To the Members of Indiabulls Real Estate Limited
Report on the Audit of the Standalone Financial Statements
1. We have audited the accompanying standalone financial statements ofIndiabulls Real Estate Limited (the Company) which comprise the Balance Sheet as at 31March 2020 the Statement of Profit and Loss (including Other Comprehensive Income) theCash Flow Statement and the Statement of Changes in Equity for the year then ended and asummary of the significant accounting policies and other explanatory information.
2. In our opinion and to the best of our information and according tothe explanations given to us the aforesaid standalone financial statements give theinformation required by the Companies Act 2013 (Act) in the manner so required and give atrue and fair view in conformity with the accounting principles generally accepted inIndia including Indian Accounting Standards (Ind AS) specified under section 133 of theAct of the state of affairs of the Company as at 31 March 2020 and its loss (includingother comprehensive income) its cash flows and the changes in equity for the year endedon that date.
Basis for Opinion
3. We conducted our audit in accordance with the Standards on Auditingspecified under section 143(10) of the Act. Our responsibilities under those standards arefurther described in the Auditors Responsibilities for the Audit of the FinancialStatements section of our report. We are
independent of the Company in accordance with the Code of Ethics issuedby the Institute of 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 Code of Ethics. We believethat the audit evidence we have obtained is sufficient and appropriate to provide a basisfor our opinion.
Emphasis of Matter
4. We draw attention to Note 52 of the standalone financial statementswhich describes the uncertainties due to the outbreak of Covid-2019 pandemic and themanagements evaluation of the same on the standalone financial statements of the Companyas at the balance sheet date. In view of these uncertainties the impact on the Companysstandalone financial statements is significantly dependent on future developments.
Our opinion is not modified in respect of this matter.
Key Audit Matters
5. Key audit matters are those matters that in our professionaljudgment were of most significance in our audit of the standalone financial statements ofthe current period. These matters were addressed in the context of our audit of thefinancial statements as a whole and in forming our opinion thereon and we do not providea separate opinion on these matters.
6. We have determined the matters described below to be the key auditmatters to be communicated in our report.
|Key audit matter ||How our audit addressed the key audit matter |
|Accounting for demerger scheme || |
|Refer note 47 to the standalone financial statements for the detailed impact of the Scheme. ||Our audit procedures to assess the appropriateness of the accounting treatment of the Scheme and overall transaction included but were not limited to the following: |
|In the previous year the Company had executed a definitive transaction document to divest its 100% stake in tranches in one of its wholly owned subsidiary and as part of said transaction the Company had divested partial stake (through sale and buy back) which had resulted in loss of control. In previous year investment held for remaining stake amounting to 34706.33 lakhs was classified as Investments held for sale. In parallel the Company had also filed composite scheme of arrangement (the Scheme) whereby step down subsidiary of the said wholly owned subsidiary will be demerged into demerged undertaking and residual transferor company and residual transferor company will then merge into the Company. The Scheme was also a part of definitive transaction document. It was also agreed that the Holding Company will transfer the Investments held for sale once the Scheme is approved and accounted. || Understood the nature of transaction i.e. understanding of the contract terms of definitive transaction document for the proposed accounting treatment in relation to the accounting policies and relevant Ind AS; |
|As described in note 47 to the standalone financial statements National Company Law Tribunal (NCLT) approved the Scheme on 03 March 2020 which has been filed with Registrar of Companies on 19 March 2020. || Obtained and read the Scheme and final order passed by NCLT; |
|Accordingly the Holding Company has recognised the assets acquired i.e. redeemable preference shares and income tax assets amounting to 45000.00 lakhs and 1520.00 lakhs in standalone financial statements. Further the Company has also adjusted/revalued Investments held for sale and recognized a net gain on settlement of overall transaction amounting to 21406.90 lakhs in standalone financial statements as presented under note 27. || Tested the appropriateness of managements control over ensuring completeness of conditions precedent to the transactions before recording the transactions; |
|The above transaction required audit focus due to complex contractual terms and due to the significant impact on standalone financial statement. The matter has been considered to be of most significance to the audit and accordingly has been considered as a key audit matter for the current year audit. || Reviewed the managements process for review and implementation of such transactions; |
