TO THE MEMBERS OF INDUS FINANCE LIMITED
Report on the Audit of the Standalone Ind AS Financial Statements Qualified Opinion
We have audited the Ind AS Financial Statements of Indus Finance Limited (FormerlyKnown as INDUS FINANCE CORPORATION LIMITED) ("the Company") which comprise thebalance sheet as at March 31 2020 and the statement of Profit and Loss including thestatement of Other Comprehensive Income and the Cash Flow Statement and the Statement ofChanges in Equity for the year then ended and notes to the Ind AS Financial Statementsincluding a summary of 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 effects of the matter described in the Basis for QualifiedOpinion section of our report the aforesaid Ind AS Financial Statements give theinformation required by the Companies Act 2013 in the manner so required and give a trueand fair view in conformity with the accounting principles generally accepted in India ofthe state of affairs of the Company as at March 31st 2020 and its profit & loss andits cash flows for the year ended on that date.
Basis of Qualified Opinion
We refer to note no 5 of the Ind AS Financial Statements under Investments outof the total investments of Rs 1146 Lakhs an amount of Rs 115.59 Lakhs is relating to anInvestment in Indowind Energy Limited a BSE and NSE listed company. An order of admissionhas been pronounced by the Madras High court vide CD No. 172/2011 dated 20.05.2020. Thecompany has appealed against this order and it stands numbered before the Division benchat Madras High Court. Under these circumstances we are unable to ascertain therecoverability of this investment.
We conducted our audit in accordance with the Standards on Auditing (SAs) specifiedunder section 143(10) of the Companies Act 2013. Our responsibilities under thoseStandards are further described in the Auditor's Responsibilities for the Audit of the IndAS Financial Statements section of our report. We are independent of the Company inaccordance with the Code of Ethics issued by the Institute of Chartered Accountants ofIndia together with the ethical requirements that are relevant to our audit of the Ind ASFinancial Statements under the provisions of the Companies Act 2013 and we have fulfilledour other ethical responsibilities in accordance with these requirements and the ICAI'sCode of Ethics. We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our qualified opinion.
Key Audit Matter:
|Key Audit Matter ||Key Audit Matter Description ||How the Key Audit Matters were addressed |
|Application of new accounting standards || With reference to Note 2.1 of the Ind AS Financial Statements The Company has adopted Indian Accounting Standards (Ind AS) with effect from April 1 2019 in terms of the Companies (Indian Accounting Standards) (Amendment) Rules 2016. The transition date balance sheet as on April 1 2018 and the comparative Ind AS Financial Statements for the year ended March 31 2019 included in these Ind AS Ind AS Financial Statements is based on the statutory Ind AS Financial Statements prepared in accordance with the Companies (Accounting Standard) Rules 2006 and have been restated to comply with Ind AS. || Considered the Ind AS impact assessment performed by management to identify areas to be impacted on account of Ind AS transition. Also considered the changes made to the accounting policies in light of the requirements of the new framework. |
| || || Understood the financial statement closure process and the additional controls established by the Company for transition to Ind AS. |
| || || Tested the accounting adjustments posted as at the transition date and in respect of the previous year to convert the financial information reported under erstwhile Indian GAAP to Ind AS. |
| || The application of mandatory and optional transitional adjustment involves significant level of judgment by the management and there is a significant increase in the disclosure requirements under Ind AS. Hence this has been identified as a key audit matter. || |
| || || Compared the disclosures included in the Ind AS Ind AS Financial Statements in respect of the previous periods presented with the requirements of Ind AS 101. |
|Impairment of loans measured at amortized cost ||With reference to Note 4 of the Ind || Our audit procedures |
| ||AS Financial Statements the company has financial assets in the form of loans and advances given to customers of Rs 674.83 Lakhs net of provision for expected credit loss(ECL). ||included considering the Company's accounting policies for impairment of financial instruments and assessing compliance with the policies in terms of Ind AS 109. |
| ||The management has exercised the following assumptions in estimation of ECL: || |
| || || Engaged our team to review management's approach for calculating the impairment provision and assess the key assumptions i.e. Probability of Default (PD) and Loss Given Default (LGD) used to determine the impairment provision |
| ||1. The Company recognizes lifetime expected credit losses (ECL) when there has been a significant increase in credit risk since initial recognition and when the financial instrument is credit impaired. If the credit risk on the financial instrument has not increased significantly since initial recognition the Company measures the loss allowance for that financial instrument at an amount equal to 12-month ECL. || |
| || || Tested the assumptions used by the Company for grouping and staging of loan portfolio into various categories and default buckets for determining the PD and LGD rates. |
| ||2. When determining whether credit risk of a financial asset has increased significantly since initial recognition and when estimating expected credit losses the Company considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis including on historical experience and forward-looking information. || |
| || || Tested the arithmetical accuracy of computation of ECL provision performed by the Company in spreadsheets. |
| || || Compared the disclosures included in the Ind AS Ind AS Financial Statements in respect of |
| || ||expected credit losses with the requirements of Ind AS 107 and 109. |
The other information comprises the information included in the Audit Report but doesnot include the Ind AS Financial Statements and our Auditor's report thereon. TheCompany's Board of Director's is responsible for the other information.
