You are here » Home » Companies » Company Overview » Indostar Capital Finance Ltd

Indostar Capital Finance Ltd.

BSE: 541336 Sector: Financials
NSE: INDOSTAR ISIN Code: INE896L01010
BSE 00:00 | 08 Aug 127.40 -9.65
(-7.04%)
OPEN

135.00

HIGH

135.00

LOW

124.00

NSE 00:00 | 08 Aug 126.90
(%)
OPEN

126.00

HIGH

132.35

LOW

123.80

OPEN 135.00
PREVIOUS CLOSE 137.05
VOLUME 17133
52-Week high 382.05
52-Week low 116.80
P/E
Mkt Cap.(Rs cr) 1,734
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 135.00
CLOSE 137.05
VOLUME 17133
52-Week high 382.05
52-Week low 116.80
P/E
Mkt Cap.(Rs cr) 1,734
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Indostar Capital Finance Ltd. (INDOSTAR) - Auditors Report

Company auditors report

To

The Members of

IndoStar Capital Finance Limited

Report on the Audit of the Standalone Financial Statements

Opinion

We have audited the accompanying standalone financial statements ofIndoStar Capital Finance

Limited ("the Company") which comprise the Balance Sheet asat 31 March 2021 and the Statement of Profit and Loss (including Other ComprehensiveIncome) the Statement of Cash Flows and the Statement of Changes in Equity for the yearthen ended and a summary of significant accounting policies and other explanatoryinformation.

In our opinion and to the best of our information and according to theexplanations given to us the aforesaid standalone financial statements give theinformation required by the Companies Act 2013 ("the Act") in the manner sorequired and give a true and fair view in conformity with the Indian Accounting Standardsprescribed under section 133 of the Act read with the Companies (Indian AccountingStandards) Rules 2015 as amended ("Ind AS") and other accounting principlesgenerally accepted in India of the state of affairs of the Company as at 31 March 2021and its loss total comprehensive loss its cash flows and the changes in equity for theyear ended on that date.

Basis for Opinion

We conducted our audit of the standalone financial statements inaccordance with the Standards on Auditing specified under section 143(10) of theAct (SAs). Our responsibilities under those Standards are further described in theAuditor's Responsibility for the Audit of the Standalone Financial Statements section ofour 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 standalone financial statements underthe provisions of the Act and the Rules made thereunder and we have fulfilled our otherethical responsibilities in accordance with these requirements and the ICAI's Code ofEthics. We believe that the audit evidence obtained by us is sufficient and appropriate toprovide a basis for our audit opinion on the standalone financial statements.

Emphasis of Matter

We draw attention to Note 31(F) of the standalone financial statementsin which the Company describes the continuing uncertainties arising from the COVID 19pandemic. Our opinion is not modified in respect of this matter.

