TO THE MEMBERS OF
MAHINDRA HOLIDAYS & RESORTS INDIA LIMITED
Report on the Audit of the Standalone Financial Statements
We have audited the standalone financial statements of Mahindra Holidays & ResortsIndia Limited ("the Company") which comprise the standalone balance sheet as atMarch 31 2021 and the standalone statement of profit and loss (including othercomprehensive income) standalone statement of changes in equity and standalone statementof cash flows for the year then ended and notes to the standalone financial statementsincluding a summary of the significant accounting policies and other explanatoryinformation.
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone financial statements give the information requiredby the Companies Act 2013 ("Act") in the manner so required and give a true andfair view in conformity with the accounting principles generally accepted in India of thestate of affairs of the Company as at March 31 2021 and profit and other comprehensiveincome changes in equity and its cash flows for the year ended on that date.
Basis for Opinion
We conducted our audit in accordance with the Standards on Auditing (SAs) specifiedunder section 143(10) of the Act. Our responsibilities under those SAs are furtherdescribed in the Auditors' Responsibilities for the Audit of the Standalone FinancialStatements section of our report. We are independent of the Company in accordance withthe Code of Ethics issued by the Institute of Chartered Accountants of India together withthe ethical requirements that are relevant to our audit of the standalone financialstatements under the provisions of the Act and the Rules thereunder and we have fulfilledour other ethical responsibilities in accordance with these requirements and the Code ofEthics. We believe that the audit evidence we have obtained is sufficient and appropriateto provide a basis for our opinion on the Standalone financial statements.
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.
Description of Key Audit Matters'
I) Revenue from Contracts with Customers under Ind AS 115 See note no. 36 and 52 to thestandalone financial statements
|The key audit matter ||How the matter was addressed in our audit |
|The Company has a unique business model and its revenue comprises of numerous individual transactions and also multiple streams of revenue with its members. ||Our procedures included the following: |
|In accordance Ind AS 115 (a) the membership fees and (b) incremental costs to obtain a contract with a customer are recognized over the effective membership period. ||- Evaluating the appropriate accounting policy in accordance with Ind AS 115 for membership contracts entered with customers. |
|The application of the accounting standard on revenue recognition involves certain judgements relating to identification of distinct performance obligations determination of transaction price of the identified performance obligations and the appropriateness of the basis used to recognize revenue over a period. ||- Evaluating and testing the identification of expenses incurred by the Company which can get classified as incremental costs of acquisition. |
|Incremental costs are those that would not have been incurred if the contract was not obtained. ||- Evaluating the process followed by the Company and evaluating the data used for the purpose of identifying and determining the effective membership period after considering breakage i.e customer's unexercised rights and comparing the basis with historical experience of utilization of memberships. |
|The Company has applied significant judgement in identifying the expenses which can be treated as incremental cost of acquiring new members. ||- Evaluating the process followed by the Company and evaluating the data used for the purpose of deferral of revenue due to uncertainty of collection based on historical trends and considering factors impacting future collections. |
| ||- Testing the processes and controls instituted for recognition of revenue and incremental costs of acquisition over the effective membership period. Involving our IT specialists to test the controls in the IT system for recording revenue as per Ind AS 115. |
| ||- Assessing the adequacy of the Company's disclosures in accordance with the requirements of Ind AS 115. |
II) Contingent liabilities
See note no. 43 to the standalone financial statements
|The key audit matter ||How the matter was addressed in our audit |
|The Company has significant tax litigations for both direct and indirect taxes. ||Our audit procedures included the following: |
|There is a high level of judgement required in estimating the level of provisioning and appropriateness of disclosure of those litigations in the financial statements. ||- Examining the list of outstanding litigation against the Company. |
|The value of the litigations together with the level of judgement involved make it a significant matter for our audit. ||- Inquiring and obtaining explanation for movement during the year. |
| ||- Reading the latest correspondence between the Company and the regulatory authorities for significant matters. |
| ||- Discussing the status of significant litigation with the Company's senior management personnel and assessing their responses. |
| ||- Examining opinions obtained by the Company from external advisors. |
| ||- Involving our tax specialists and discussing with the Company's tax officers their views and strategies on significant cases as well as the related technical grounds relating to their conclusions based on applicable tax laws. |
| ||- Assessing the decisions and rationale for provisions made or for decisions not to record provisions or make disclosures. |
III) Leases in accordance with Ind AS 116
See note no. 3 5 and 53 to the standalone financial statements
|The key audit matter ||How the matter was addressed in our audit |
|The Company has a large number of leasing arrangements. ||Our audit procedures included the following: |
