/ advised together with liquid assets held by the Company as at 31 March 2019 will be sufficient to at least meet the Company's existing and future obligations arising over the next 12 months. || Compared the revenue operating costs and capital expenditure included in the prior year's free cash flow forecast with the current year's performance of the Group to assess the accuracy and reliability of management's budget and forecasting processes and considered the nature of any significant differences. |
|The Board's going concern assessment and conclusion includes the anticipated receipts by allocating seed commitment for new fund raise which is dependent inter alia on Board approvals and outcome of stake sale by IL&FS Board. || Performed sensitivity analysis of the key assumptions adopted in the free cash flow forecast and assessed the impact of changes in the key assumptions on the conclusions reached and whether there were any indicators of management bias. |
|Refer above paragraph on "Material Uncertainty Related to Going Concern" || |
Information Other than the standalone financial statements and Auditors' Report Thereon
The Company's management and Board of Directors are responsible for the otherinformation. The other information comprises the information included in the Annualreport but does not include the standalone financial statements and our auditor's reportthereon. The Annual report is expected to be made available to us after the date of thisauditor's report.
Our opinion on the standalone financial statements does not cover the other informationand we 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 identified above when it becomes available and in doingso consider whether the other information is materially inconsistent with the standalonefinancial statements or our knowledge obtained in the audit or otherwise appears to bematerially misstated.
When we read the Annual report if we conclude that there is material misstatementtherein we are required to communicate the matter to those charged with governance.
Management's Responsibility for the standalone 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 standalone financialstatements that give a true and fair view of the state of affairs profit and othercomprehensive income changes in equity and cash flows of the Company in accordance withthe accounting principles generally accepted in India including the Indian AccountingStandards (Ind AS) specified under section 133 of the Act.
This responsibility also includes maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding of the assets of the Companyand for preventing and detecting frauds and other irregularities; selection andapplication of appropriate accounting policies; making judgments and estimates that arereasonable and prudent; and design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the accuracy andcompleteness of the accounting records relevant to the preparation and presentation ofthe standalone financial statements that give a true and fair are free from materialmisstatement whether due to fraud or error.
In preparing the standalone financial statements management and Board of Directors areresponsible for assessing ability to continue as a going concern disclosing asapplicable matters related to going concern and using the going concern basis ofaccounting 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 in accordance with SAs we exercise professional judgment andmaintain professional skepticism throughout the audit.
Identify and assess the risks of material misstatement of the standalonefinancial and sufficient and appropriate to provide a basis for our opinion. The risk ofnot detecting a material misstatement resulting from fraud is higher than for oneresulting from error as fraud may involve collusion forgery intentional omissionsmisrepresentations or the override of internal control.
Obtain an understanding of internal 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 with reference to standalone financial statements inplace 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.
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 We also provide thosecharged with governance with a statement that we have complied with relevant ethicalrequirements regarding independence and to communicate with them all relationships andother matters that may reasonably be thought to bear on our independence and whereapplicable 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 mattersour auditors' report unless law or regulation precludes public disclosure about the matteror 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.
The opening balance sheet as at 1 April 2017 (transition date) included in thesefinancial statements is based on the previously issued statutory financial statements ofthe Company prepared in accordance with the Companies (Accounting Standards) Rules 2006jointly audited by us along with another auditor and our report for the year ended 31March 2017 dated 29 May 2017 expressed an unmodified opinion on those financialstatements as adjusted for the differences in the accounting principles adopted by theCompany on transition to Ind AS which have been audited by us. Our opinion is notmodified in respect of this matter.
Report on Other legal and regulatory requirements
1. As required by the Companies (Auditors' Report) Order 2016 ("the Order")issued by the Central Government in terms of section 143 (11) of the Act we give specifiedin paragraphs 3 and 4 of the Order to the the" Annexure A" a statement onthe matters extent applicable.
(A) 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.
b) Except for the possible effects of the matters described in the Basis for QualifiedOpinion paragraph above in our opinion proper books of account as required by law havebeen kept by the Company so far as it appears from our examination of those books.
c) The standalone balance sheet the standalone statement of profit and loss (includingother comprehensive income) the standalone statement of changes in equity and thestandalone statement of cash flows dealt with by this Report are in agreement with thebooks of account.
d) Except for the possible effect of the matters relating to Related Parties describedin the Basis for Qualified Opinion paragraph above in our opinion the aforesaidstandalone financial statements comply with the Ind AS specified under section 133 of theAct.
e) The matter relating to going concern describe under Material Uncertainty Related toGoing Concern paragraph above and matters relating to investigation by SFIO againstIL&FS and its subsidiaries (including the Company) and NCLT order of re-opening ofbooks of accounts of IL&FS and its two subsidiaries (other than this Company) for thepast financial years described under Basis for Qualified Opinion paragraph above in ouropinion may have an adverse effect on the functioning of the Company.
f) On the basis of the written representations received from the directors as on 31March 2019 taken on record by the Board of Directors none of the directors aredisqualified as on 31 March 2019 from being appointed as a director in terms of Section164(2) of the Act.
g) The qualification relating to the maintenance of accounts and other mattersconnected therewith are as stated in the Opinion paragraph above. Basisfor Qualified
h) With respect to the adequacy of the internal financial controls with reference tostandalone financial Company and the operating effectiveness of such controls refer toour separate Report in "Annexure B".
(B) With respect to the other matters to be included in the Auditors' 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. There are no pending litigations against the Company;
ii. The Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses;
iii. There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company;
iv. The disclosures in the standalone financial statements regarding holdings as wellas dealings in specified bank notes during the period from 8 November 2016 to 30 December2016 have not been made in these standalone financial statements since they do not pertainto the financial year ended 31 March 2019.