Key Audit Matters

Key audit matters are those matters that in our professional judgmentwere of most significance in our audit of the standalone financial statements of thecurrent period. These matters were addressed in the context of our audit of the standalonefinancial statements as a whole and in forming our opinion thereon and we do not providea separate 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
1 Allowances for Expected Credit Losses (ECL): (Refer Notes 2.3(f)(i) and 5 to the standalone financial statements) Principal audit procedures performed:
As at March 31 2021 loan assets aggregated Rs. 6692.46 crore (net of ECL Rs. 685.11 crore) constituting 68% of the Company's total assets which are measured at amortised cost. We have read and assessed the accounting policies and the governance framework approved by the Board of Directors of the Company including the policy with respect of one-time restructuring offered to customers pursuant to the Resolution Framework issued by RBI.
Significant judgement is used in classifying these loan assets and applying appropriate measurement principles. The allowance for expected credit losses ("ECL") on such loan assets measured at amortised cost is a critical estimate involving greater level of management judgement. We have verified the methodology adopted for computation of ECL ("ECL Model") that addresses policies approved by the Board of Directors procedures and controls for assessing and measuring credit risk on loan assets measured at amortised cost.
As part of our risk assessment we determined that the allowance for ECL on loan assets has a high degree of estimation uncertainty with a potential range of reasonable outcomes for the financial statements. The elements of estimating Our audit procedures related to the allowance for ECL included the following among others:
ECL which involved increased level of audit focus are the following: • Testing the design and effectiveness of internal controls over the:
• Staging the loan assets i.e. classification in 'significant increase in credit risk' ('SICR') and 'default' categories - completeness and accuracy of the Exposure at Default ("EAD") and the classification thereof into stages consistent with the definitions applied in accordance with the policy approved by the Board of Directors including the appropriateness of the qualitative factors to be applied.
• Basis used for estimating Probabilities of Default ("PD"); - appropriateness of information used in the estimation of the PD and LGD for the different stages depending on the nature of the portfolio; and
• Basis used for estimating Loss Given Default ("LGD"); - computation of the ECL including methodology used to determine macro-economic overlays and adjustments to the output of the ECL Model including the impact of COVID19 pandemic.
• Adjustments to model driven ECL results to address emerging trends including the impact of COVID19 pandemic. • Also for selected sample of loan assets:
- we have tested the additional considerations applied by the management for staging of loans as SICR or default categories in view of Company's policy on one-time restructuring.
- we tested the input data used in estimating the PD;
- we evaluated reasonableness of LGD estimates.
• We tested the mathematical accuracy and computation of the allowances.
• We also assessed the disclosures made in relation to the ECL allowance to confirm compliance with the provisions of Ind AS.

Information Other than the Financial Statements and Auditor'sReport Thereon

• The Company's Board of Directors is responsible for the otherinformation. The other information comprises the information included in the managementdiscussion and analysis and Board's report and its annexures but does not include theconsolidated financial statements standalone financial statements and our auditor'sreport thereon. The management discussion and analysis and Board's report and itsannexures are expected to be made available to us after the date of this auditor's report.

• Our opinion on the standalone financial statements does notcover the other information and we will not express any form of assuranceconclusion thereon.

• In connection with our audit of the standalone financialstatements our responsibility is to read the other information identified above when itbecomes available and in doing so consider whether the other information is materiallyinconsistent with the standalone financial statements or our knowledge obtained during thecourse of our audit or otherwise appears to be materially misstated.

• When we read management discussion and analysis and Board'sreport and its annexures if we conclude that there is a material misstatement thereinwe are required to communicate the matter to those charged with governance as requiredunder SA 720 'The Auditor's responsibilities Relating to Other Information'.

Management's Responsibility for the Standalone FinancialStatements

The Company's Board of Directors is 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 financial position financial performanceincluding other comprehensive income cash flows and changes in equity of the Company inaccordance with the Ind AS and other accounting principles generally accepted in India.This responsibility also includes maintenance of adequate accounting records in accordancewith the provisions of the Act for safeguarding the assets of the Company and forpreventing and detecting frauds and other irregularities; selection and application ofappropriate accounting policies; making judgments and estimates that are reasonable andprudent; and design implementation and maintenance of adequate internal financialcontrols that were operating effectively for ensuring the accuracy and completeness ofthe accounting records relevant to the preparation and presentation of the standalonefinancial statement that give a true and fair view and are free from materialmisstatement whether due to fraud or error.

In preparing the standalone financial statements management isresponsible for assessing the Company's ability to continue as a going concerndisclosing as applicable matters related to going concern and using the going concernbasis of accounting unless management either intends to liquidate the Company or to ceaseoperations or has no realistic alternative but to do so.

Those Board of Directors are also responsible for overseeing theCompany's financial reporting process.

Auditor's Responsibility for the Audit of the Standalone FinancialStatements

Our objectives are to obtain reasonable assurance about whether thestandalone financial statements as a whole are free from material misstatement whetherdue to fraud or error and to issue an auditor's report that includes our opinion.Reasonable assurance is a high level of assurance but is not a guarantee that an auditconducted in accordance with SAs will always detect a material misstatement when itexists. Misstatements can arise from fraud or error and are considered material ifindividually or in the aggregate they could reasonably be expected to influence theeconomic decisions of users taken on the basis of these standalone financial statements.

