The Unit holders of IRB InvIT Fund
Report on the Audit of the Standalone Financial Statements
We have audited the accompanying standalone financial statements of IRB InvIT Fund("the Fund") which comprise the Balance Sheet as at March 31 2021 theStatement of Profit and Loss including the Other Comprehensive Income the Statement ofChanges in Unit Holders' Equity and the Statement of Cash Flows for the year then endedand the Statement of Net Assets at fair value as at March 31 2021 and the Statement ofTotal Returns at fair value and the Statement of Net Distributable Cash Flows(NDCFs') for the year then ended and notes to the standalone financial statementsincluding a summary of significant accounting policies and other explanatory information(hereinafter referred to as "the standalone financial statements").
In our opinion and to the best of our information and according to the explanationsgiven to us the standalone financial statements give the information required by theSecurities and Exchange Board of India (Infrastructure Investment Trusts) Regulations2014 as amended from time to time including any guidelines and circulars issued thereunderin the manner so required and give a true and fair view in conformity with IndianAccounting Standards (Ind AS) and / or any addendum thereto as defined in the Rule 2(1)(a)of the Companies (Indian Accounting Standards) Rule 2015 and other accounting principlesgenerally accepted in India of the state of affairs of the Fund as at March 31 2021 itsprofit including other comprehensive income movement of the unit holders' funds and itscash flows for the year ended March 31 2021 its net assets at fair value as at March 312021 its total returns at fair value and the net distributable cash flows for the yearended on that date.
Basis for Opinion
We conducted our audit of the standalone financial statements in accordance with theStandards on Auditing (SAs) issued by Institute of Chartered Accountants of India("ICAI"). Our responsibilities under those Standards are further described inthe Auditor's Responsibilities for the Audit of the Financial Statements section of ourreport. We are independent of the Fund in accordance with the Code of Ethics issued by theICAI and we have fulfilled our other ethical responsibilities in accordance with theICAI's Code of Ethics. We believe that the audit evidence we have obtained is sufficientand appropriate to provide a basis for our audit opinion on the standalone financialstatements.
Key Audit Matters
Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the standalone financial statements of the current period.These matters were addressed in the context of our audit of the standalone financialstatements as a whole and in forming our opinion thereon and we do not provide aseparate opinion on these matters. We have determined the matters described below to bethe key audit matters to be communicated in our report.
|Sr.No. Key Audit Matter ||How our audit addressed the key audit matter |
|1 Assessing Impairment of investments and loans in subsidiary companies (note 3.09 4.1 4.2 and 5.4) ||Our audit procedures included the following: |
|As at March 31 2021 the carrying values of Fund's investment in subsidiaries amounted to Rs 226936.48 Lakhs. Further the Fund has granted loans to its subsidiaries amounting to Rs 424761.90 Lakhs. ||- Assessed the appropriateness of the Fund's valuation methodology applied in determining the recoverable amount. |
| ||In making this assessment we also evaluated the objectivity independence and competency of specialists involved in the process; |
|Management reviews regularly whether there are any indicators - of impairment of such investments / loans by reference to the requirements under Ind AS. Management performs its impairment assessment by comparing the carrying value of these investments / loans made to their recoverable amount to determine whether impairment needs to be recognized. ||Assessed the assumptions around the key drivers of the cash flow forecasts discount rates revenue projection based on the independent experts tra_c study report etc. by management and independent valuer including considerations due to current economic and market conditions including effects of COVID-19 pandemic; |
|For impairment testing value in use has been determined by - forecasting and discounting future cash flows of subsidiary companies. Further the value in use is highly sensitive to changes in critical variable used for forecasting the future cash flows - including tra_c projection for revenues and discounting rate. ||Assessed the appropriateness of the weighted average cost of capital used in the determining recoverable amount by engaging valuation expert; |
|The determination of the recoverable amount from subsidiary companies involves significant judgment and accordingly the evaluation of impairment of investments / loans in subsidiary companies has been determined as a key audit matter. ||Discussed / Evaluated potential changes in key drivers as compared to previous year / actual performance with management in order to evaluate whether the inputs and assumptions used in the cash flow forecasts were suitable including considerations due to current economic and market conditions including effects of COVID- 19 pandemic. |
| ||- Assessed the recoverable value headroom by performing sensitivity analysis of key assumptions used. |
| ||- Tested the arithmetical accuracy of the model. |
| ||- As regards loans granted to subsidiary companies we have obtained and considered management evaluations of recoverability of loans granted to its subsidiary companies. |