(C) With respect to the matter to be included in the Auditors' Report under section197(16) in our opinion and according to the information and explanations given to us theremuneration paid by the company to its directors during the current year is in accordancewith the provisions of Section 197 of the Act. The remuneration paid to any director isnot in excess of the limit laid down under Section 197 of the Act. The Ministry ofCorporate Affairs has not prescribed other details under Section 197(16) which arerequired to be commented upon by us.
| ||For b s r & Associates LLp |
| ||Chartered Accountants |
| ||Firm's Registration No: 116231W/W- 100024 |
| ||n sampath ganesh |
|Mumbai ||Partner |
|30 May 2019 ||Membership No: 042554 |
(referred to in our report of even date)
i. (a) According to the information and explanation given to us the Company hasmaintained proper records showing full particulars including quantitative details andsituation of fixed assets.
(b) According to the information and explanation given to us the Company has a regularprogramme of physical verification of its fixed assets by which all the fixed assets areverified annually. In our opinion this periodicity of physical verification reasonablehaving regard to the size of the Company and the nature of its assets. No materialdiscrepancies were noticed on such verification.
(c) According to the information and explanation given to us there is no immovableproperty held by the Company during the year.
ii. The Company is a service company primarily rendering fund management services.Accordingly it does not hold any inventories. Thus paragraph 3 (ii) of the Order is notapplicable to the Company.
iii. According to the information and explanation given to us the Company has notgranted any loans secured or unsecured to companies firms limited liabilitypartnerships or other parties covered in the register maintained under Section 189 of theAct. Thus paragraph 3 (iii) of the Order are not applicable to the Company.
iv. To the best our knowledge and according to the information and explanation providedto us the Company has not granted any loans given any guarantee or provided any securityin connection with loan to any of its Directors or to any person in whom the Director isinterested. The Company has complied with the provisions of Section 186 of the Act withrespect to the loan granted and investments made as applicable.
v. In our opinion and according to the information and explanations given to us theCompany has not accepted deposits as per the directives issued by Reserve Bank of Indiaand the provisions of Sections 73 to 76 or any other relevant provisions of the Act andRules framed there under. Thus paragraph 3 (v) of the Order is not applicable to theCompany.
vi. The Central Government has not prescribed the maintenance of cost records underSection 148 (1) of the Act for any of the services rendered by the Company. Accordinglyparagraph 3(vi) of the Order is not applicable to the Company.
vii. (a) According to the information and explanations given to us and on the basis ofour examination of the books of account amounts deducted/ accrued in the books of accountin respect of undisputed statutory dues including provident fund income tax goods andservices tax cess and other material statutory dues have been regularly deposited duringthe year by the Company with the appropriate authorities. Attention is invited to Note 12of standalone financial statement for payment of provident fund. As explained to us theCompany did not have any dues on account of sales tax employees' state insurance wealthtax duty of customs duty of excise and value added tax.
(b) According to the information and explanations given to us no undisputed amountspayable in respect of provident fund income tax goods and services tax cess and othermaterial statutory dues were in arrears as at 31 March 2019 for a period of more than sixmonths from the date they became payable.
(c) There are no dues of provident fund income tax goods and services tax cess as on31 March 2019 on account of dispute.
viii. In our opinion and according to the information and explanations given to us theCompany has not taken any loan or borrowing from financial institution bank Governmentor debenture holders. Thus paragraph 3 (viii) of the Order is not applicable to theCompany.
ix. In our opinion and according to the information and explanations given to us theCompany has not raised any money by way of initial public offer or further public offer(including debt instrument) and term loans. Thus paragraph 3 (ix) of the Order is notapplicable to the Company.
x. According to the information and explanations given to us no material fraud by theCompany officers or on the Company by its employees has been noticed or reported duringthe course of our audit.
xi. According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has paid/provided for managerialremuneration in accordance with the requisite approvals mandated by the provisions ofSection 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 as per the Act. Thus paragraph 3 (xii) of the Order is notapplicable to the Company.
xiii. Attention is invited to Note 25 of standalone financial statements and asdescribed in the Basis for Qualified Opinion section above due to the limitationdescribed in the said note our verification of the Company's compliance with section 177and 188 of the Companies Act 2013 and disclosure of details in the standalonefinancialstatements as required under Ind AS is limited to those parties identified by theCompany. Accordingly we are unable to report whether all transactions with the relatedparties are in compliance with section 177 and 188 of the Companies Act 2013 whereapplicable and whether details have been disclosed in the standalone financial statementsas required by the applicable accounting standards.
xiv. According to the information and explanation given to us and based on ourexamination of the records of the Company the Company has not made preferential allotmentor private placement of shares or allotted fully or partly convertible debentures duringthe year. Thus paragraph 3 (xiv) of the Order is not applicable to the Company.
xv. According to the information and explanation given to us and based on ourexamination of the records of the Company the Company has not entered into non-cashtransactions with Directors or person connected with him. Thus paragraph 3 (xv) of theOrder is not applicable to the Company.
xvi. According to the information and explanation given to us the Company is notrequired to be registered under Section 45-IA of the Reserve Bank of India Act 1934.Thus paragraph 3 (xvi) of the Order is not applicable to the Company.
| ||For B S R & Associates LLp |
| ||Chartered Accountants |
| ||Firm's Registration No: 116231W/W- 100024 |
| ||N Sampath ganesh |
|Mumbai ||Partner |
|30 May 2019 ||Membership No: 042554 |