| || Understood from the management the accounting treatment prescribed in the approved Scheme including the determination of effective date; |
| || Tested the completeness and accuracy of the data used in the computation of net gain on the settlement of overall transaction; and |
| || Ensured appropriate disclosures in the standalone financial statements with respect to the Scheme and overall transaction. |
|Impairment assessment of investments and loans made to its subsidiaries || |
|The Companys policies on the impairment assessment of the investments and loans is set out in Note 4.12 to the standalone financial statements. ||Our procedures in relation to the impairment assessment of investments and loans included but not limited to the following: |
|The Company has investments amounting to 374565.05 lakhs (net of impairment) and has outstanding loans amounting to 444302.40 lakhs (net of impairment) to its subsidiaries as at 31 March 2020 as disclosed under the Note 8A and 9B to the standalone financial statements. || Assessed the appropriateness of the Companys accounting policy by comparing with applicable Ind AS; |
|Impairment assessment of these investments and loans is considered as a significant risk as there is a risk that recoverability of the investments and loans could not be established and potential impairment charge might be required to be recorded in the standalone financial statements. The recoverability of these investments is inherently subjective due to reliance on either the net worth of investee or valuations of the properties held or cash flow projections of real estate properties in these investee companies. || We obtained an understanding of the management process for identification of possible impairment indicators and process performed by the management for impairment testing; |
|However due to their materiality in the context of the Companys standalone financial statements as a whole and significant degree of judgement and subjectivity involved in the estimates and key assumptions used in determining the cash flows used in the impairment evaluation this is considered to be the area to be of most significance to the audit and accordingly has been considered as a key audit matter for the current year audit. || Enquired of the management and understood the internal controls related to completeness of the list of loans and investment along with the process followed to recover/adjust these and assessed whether further provisioning is required; |
| || Performed test of details: |
| ||a. For all significant additions made during the year underlying supporting documents were verified to ensure that the transaction has been accurately recorded in the standalone financial statement; |
| ||b. For all significant investments and loans outstanding as at 31 March 2020 confirmations were circulated and received. Further all the significant reconciling items were tested; |
| ||c. All material investments and significant loans as at 31 March 2020 were discussed on case to case basis with the management for their plan of recovery/adjustment; |
| ||d. Compared the carrying value of material investments and significant loans to the net assets of the underlying entity to identify whether the net assets being an approximation of their minimum recoverable amount were in excess of their carrying amount; and |
| ||e. Wherever the net assets were lower than the recoverable amount for material amounts: |
| ||i. We obtained and verified the management certified cash flow projections of real estate properties and tested the underlying assumptions used by the management in arriving at those projections; |
| ||ii. We challenged the managements on the underlying assumptions used for the cash flow projections considering evidence available to support these assumptions and our understanding of the business; |
| ||iii. We obtained and verified the valuation of land parcels as per the government prescribed circle rates; and |
| ||iv. We assessed the appropriateness and adequacy of the disclosures made by the management for the impairment losses recognized in accordance with applicable accounting standards. |
Information other than the Financial Statements and Auditors Reportthereon
7. The Companys Board of Directors is responsible for the otherinformation. The other information comprises the information included in the AnnualReport but does not include the standalone financial statements and our auditors reportthereon. The Annual Report is expected to be made available to us after the date of thisauditors report.
Our opinion on the standalone financial statements does not cover theother information and we will not express any form of assurance conclusion thereon.
In connection with our audit of the standalone financial statementsour responsibility is to read the other information identified above when it becomesavailable and in doing so consider whether the other information is materiallyinconsistent
with the standalone financial statements or our knowledge obtained inthe audit or otherwise appears to be materially misstated.
When we read the Annual Report if we conclude that there is a materialmisstatement therein we are required to communicate the matter to those charged withgovernance.