|2 Computation and disclosures as prescribed in the InvIT regulations relating to Statement of Net Assets and Total - Returns at Fair Value (as described in note 30 and in Statement of Net assets at fair value and Statement of total returns at fair value of the - standalone financial statements) ||Our audit procedures include the following- |
| ||Read the requirements of SEBI InvIT regulations for disclosures relating to Statement of Net Assets at Fair Value and Statement of Total Returns at Fair Value. |
| ||Assessed the appropriateness of independent valuer's and management's valuation methodology applied in determining the fair values. |
|As per the provisions of InvIT Regulations the Fund is required to disclose Statement of Net Assets at Fair Value and Statement of Total Returns at Fair Value which requires fair valuation of assets. For this purpose fair value is determined by forecasting and discounting future cash flows. The inputs to the valuation models are taken from observable markets where possible but where this is not feasible a degree of judgement is required in establishing fair values. Judgements include considerations of inputs such as WACC Tax rates Inflation rates etc. ||- Tested controls implemented by management to determine inputs for fair valuation as well as assumptions used in the fair valuation. |
| ||- We involved valuation specialists to: |
| ||a) Assess the valuation reports issued by the independent valuer engaged by the management and compared key property related data used as input with actual data. |
|Accordingly the aforementioned computation and disclosures are determined to be a key audit matter in our audit of the standalone financial statements. ||b) Assess the key assumptions included in the cash flow forecasts by management and independent valuer including considerations due to current economic and market conditions including effects of COVID-19 pandemic. |
| ||c) Discussed changes in key drivers as compared to actual performance with management in order to evaluate whether the inputs and assumptions used in the valuation models by management and independent valuer were reasonable including considerations due to current economic and market conditions including effects of COVID-19 pandemic. |
| ||- Tested the arithmetical accuracy of computation in the Statement of Net Assets and Total Returns at Fair Value |
| ||- Read / Assessed the disclosures in the standalone financial statements for compliance with the relevant requirements of InvIT Regulations. |
|3 Related party transactions and disclosures (as described in note 22 of the standalone financial statements) ||Our audit procedures included the following: |
|The Fund has undertaken transactions with its related parties in the normal course of business. These include making new loans to SPVs interest on such loans fees for services provided by related parties to Fund etc. as disclosed in Note 22 of the standalone financial statements. ||- Obtained read and assessed the Fund's policies processes and procedures in respect of identifying related parties evaluation of arm's length obtaining necessary approvals recording and disclosure of related party transactions including compliance of transactions and disclosures in accordance with InvIT regulations. |
|We identified the accuracy and completeness of related party transactions and its disclosure as set out in respective - notes to the standalone financial statements as a key audit matter due to the significance of transactions with related parties during the year ended March 31 2021 and regulatory compliance thereon. ||- We tested on a sample basis related party transactions with the underlying contracts and other supporting documents for appropriate authorization and approval for such transactions. We read minutes of Unit holder meetings Board and its relevant committee meetings and minutes of meetings of those charged with governance of the Manager in connection with transactions with related parties affected during the year and Fund's assessment of related party transactions being in the ordinary course of business at arm's length and in accordance with the InvIT regulations. |
| ||- Assessed and tested the disclosures made in accordance with the requirements of Ind AS and InvIT regulations. |
Information Other than the Standalone Financial Statements and Auditor's Report Thereon
The management of IRB Infrastructure Private Limited ("Investment Manager")is responsible for the preparation of the other information. The other informationcomprises the information included in the Management Discussion and Analysis InvestmentManager's Report including Annexures to Investment Manager's Report and InvestmentManager's Information but does not include the standalone financial statements and ourauditor's report thereon.
Our opinion on the standalone financial statements does not cover the other informationand we do not express any form of assurance conclusion thereon.
In connection with our audit of the standalone financial statements our responsibilityis to read the other information and in doing so consider whether the other informationis materially inconsistent with the standalone financial statements or our knowledgeobtained during the course of our audit or otherwise appears to be materially misstated.
If based on the work we have performed we conclude that there is a materialmisstatement of this other information we are required to report that fact. We havenothing to report in this regard.