Our opinion on the Ind AS Financial Statements does not cover the other information andwe do not express any form of assurance conclusion thereon.
In connection with our Audit of the Ind AS Financial Statements our responsibility isto read and the other information and in doing so considers whether such otherinformation is materially inconsistent with the financial statements or our knowledgeobtained in the audit or otherwise appears to be materially misstated. If based on thework we have performed we conclude that there is no material misstatement of this otherinformation; we are required to report that fact. We have nothing to report in thisregard.
Responsibilities of Management and Those Charged with Governance for the Ind ASFinancial Statements
The Company's Board of Directors is responsible for the matters stated in section134(5) of the Companies Act 2013 ("the Act") with respect to the preparation ofthese standalone Ind AS Financial Statements that give a true and fair view of thefinancial position financial performance and cash flows of the Company in accordancewith the accounting principles generally accepted in India including the accountingStandards specified under section 133 of the Act. This responsibility also includesmaintenance of adequate accounting records in accordance with the provisions of the Actfor safeguarding of the assets of the Company and for preventing and detecting frauds andother irregularities; selection and application of appropriate accounting policies; makingjudgments and estimates that are reasonable and prudent and design implementation andmaintenance of adequate internal financial controls that were operating effectively forensuring the accuracy and completeness of the accounting records relevant to thepreparation and presentation of the financial statement that give a true and fair view andare free from material misstatement whether due to fraud or error.
In preparing the Ind AS Financial Statements management is responsible for assessingthe Company's ability to continue as a going concern disclosing as applicable mattersrelated to going concern and using the going concern basis of accounting unless
management either intends to liquidate the Company or to cease operations or has norealistic alternative but to do so.
The Board of Directors are also responsible for overseeing the Company's financialreporting process.
Auditor's Responsibilities for the Audit of the Ind AS Financial Statements
Our objectives are to obtain reasonable assurance about whether the Ind AS FinancialStatements as a whole are free from material misstatement whether due to fraud or errorand to issue an auditor's report that includes our opinion. Reasonable assurance is a highlevel of assurance but is not a guarantee that an audit conducted in accordance with SAswill always detect a material misstatement when it exists. Misstatements can arise fromfraud or error and are considered material if individually or in the aggregate theycould reasonably be expected to influence the economic decisions of users taken on thebasis of these Ind AS 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 Ind AS 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 control relevant to the audit in order todesign audit procedures that are appropriate in the circumstances. Under section 143(3)(i)of the Companies Act 2013 we are also responsible for expressing our opinion on whetherthe company has adequate internal financial controls system in place and the operatingeffectiveness of such controls.
Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basisof accounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the 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 Ind AS 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 to continue as a going concern.
Evaluate the overall presentation structure and content of the Ind AS FinancialStatements including the disclosures and whether the Ind AS Financial Statementsrepresent 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 during our audit.
We also provide those charged with governance with a statement that we have compliedwith relevant ethical requirements regarding independence and to communicate with themall relationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safeguards.
Emphasis of Matter
1. We refer to note no 2.10(c) of the Financial Statement whereby a loan given of Rs600 Lakhs to Quantum Capital has been adjusted from Associate Companies loans and theresultant asset and liability amounts have been reduced to that extent vide notice ofassignment dated 31/03/2020.
2. We refer to Note 19 of the Ind AS Financial Statements under Travelling andConveyance expenses amounting to Rs 9.49 Lakhs which were not supported with adequatesupporting evidences.
3. We refer to Note 9 of Ind AS Financial Statements under other Non-Financial Assetsthe Staff loan of Rs. 43 Lakhs extended by the company is not in accordance with theremuneration policy of the company and we are unable to comment on the recoverability ofthe advance.
4. We refer to Note no 1 of the Ind AS Financial Statements which is related to theimpact of COVID-19 pandemic on the company's operations and financial metrics (Includingimpact on impairment allowances for loan portfolio). The financial metrics will depend onfuture developments including governmental and regulatory measures and the company'sresponse thereto which are highly uncertain at this time.
Our opinion is not modified in respect of above matters.
Further to the continuous spreading of COVID-19 across India the Indian Governmentannounced a strict 21-day lockdown on March 24 2020 which was further extended till July31 2020 across India to contain the spread of virus. This has resulted in restriction onphysical visit to the client locations and the need for carrying out alternative auditprocedures as per the Standards of Auditing prescribed by the Institute of CharteredAccountants of India (ICAI).