As part of an audit in accordance with SAs we exercise professionaljudgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of thestandalone financial statements whether due to fraud or error design and perform auditprocedures responsive to those risks and obtain audit evidence that is sufficient andappropriate to provide a basis for our opinion. The risk of not detecting a materialmisstatement resulting from fraud is higher than for one resulting from error as fraudmay involve collusion forgery intentional omissions misrepresentations or the overrideof internal control.

• Obtain an understanding of internal financial control relevantto the audit in order to design audit procedures that are appropriate in thecircumstances. Under section 143(3)(i) of the Act we are also responsible for expressingour opinion on whether the Company has adequate internal financial controls system inplace and the operating effectiveness of such controls.

• Evaluate the appropriateness of accounting policies used and thereasonableness of accounting estimates and related disclosures made by the management.

• Conclude on the appropriateness of management's 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 theCompany's ability to continue as a going concern. If we conclude that a materialuncertainty exists we are required to draw attention in our auditor's report to therelated disclosures in the standalone financial statements or if such disclosures areinadequate to modify our opinion. Our conclusions are based on the audit evidenceobtained up to the date of our auditor's report. However future events or conditions maycause the Company to cease to continue as a going concern.

• Evaluate the overall presentation structure and content of thestandalone financial statements including the disclosures and whether the standalonefinancial statements represent the underlying transactions and events in a manner thatachieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding thefinancial information of the Company to express an opinion on the standalone financialstatements.

Materiality is the magnitude of misstatements in the standalonefinancial statements that individually or in aggregate makes it probable that theeconomic decisions of a reasonably knowledgeable user of the standalone financialstatements may be influenced. We consider quantitative materiality and qualitative factorsin

(i) planning the scope of our audit work and in evaluating the resultsof our work; and

(ii) to evaluate the effect of any identified misstatements in thestandalone financial statements.

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.

We also provide those charged with governance with a statement that wehave 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.

From the matters communicated with those charged with governance wedetermine those matters that were of most significance in the audit of the standalonefinancial statements of the current period and are therefore the key audit matters. Wedescribe these matters in our auditor's report unless law or regulation precludes publicdisclosure about the matter or when in extremely rare circumstances we determine that amatter should not be communicated in our report because the adverse consequences of doingso would reasonably be expected to outweigh the public interest benefits of suchcommunication.

Other Matter

The comparative financial information of the Company as of and for theyear ended March 31 2020 prepared in accordance with Ind AS included in this standalonefinancial statement have been audited by the predecessor auditor. The report of thepredecessor auditor on these comparative financial information dated June 17 2020expressed an unmodified opinion.

Our opinion on the standalone financial statements and our report onOther Legal and Regulatory 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 wereport that:

a. We have sought and obtained all the information and explanationswhich to the best of our knowledge and belief were necessary for the purposes ofour audit.

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 Balance Sheet the Statement of Profit and Loss including OtherComprehensive Income the Statement of Cash Flows and Statement of Changes in Equity dealtwith by this Report are in agreement with the relevant books of account.

d. In our opinion the aforesaid standalone financial statements complywith the Ind-AS specified under Section 133 of the Act.

e. On the basis of the written representations received from thedirectors as on 31 March 2021 taken on record by the Board of Directors none of thedirectors is disqualified as on 31 March 2021 from being appointed as a director in termsof Section 164(2) of the Act.

f. With respect to the adequacy of the internal financialcontrols over financial reporting of the Company and the operating effectiveness of suchcontrols refer to our separate Report in "Annexure A". Our report expresses anunmodified opinion on the adequacy and operating effectiveness of the Company's internalfinancial controls over financial reporting.

g. With respect to the other matters to be included in theAuditor's Report in accordance with the requirements of section 197(16) of the Act asamended:

• We draw attention to Note 32 of the standalone financialstatements regarding excess remuneration paid to the whole-time director amounting to Rs.0.44 crore for the year ended March 31 2021 in terms of the prescribed limits undersection 197 read with Schedule V to the Act is subject to approval of the shareholderswhich the Company proposes to obtain at the forthcoming annual general meeting. Ouropinion is not modified in respect to this matter.