Responsibilities of Management and Those charged with
governance for the Standalone Financial Statements
8. The accompanying standalone financial statements have been approvedby the Companys Board of Directors. The Companys Board of Directors is responsible for thematters stated in section 134(5) of the Act with respect to the preparation of thesestandalone financial statements that give a true and fair view of the financial positionfinancial performance including other comprehensive income changes in equity and cashflows of the Company in accordance with the accounting principles generally accepted inIndia including the Ind AS specified under section 133 of the Act. This responsibilityalso includes maintenance of adequate accounting records in accordance with the provisionsof the Act for safeguarding of the assets of the Company and for preventing and detectingfrauds and other irregularities; selection and application of appropriate accountingpolicies; making judgments and estimates that are reasonable and prudent; and designimplementation and maintenance of adequate internal financial controls that wereoperating effectively for ensuring the accuracy and completeness of the accountingrecords relevant to the preparation and presentation of the financial statements thatgive a true and fair view and are free from material misstatement whether due to fraud orerror.
9. In preparing the financial statements management is responsible forassessing the Companys 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.
10. Those Board of Directors are also responsible for overseeing theCompanys financial reporting process.
Auditors Responsibilities for the Audit of the Financial
11. Our objectives are to obtain reasonable assurance about whether thefinancial statements as a whole are free from material misstatement whether due to fraudor error and to issue an auditors report that includes our opinion. Reasonable assuranceis a high level of assurance but is not a guarantee that an audit conducted in accordancewith Standards on Auditing will always detect a material misstatement when it exists.Misstatements can arise from fraud or error and are considered material if individually
or in the aggregate they could reasonably be expected to influence theeconomic decisions of users taken on the basis of these financial statements.
12. As part of an audit in accordance with Standards on Auditing weexercise professional judgment and maintain professional skepticism throughout the audit.We also:
Identify and assess the risks of material misstatement of thefinancial 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 theaudit in order to design audit procedures that are appropriate in the circumstances. Undersection 143(3)(i) of the Act we are also responsible for expressing our opinion onwhether the Company has adequate internal financial controls with reference to financialstatements system in place and the operating effectiveness of such controls;
Evaluate the appropriateness of accounting policies used and thereasonableness of accounting estimates and related disclosures made by management;
Conclude on the appropriateness of managements use of the goingconcern basis of accounting and based on the audit evidence obtained whether a materialuncertainty exists related to events or conditions that may cast significant doubt on theCompanys ability to continue as a going concern. If we conclude that a materialuncertainty exists we are required to draw attention in our auditors report to therelated disclosures in the financial statements or if such disclosures are inadequate tomodify our opinion. Our conclusions are based on the audit evidence obtained up to thedate of our auditors report. However future events or conditions may cause the Company tocease to continue as a going concern; and
Evaluate the overall presentation structure and content of thefinancial statements including the disclosures and whether the financial statementsrepresent the underlying transactions and events in a manner that achieves fairpresentation.
13. We communicate with those charged with governance regarding amongother matters the planned scope and timing of the audit and significant audit findingsincluding any significant deficiencies in internal control that we identify during ouraudit.
14. We also provide those charged with governance with a statement thatwe have complied with relevant ethical requirements regarding independence and tocommunicate with them all relationships and other matters that may reasonably be thoughtto bear on our independence and where applicable related safeguards.
15. From the matters communicated with those charged with governancewe determine those matters that were of most significance in the audit of the financialstatements of the current period and are therefore the key audit matters. We describethese matters in our auditors report unless law or regulation precludes public disclosureabout the matter or when in extremely rare circumstances we determine that a mattershould not be communicated in our report because the adverse consequences of doing sowould reasonably be expected to outweigh the public interest benefits of suchcommunication.
Report on Other Legal and Regulatory Requirements
16. Based on our audit we report that the Company has not paid orprovided for any managerial remuneration during the year. Accordingly reporting undersection 197(16) of the Act is not applicable.
17. As required by the Companies (Auditors Report) Order 2016 (theOrder) issued by the Central Government of India in terms of section 143(11) of the Actwe give in the Annexure A a statement on the matters specified in paragraphs 3 and 4 ofthe Order.