Management's Responsibility for the Standalone Financial Statements
The Management of IRB Infrastructure Private Limited (Investment Manager') isresponsible for the preparation of these standalone financial statements that give a trueand fair view of the financial position as at March 31 2021 financial performanceincluding other comprehensive income movement of the unit holders' funds and cash flowsfor the year ended March 31 2021 its net assets at fair value as at March 31 2021 itstotal returns at fair value and the net distributable cash flows of the Fund for the yearended March 31 2021 in accordance with accounting principles generally accepted inIndia including the Indian Accounting Standards (Ind AS) and / or any addendum thereto asdefined in Rule 2(1)(a) of the Companies (Indian Accounting Standards) Rules 2015 asamended read with the Securities and Exchange Board of India (Infrastructure InvestmentTrusts) Regulations 2014 as amended from time to time including any guidelines andcirculars issued thereunder (together referred to as the "InvIT Regulations").This responsibility also includes maintenance of adequate accounting records in accordancewith the provisions InvIT Regulations for safeguarding of the assets of the Fund and forpreventing and detecting frauds and other irregularities; selection and application ofappropriate accounting policies; making judgments and estimates that are reasonable andprudent; for ensuring the accuracy and completeness of the accounting records relevant tothe preparation and presentation of the financial statements that give a true and fairview and are free from material misstatement whether due to fraud or error.
In preparing the standalone financial statements management is responsible forassessing the Fund's ability to continue as a going concern disclosing as applicablematters related to going concern and using the going concern basis of accounting unlessmanagement either intends to liquidate the Fund or to cease operations or has norealistic alternative but to do so.
The Investment Manager is also responsible for overseeing the Fund's financialreporting process.
Auditor's Responsibilities for the Audit of Standalone Financial Statements
Our objectives are to obtain reasonable assurance about whether the 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 financial statements.
As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the standalone financialstatements whether due to fraud or error design and perform audit procedures responsiveto those risks and obtain audit evidence that is sufficient and appropriate to provide abasis for our opinion. The risk of not detecting a material misstatement resulting fromfraud is higher than for one resulting from error as fraud may involve collusionforgery intentional omissions misrepresentations or the override of internal control.
Obtain an understanding of internal financial controls relevant to the audit in orderto design audit procedures that are appropriate in the circumstances but not for thepurpose of expressing an opinion on the effectiveness of such controls.
Evaluate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basis ofaccounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the Fund'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 financial statements or if such disclosures are inadequate to modify our opinion.Our conclusions are based on the audit evidence obtained up to the date of our auditor'sreport. However future events or conditions may cause the Fund to cease to continue as agoing concern.
Evaluate the overall presentation structure and content of the financial statementsincluding the disclosures and whether the standalone financial statements represent theunderlying transactions and events in a manner that achieves fair presentation.
Materiality is the magnitude of misstatements in the standalone financial statementsthat individually or in aggregate makes it probable that the economic decisions of areasonably knowledgeable user of the financial statements may be influenced. We considerquantitative materiality and qualitative factors in (i) planning the scope of our auditwork and in evaluating the results of our work; and (ii) to evaluate the effect of anyidentified misstatements in the standalone financial statements.
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.
From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the standalone financial statementsof the current period and are therefore the key audit matters. We describe these mattersin our auditor's report unless law or regulation precludes public disclosure about thematter or when in extremely rare circumstances we determine that a matter should not becommunicated in our report because the adverse consequences of doing so would reasonablybe expected to outweigh the public interest benefits of such communication.
Report on Other Legal and Regulatory Requirements
Based on our audit and as required by InvIT Regulations we report that: a) We haveobtained all the information and explanations which to the best of our knowledge andbelief were necessary for the purpose of our audit; b) The balance sheet and statement ofprofit and loss including other comprehensive income dealt with by this report are inagreement with the books of account of the Fund; and c) In our opinion the aforesaidstandalone financial statements comply with the Accounting Standards (Ind AS) and / or anyaddendum thereto as defined in Rule 2(1)(a) of the Companies (Indian Accounting Standards)Rules 2015 as amended.
|For Suresh Surana & Associates LLP |
|Chartered Accountants |
|Firm's Reg. No. 121750W/W-100010 |
|(Ramesh Gupta) |
|Membership No.:102306 |
|UDIN: 21102306AAAABO8034 |
|Place: Mumbai |
|Dated: May 15 2021 |