h. With respect to the other matters to be included in the Auditor'sReport 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 has disclosed the impact of pending litigations on itsfinancial position in its standalone financial statements;

ii. The Company did not have any long-term contracts includingderivative contracts for which there were any material foreseeable losses;

iii. There were no amounts which were required to be transferred to theInvestor Education 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 Section 143(11) ofthe Act we give in "Annexure B" a statement : on the matters specified inparagraphs 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 andRegulatory Requirements' section of our report of even date)

Report on the Internal Financial Controls Over Financial Reportingunder Clause (i) of Sub-section 3 of Section 143 of the Companies Act 2013 ("theAct")

We have audited the internal financial controls over financialreporting of IndoStar Capital Finance Limited ("the Company") as of March 312021 in conjunction with our audit of the standalone Ind AS 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 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 issued by the Institute of Chartered Accountants of India. Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of its business including adherence to company's policies the safeguarding ofits assets the prevention and detection of frauds and errors the accuracy andcompleteness of the accounting records and the timely preparation of reliable financialinformation as required under the Companies Act 2013.

Auditor's Responsibility

Our responsibility is to express an opinion on the Company's internalfinancial controls over financial reporting of the Company based on our audit. Weconducted our audit in accordance with the Guidance Note on Audit of Internal FinancialControls Over Financial Reporting (the "Guidance Note") issued by the Instituteof Chartered Accountants of India and the Standards on Auditing prescribed under Section143(10) of the Companies Act 2013 to the extent applicable to an audit of internalfinancial controls. Those Standards and the Guidance Note require that we comply withethical requirements and plan and perform the audit to obtain reasonable assurance aboutwhether adequate 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 aboutthe adequacy of the internal financial controls system over financial reporting and theiroperating effectiveness. Our audit of internal financial controls over financial reportingincluded obtaining an understanding of internal financial controls over financialreporting assessing the risk that a material weakness exists and testing and evaluatingthe design and operating effectiveness of internal control based on the assessed risk. Theprocedures selected depend on the auditor's judgement including the assessment of therisks of material misstatement of the financial statements whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our audit opinion on the Company's internal financialcontrols system over financial reporting.

Meaning of Internal Financial Controls Over Financial Reporting

A company's internal financial control over financial reporting is aprocess designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles. A company's internal financial control overfinancial reporting includes 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 company's assets thatcould have a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls Over FinancialReporting

Because of the inherent limitations of internal financial controls overfinancial reporting including the possibility of collusion or improper managementoverride of controls material misstatements due to error or fraud may occur andnot be detected. Also projections of any evaluation of the internal financial controlsover financial reporting to future periods are subject to the risk that the internalfinancial control over financial reporting may become inadequate because of changes inconditions or that the degree of compliance with the policies or procedures maydeteriorate.

Opinion

In our opinion to the best of our information and according to theexplanations given to us 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 2021 based on thecriteria for internal financial control over financial reporting established by therespective Company considering the essential components of internal control stated in theGuidance Note on Audit of Internal Financial Controls Over Financial Reporting issued bythe Institute of Chartered Accountants of India.

(i)(a) The Company has maintained proper records showing fullparticulars including quantitative details and situation of fixed assets.

(i)(b) The Company has a program of verification of fixed assets tocover all the items in a phased manner over a period of three years which in our opinionis reasonable having regard to the size of the Company and the nature of its assets.Pursuant to the program certain fixed assets were physically verified by the Managementduring the year. According to the information and explanations given to us no materialdiscrepancies were noticed on such verification.

(i) (c) According to the information and explanations given tous and the records examined by us and based on the examination of the registeredconveyance deed / provided to us we report that immovable properties of land whose titledeeds have been pledged as security for loans are held in the name of the Company basedon the relevant document which evidences title.

(ii) The Company does not have any inventory and hence reporting underclause (ii) of the CARO 2016 is not applicable.

(iii) The Company has not granted any loans secured or unsecured tocompanies firms Limited Liability Partnerships or other parties covered in the registermaintained under section 189 of the Companies Act 2013.