18. Further to our comments in Annexure A as required by section143(3) of the Act bases on our audit we report to the extent applicable that:
a) we have sought and obtained all the information and explanationswhich to the best of our knowledge and belief were necessary for the purpose of our auditof the accompanying standalone financial statements;
b) in our opinion proper books of account as required by law have beenkept by the Company so far as it appears from our examination of those books;
c) the standalone financial statements dealt with by this report are inagreement with the books of account;
d) in our opinion the aforesaid standalone financial statements complywith Ind AS specified under section 133 of the Act;
e) on the basis of the written representations received from thedirectors and taken on record by the Board of Directors none of the directors isdisqualified as on 31 March 2020 from being appointed as a director in
terms of section 164(2) of the Act;
f) the matter described in paragraph 4 under the Emphasis of Matter inour opinion may have an adverse effect on the functioning of the Company;
g) we have also audited the internal financial controls with referenceto financial reporting (IFCoFR) of the Company as on 31 March 2020 in conjunction with ouraudit of the standalone financial statements of the Company for the year ended on thatdate and our report dated 14 May 2020 as per Annexure B expressed unmodified opinion; and
h) with respect to the other matters to be included in the AuditorsReport in accordance with rule 11 of the Companies (Audit and Auditors) Rules 2014 (asamended) in our opinion and to the best of our information and according to theexplanations given to us:
i. the Company as detailed in Note 41A to the standalone financialstatements has disclosed the impact of pending litigations on its financial position asat 31 March 2020;
ii. the Company did not have any long-term contracts includingderivative contracts for which there were any material foreseeable losses as at 31 March2020;
iii. there has been no delay in transferring amounts required to betransferred to the Investor Education and Protection Fund by the Company during the yearended 31 March 2020; and
iv. the disclosure requirements relating to holdings as well asdealings in specified bank notes were applicable for the period from 8 November 2016 to 30December 2016 which are not relevant to these standalone financial statements. Hencereporting under this clause is not applicable.
Annexure A to the Independent Auditors Report of even date to themembers of Indiabulls Real Estate Limited on the standalone financial statements for theyear ended 31 March 2020
Based on the audit procedures performed for the purpose of reporting atrue and fair view on the financial statements of the Company and taking intoconsideration the information and explanations given to us and the books of account andother records examined by us in the normal course of audit and to the best of ourknowledge and belief we report that:
(i) (a) The Company has maintained proper records showing
full particulars including quantitative details and situation ofproperty plant and equipment right of use assets and intangible assets.
(b) The property plant and equipment have been physically verified bythe management during the year and no material discrepancies were noticed on suchverification. In our opinion the frequency of verification of the property plant andequipment is reasonable having regard to the size of the Company and the nature of itsassets.
(c) The lease deeds of all the immovable properties (which are includedunder the head right of use assets) are held in the name of the Company. The Company doesnot hold any immovable property (in the nature of property plant and equipment).
(ii) In our opinion the management has conducted physical verificationof inventory at reasonable intervals during the year and no material discrepancies betweenphysical inventory and book records were noticed on physical verification.
(iii) The Company has granted interest free as well as interest bearingunsecured loans to companies covered in the register maintained under Section 189 of theAct; and with respect to the same:
(a) in our opinion the terms and conditions of grant of such loans arenot prima facie prejudicial to the Companys interest.
(b) the schedule of repayment of principal has been stipulated whereinthe principal amounts are
repayable on demand and since the repayment of such loans has not beendemanded in our opinion repayment of the principal amount and the interest are regularexcept for the loans given to the companies which are interest free; and
(c) there is no overdue amount in respect of loans granted to suchcompanies.
(iv) In our opinion the Company has complied with the provisions ofSections 185 and 186 of the Act in respect of loans investments guarantees and security.
(v) In our opinion the Company has not accepted any deposits withinthe meaning of Sections 73 to 76 of the Act and the Companies (Acceptance of Deposits)Rules 2014 (as amended). Accordingly the provisions of clause 3(v) of the Order are notapplicable.