As a result of the above the entire audit was carried out based on remote access ofthe data as provided the management. This has been carried out based on the advisory on"Specific Considerations while conducting Distance Audit/Remote Audit/Online auditunder Covid-19 situation" issued by the Auditing and the Assurance Standards Board ofICAI. We have been represented by the management that the data provided for our auditpurposes is correct complete reliable and are directly generated by the accountingsystem of the company without any further manual modifications.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditor's Report) Order 2016 ("the Order")issued by the Central Government of India in terms of sub-section (11) of section 143 ofthe Act we give in the "Annexure A" a statement on the matters specified inparagraph 3 and 4 of the Order to the extent applicable.
2. Further to the comments in the annexure as required by Section 143 (3) of the Actwe 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) In our opinion proper books of account as required by law have been kept by theCompany so far as it appears from our examination of those books.
(c) The Balance Sheet the Statement of Profit and Loss including the Statement ofOther Comprehensive Income and the Cash Flow Statement and the Statement of Changes inEquity dealt with by this Report are in agreement with the books of account.
(d) In our opinion the aforesaid Ind AS Financial Statements comply with theAccounting Standards specified under Section 133 of the Act read with Rule 7 of theCompanies (Accounts) Rules 2014.
(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 31st March 2020 from being appointed as a director in terms of Section164 (2) of the Act.
(f) With respect to the adequacy of the internal financial controls over financialreporting of the company and the operating effectiveness of such controls refer to ourseparate report in "Annexure B".
(g) In our opinion the managerial remuneration for the year ended March 312020 hasbeen provided by the Company to its directors in accordance with the provisions of Section197 read with the Schedule V to the Act.
(h) With respect to the other matters to be included in the Auditor's Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand to the best of our information and according to the explanations given to us:
i. The Company has disclosed the impact of pending litigations on its financialposition to be disclosed in its Ind AS Financial Statements- Refer to Note no. 26 of theInd AS Financial Statements.
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.
| ||For V Ramaratnam and Company |
| ||Chartered Accountants |
| ||Firm Registration No: 002956S |
| ||Venkat Krishnamurthy |
| ||Partner |
|Place: Chennai ||Membership Number: 049322 |
|Date: 29thJuly 2020 ||UDIN: 20049322AAAACW8072 |
"Annexure A" to the Independent Auditors' Report
Referred to in paragraph 1 under the heading Report on Other Legal &Regulatory Requirement' of our report of even date to the Ind AS Financial Statements ofthe Company for the year ended March 312020:
1. In respect of the Company's fixed assets:
(a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.
(b) The Company has a program of verification to cover all the items of fixed assets ina phased manner over a period of three years which in our opinion is reasonable havingregard to the size of the Company and the nature of its assets. Pursuant to the programcertain fixed assets were physically verified by the management during the year. Howeverno physical verification has been carried at the end the year due to Covid-19 pandemiclockdown. Accordingly we were unable to comment on whether any material discrepancieswere noticed on such verification and whether they are properly dealt with in the Ind ASFinancial Statements.
(c) According to the information and explanations given by the management there are noimmovable properties included in property plant and equipment of the Company andaccordingly the requirements under the clause 3(i)(c) of the Order are not applicable tothe Company.
2. The Company's business does not involve inventories accordingly the requirementsunder clause 3(ii) of the Order is not applicable to the Company.
3. The Company has granted loans both secured and unsecured to companies firmslimited liability partnerships and other parties covered in the register maintained underSection 189 of the Companies Act 2013.
a) "According to the information and explanations given by the management andbased on the audit procedures conducted by us we are of the opinion that the terms andconditions of loans granted by the company to a party are covered in the registermaintained under section 189 of the Companies Act 2013 except for the advance asmentioned under point no.2 under emphasis of matters.
b) According to the information and explanation given by the management and based onthe audit procedures conducted by us the schedule of repayment of principal and payment ofinterest has been stipulated except for the advance as mentioned under point no.2 underemphasis of matters.
c) According to the information and explanations given by the management there areover dues for more than 90 days from the parties covered in the register maintained undersection 189 of the Companies Act 2013.
4. In our opinion and according to the information and explanation given by themanagement and based on the audit procedures conducted by us the provisions of section185 and I86 of the Companies Act 2013 are not applicable.
5. In our opinion and according to the information and explanations given by themanagement the Company has not accepted any deposits from public within the meaning ofSections 73 to 76 of the Companies Act 20 13and the Companies (Acceptance and Deposit)Rules2014(as amended).Accordingly the provisions of Clause 3(v) of the Order are notapplicable.
6. The Central Government has not prescribed the maintenance of Cost Records undersub-section (1) of section 148 of the Companies Act 2013 for any of the services renderedby the Company.