(iv) In our opinion and according to the information and explanationsgiven to us the Company has complied with the provisions of Sections 185 and 186 of theCompanies Act 2013 in respect of grant of loans to director investments made andguarantees provided. The Company has not provided any security to the parties coveredunder Section 185 and 186 of the Act.

(v) According to the information and explanations given to us theCompany has not accepted any deposit during the year. Accordingly the provisions ofclause 3(v) of the Order are not applicable.

(vi) Having regard to the nature of the Company's business reportingunder clause (vi) of CARO 2016 is not applicable.

(vii) According to the information and explanations given to us inrespect of statutory dues:

(vii)(a) The Company has been generally been regular in depositingundisputed statutory dues including Provident Fund Employees' State InsuranceIncome-tax Goods and Service Tax cess and other material statutory dues applicable to itto the appropriate authorities. To the best of our knowledge and belief the Company wasnot required to deposit or pay any dues in respect of Sales tax Custom Duty Excise DutyValue Added Tax and corresponding cess during the year.

(vii)(b) There were no undisputed amounts payable in respect ofProvident Fund Employees' State Insurance Income-tax Goods and Service Tax cess andother material statutory dues in arrears as at March 31 2021 for a period of more thansix months from the date they became payable. The provisions relating to Sales Tax CustomDuty Excise Duty Value Added Tax and corresponding cess is not applicable to theCompany.

(vii) (c) There are no dues of Income-tax and Goods and ServiceTax as on March 31 2021 on account of disputes. The provisions relating to Sales TaxCustom Duty Excise Duty and Value Added Tax is not applicable to the Company.

(viii) In our opinion and according to the information and explanationsgiven to us the Company has not defaulted in the repayment of loans or borrowings tofinancial institutions banks and debenture holders.

(ix) In our opinion and according to the information and explanationsgiven to us money raised by way of debt instruments in the nature of debentures andcommercial papers and the term loans have been applied by the Company during the year forthe purposes for which they were raised other than temporary deployment pendingapplication of proceeds.

The Company has not raised any monies by way of initial public offer /further public offer.

(x) To the best of our knowledge and according to the information andexplanations given to us no fraud by the Company and no material fraud on the Company byits officers or employees has been noticed or reported during the year.

(xi) According to the information and explanations given to us andbased on our examination of the records of the Company the Company has paid / providedfor managerial remuneration in accordance with the requisite approvals mandated by theprovisions of Section 197 read with Schedule V of the Act for the year ended March 312021 except for Rs. 0.44 crore of remuneration paid to the whole-time director which isin excess of the limits prescribed under Section 197 read with Schedule V of the Act. Asper the provisions of the Companies Act 2013 the excess remuneration is subject toapproval of the shareholders which the Company proposes to obtain in the forthcomingannual general meeting.

(xii) The Company is not a Nidhi Company and hence reporting underclause (xii) of the CARO 2016 Order is not applicable.

(xiii) In our opinion and according to the information and explanationsgiven to us the Company is in compliance with Section 177 and 188 of the Companies Act2013 where applicable for all transactions with the related parties and the details ofrelated party transactions have been disclosed in the financial statements etc. asrequired by the applicable accounting standards.

(xiv) According to the information and explanations given to us theCompany has made preferential allotment of shares during the year under review.

In respect of the above we further report that:

a) the requirement of Section 42 of the Companies Act 2013 asapplicable have been complied with; and

b) the amounts raised have been applied by the Company during the yearfor the purposes for which the funds were raised other than temporary deployment pendingapplication.

(xv) In our opinion and according to the information and explanationsgiven to us during the year the Company has not entered into any non-cash transactionswith its directors or directors of its holding or subsidiary company or persons connectedwith them and hence provisions of section 192 of the Companies Act 2013 are notapplicable.

(xvi) The Company is required to be registered under section 45-I ofthe Reserve Bank of India Act 1934 and it has obtained the registration.

For Deloitte Haskins & Sells LLP
Chartered Accountants
(Firm's Registration No. 117366W/W-100018)
Mukesh Jain
(Partner)
Place: Mumbai (Membership No. 108262)
Date: 17 June 2021 (UDIN: 21108262AAAALK3406)

.