(vi) We have broadly reviewed the books of account maintained by theCompany pursuant to the Rules made by the Central Government for the maintenance of costrecords under sub-section (1) of Section 148 of the Act in respect of Companysproducts/services and are of the opinion that prima facie the prescribed accounts andrecords have been made and maintained. However we have not made a detailed examination ofthe cost records with a view to determine whether they are accurate or complete.
(vii) (a) The Company is regular in depositing undisputed
statutory dues including provident fund employees state insuranceincome-tax service tax duty of customs duty of excise value added tax goods andservices tax cess and other material statutory dues as applicable to the appropriateauthorities. Further no undisputed amounts payable in respect thereof were outstanding atthe year-end for a period of more than six months from the date they become payable.
(b) The dues outstanding in respect of income-tax sales- taxservice-tax duty of customs duty of excise value
added tax and goods and services tax on account of any dispute are asfollows: Statement of Disputed Dues
|Name of the statute ||Nature of dues ||Amount (Rs. in lakhs) ||Amount paid under protest (Rs. in lakhs) ||Period to which the amount relates ||Forum where dispute is pending |
|Income-tax Act 1961 ||Disallowance under section 14A ||146.26 ||- ||Assessment Year 2009-10 ||Honble High Court of Mumbai |
|Income-tax Act 1961 ||Disallowance under section 14A ||161.88 ||- ||Assessment Year 2010-11 ||Honble High Court of Mumbai |
|Income-tax Act 1961 ||Disallowance under section 14A ||213.05 ||- ||Assessment Year 2011-12 ||Honble High Court of Mumbai |
|Income-tax Act 1961 ||Disallowance under section 14A ||38.43 ||- ||Assessment Year 2013-14 ||Income Tax Appellate Tribunal |
|The Finance Act 2004 and Service tax rules ||Denial of service tax input credit ||1695.25 || ||Assessment year 2011-12 to 2014- 15 ||Assistant Commissioner of Service Tax |
|The Finance Act 2004 and Service tax rules ||Denial of service tax input credit ||1019.00 || ||Assessment year 2016-17 to June 2017 ||Deputy Commissioner of Service Tax |
(viii) The Company has not defaulted in repayment of loans orborrowings to any bank or any dues to debenture holders during the year. The Company didnot have any loans or borrowings payable to financial institution or government during theyear.
(ix) The Company did not raise moneys by way of initial public offer orfurther public offer (including debt instruments). In our opinion The Company has appliedmoneys raised by way of the term loans for the purposes for which these were obtainedthough idle/surplus funds which were not required for immediate utilisation have beeninvested in liquid investments payable on demand.
(x) No fraud by the Company or on the Company by its officers oremployees has been noticed or reported during the period covered by our audit.
(xi) The Company has not paid or provided for any managerialremuneration. Accordingly the provisions of Clause 3(xi) of the Order are not applicable.
(xii) In our opinion the Company is not a Nidhi Company. Accordinglyprovisions of clause 3(xii) of the Order are not applicable.
(xiii) In our opinion all transactions with the related parties are incompliance with Sections 177 and 188 of Act where applicable and the requisite detailshave been disclosed in the financial statements etc. as required by the applicable IndAS.
(xiv) During the year the Company has not made any preferentialallotment or private placement of shares or fully or partly convertible debentures.
(xv) In our opinion the Company has not entered into any non- cashtransactions with the directors or persons connected with them covered under Section 192of the Act.
(xvi) As detailed in Note 53 to the financial statements the Companyis not required to be registered under Section 45-IA of the Reserve Bank of India Act1934.
Annexure B to the Independent Auditors Report of even date to themembers of Indiabulls Real Estate Limited on the standalone financial statements for theyear ended 31 March 2020
Independent Auditors Report on the internal financial controls withreference to the standalone financial statements under
Clause (i) of Sub-section 3 of Section 143 of the Companies
Act 2013 (the Act)
1. In conjunction with our audit of the standalone financial statementsof Indiabulls Real Estate Limited (the Company) as at and for the year ended 31 March2020 we have audited the internal financial controls financial statements of the Companyas at that date.