7. (a)According to the records of the company the company is generally regular indepositing with the appropriate authorities undisputed statutory dues including ProvidentFund Employees' State Insurance Sales-tax Value Added Tax Wealth Tax Service TaxGoods and services tax Custom Duty Excise Duty Cess & other statutory duesapplicable.
(b) According to the records of the company there are no dues to Sales Tax CustomDuty Income tax Wealth Tax Value Added Tax Service Tax Excise Duty or Cess which havenot been deposited on account of any dispute except for the following:
|S.N o ||Name of the Statute ||Amount (Rs.) in lakhs ||Period ||Forum where dispute is pending |
|1 ||Income tax act 1961 ||227.021 ||AY 2012-13 ||Third appellate authority - High Court |
|2 ||Income tax act 1961 ||10.61 ||AY 2013-14 ||Second appellate authority - ITAT |
8. According to the information and explanations given by the management the Companyhas not defaulted in the repayment of dues to banks or financial institution. The companydoes not have any loans or borrowings from the government and has not issued anydebentures.
9. The Company has not raised moneys by way of initial public offer or further publicoffer (including debt instruments) or term loans and hence reporting under clause 3 (ix)of the Order is not applicable to the Company.
10. To the best of our knowledge and according to the information and explanationsgiven to us no fraud by the Company or no material fraud on the Company by its officersor employees has been noticed or reported during the year.
11. According to the information and explanations given to us and based on ourexamination of the records of the company the company has paid an amount of Rs.36 Lakhsas remuneration to the directors.
The remuneration paid is in accordance with the requisite approvals mandated under theprovisions of section 197 read with provisions of part II of Schedule V of Companies Act2013.
12. In our opinion and according to the information and explanations given to us thecompany is not a Nidhi Company. Thus paragraph 3(xii) of the Order is not applicable.
13. According to the information and explanations given to us and based on ourexamination of the records of the company transactions with related parties are incompliance with Section 177 and 188 of the Companies Act 2013 where applicable and thedetails have been disclosed in the financial statement as required by the applicableaccounting standard except for the advance as mentioned under point no. 2 of emphasis ofmatters.
14. According to the information and explanations given to us the company has not madeany preferential allotment or private placement of shares or fully or partly convertibledebentures during the year under review. Thus paragraph 3(xiv) of the Order is notapplicable.
15. According to the information and explanations given to us and based on ourexamination of the records of the company the company has not into entered Non-cashtransactions with directors or persons connected with him.
16. The company has obtained the registration as required under Section 45 IA ofReserve Bank of India Act 1934.
For V Ramaratnam and Company Chartered Accountants Firm Registration No: 002956S
"Annexure B" to the Independent Auditors' Report
Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section143 of the Companies Act 2013 ("the Act")
We have audited the internal financial controls over financial reporting of IndusFinance Limited(Formerly Known as INDUS FINANCE CORPORATION LIMITED) ("theCompany") as of 31stMarch 2020 in conjunction with our audit of the IndAS 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 (ICAI'). 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.
Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting based on our audit. We conducted our audit in accordancewith the Guidance Note on Audit of Internal Financial Controls over Financial Reporting(the "Guidance Note") and the Standards on Auditing issued by ICAI and deemedto be prescribed under section 143(10) of the Companies Act 2013 to the extentapplicable to an audit of internal financial controls both applicable to an audit ofInternal Financial Controls and both issued by the Institute of Chartered Accountants ofIndia. Those Standards and the Guidance Note require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetheradequate internal financial controls over financial reporting was established andmaintained and if such controls operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls over financial reporting includedobtaining an understanding of internal financial controls over financial reportingassessing the risk that a material weakness exists and testing and evaluating the designand
operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditor's judgment including the assessment of the risks ofmaterial misstatement of the Ind AS 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 Ind AS Financial Statements for external purposes in accordance withgenerally accepted accounting principles.
A company's internal financial control over financial reporting includes those policiesand procedures that
(1) Pertain to the maintenance of records that in reasonable detail accurately andfairly reflect the transactions and dispositions of the assets of the company.
(2) Provide reasonable assurance that transactions are recorded as necessary to permitpreparation of Ind AS Financial Statements in accordance with generally acceptedaccounting principles and that receipts and expenditures of the company are being madeonly in accordance with authorizations of management and directors of the company; and
(3) Provide reasonable assurance regarding prevention or timely detection ofunauthorized acquisition use or disposition of the company's assets that could have amaterial effect on the Ind AS Financial Statements.
Inherent Limitations of Internal Financial Controls over Financial Reporting
Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.
In our opinion the Company has in all material respects an adequate internalfinancial controls system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at 31 March 2020 based on theinternal control over financial reporting criteria established by the Company consideringthe essential components of internal control stated in the Guidance Note issued byInstitute of Chartered Accountants of India.
For V Ramaratnam and Company Chartered Accountants
Firm Registration No: 002956S