Responsibilities of Management and Those Charged with
Governance for Internal Financial Controls
2. The Companys Board of Directors is responsible for establishing andmaintaining internal financial controls based on the internal control over financialreporting criteria established by the Company considering the essential components ofinternal control stated in the Guidance Note on Audit of Internal Financial Controls overFinancial Reporting (the Guidance Note) issued by the Institute of Chartered Accountantsof India (ICAI). These responsibilities include the design implementation and maintenanceof adequate internal financial controls that were operating effectively for ensuring theorderly and efficient conduct of the Companys business including adherence to theCompanys policies the safeguarding of its assets the prevention and detection of fraudsand errors the accuracy and completeness of the accounting records and the timelypreparation of reliable financial information as required under the Act.
Auditors Responsibility for the Audit of the Internal FinancialControls with Reference to Financial Statements
3. Our responsibility is to express an opinion on the Companys internalfinancial controls with reference to financial statements based on our audit. We conductedour audit in accordance with the Standards on Auditing issued by the ICAI prescribed underSection 143(10) of the Act to the extent applicable to an audit of internal financialcontrols with reference to financial statements and the Guidance Note issued by the ICAI.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 with reference to financial statements were established and maintainedand if such controls operated effectively in all material respects.
4. Our audit involves performing procedures to obtain audit evidenceabout the adequacy of the internal financial controls with reference to financialstatements and their operating effectiveness. Our audit of internal financial controlswith reference to financial statements includes obtaining an understanding of suchinternal financial controls assessing the risk that a material weakness exists andtesting and evaluating the design and operating effectiveness of internal control based onthe assessed risk. The procedures selected depend on the auditors judgement including theassessment of the risks of material misstatement of the financial statements whether dueto fraud or error.
5. We believe that the audit evidence we have obtained is sufficientand appropriate to provide a basis for our audit opinion on the Companys internalfinancial controls with reference to financial statements.
Meaning of Internal Financial Controls with Reference to FinancialStatements
6. A companys internal financial controls with reference to financialstatements is a process designed to provide reasonable assurance regarding the reliabilityof financial reporting and the preparation of financial statements for external purposesin accordance with generally accepted accounting principles. A companys internal financialcontrols with reference to financial statements include those policies and procedures that
(1) pertain to the maintenance of records that in reasonable detailaccurately and fairly reflect the transactions and dispositions of the assets of thecompany;
(2) provide reasonable assurance that transactions are recorded asnecessary to permit preparation of financial statements in accordance with generallyaccepted accounting principles and that receipts and expenditures of the company arebeing made only in accordance with authorisations of management and directors of thecompany; and
(3) provide reasonable assurance regarding prevention or timelydetection of unauthorised acquisition use or disposition of the companys assets thatcould have a material effect on the financial statements.
Inherent Limitations of Internal Financial Controls with Reference toFinancial Statements
7. Because of the inherent limitations of internal financial controlswith reference to financial statements including the possibility of collusion or impropermanagement override of controls material misstatements due to error or fraud may occurand not be detected. Also projections of any evaluation of the internal financialcontrols with reference to financial statements to future periods are subject to the riskthat the internal financial controls with reference to financial statements may becomeinadequate because of changes in conditions or that the degree of compliance with thepolicies or procedures may deteriorate.
8. In our opinion the Company has in all material respects adequateinternal financial controls with reference to financial statements and such controls wereoperating effectively as at 31 March 2020 based on the internal control over financialreporting criteria established by the Company considering the essential components ofinternal control stated in the Guidance Note issued by the ICAI.
| ||For Walker Chandiok & Co LLP |
| ||Chartered Accountants |
| ||Firms Registration No.: 001076N/N500013 |
| ||Neeraj Sharma |
| ||Partner |
|Place: New Delhi ||Membership No.: 502103 |
|Date: 14 May 2020 ||UDIN: 20502103AAAAAY9865 |