|The application of the accounting standard on leases involves certain judgements relating to determination of incremental borrowing rate determination of leases to which Ind AS 116 applies and determination of lease period. ||- Assessing and testing processes and controls in respect of Ind AS 116 |
|During the current year Company has also negotiated lease concessions with lessors based on mutually agreed terms. ||- Assessing the Company's evaluation on the identification of leases based on the contractual agreements and our knowledge of the business. |
| ||- Evaluating the reasonableness of Company's key judgements and estimates made in determining the amounts at which ROU assets and lease liabilities are accounted. |
| ||- Evaluating the completeness accuracy and relevance of data used in preparing the lease adjustments. |
| ||- Assessing management's calculation on remeasurement of lease liabilities. |
| ||- On a statistical sample assessing the key terms and conditions of each lease with the underlying lease contracts including lease rent concessions received; and |
| ||- On a statistical sample evaluating computation of lease liabilities and challenging the key estimates such as discount rates and the lease term. |
| ||- Assessing the computation of lease incentives with the aforesaid lease rent concession terms agreed with lessors |
| ||- Assessing and testing the presentation and disclosures relating to Ind AS 116 |
The Company's management and Board of Directors are responsible for the otherinformation. The other information comprises the information included in the Company'sannual report but does not include the financial statements and our auditors' reportthereon.
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 in the audit or otherwise appears to be materially misstated. If based on thework we have performed we conclude that there is a material misstatement of this otherinformation we are required to report that fact. We have nothing to report in thisregard.
Management's and Board of Directors' Responsibility for the Standalone FinancialStatements
The Company's Management and Board of Directors are responsible for the matters statedin section 134(5) of the Act with respect to the preparation of these standalone financialstatements that give a true and fair view of the state of affairs profit/loss and othercomprehensive income changes in equity and cash flows of the Company in accordance withthe accounting principles generally accepted in India including the Indian AccountingStandards (Ind AS) specified under section 133 of the Act. This responsibility alsoincludes maintenance of adequate accounting records in accordance with the provisions ofthe 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 were operatingeffectively for ensuring accuracy and completeness of the accounting records relevant tothe preparation and presentation of the standalone financial statements that give a trueand fair view and are free from material misstatement whether due to fraud or error.
In preparing the standalone financial statements the Management and Board of Directorsare responsible 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 the Board of Directors either intends to liquidate the Companyor to cease operations or has no realistic alternative but to do so.
The Board of Directors is also responsible for overseeing the Company's financialreporting process.
Auditors' Responsibilities for the Audit of the Standalone Financial Statements
Our objectives are to obtain reasonable assurance about whether the standalonefinancial statements as a whole are free from material misstatement whether due to fraudor error and to issue an auditors' report that includes our opinion. Reasonable assuranceis a high level of assurance but is not a guarantee that an audit conducted in accordancewith SAs will always detect a material misstatement when it exists. Misstatements canarise from fraud or error and are considered material if individually or in theaggregate they could reasonably be expected to influence the economic decisions of userstaken on the basis of these standalone financial statements.
As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the standalonefinancial 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 the audit in order todesign audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Act we are also responsible for expressing our opinion on whether the companyhas adequate internal financial controls with reference to financial statements in placeand the operating effectiveness of such controls.
Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures in the standalone financial statementsmade by the Management and Board of Directors.
Conclude on the appropriateness of the Management and Board of Directors use ofthe going concern basis of accounting and based on the audit evidence obtained whether amaterial uncertainty exists related to events or conditions that may cast significantdoubt on the Company's ability to continue as a going concern. If we conclude that amaterial uncertainty exists we are required to draw attention in our auditors' report tothe related 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 auditors' 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 the standalonefinancial statements including the disclosures and whether the standalone financialstatements represent the underlying transactions and events in a manner that achieves fairpresentation.
We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify 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 auditors' 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
1. As required by the Companies (Auditors' Report) Order 2016 ("the Order")issued by the Central Government in terms of section 143(11) of the Act we give in the"Annexure A" a statement on the matters specified in paragraphs 3 and 4 of theOrder to the extent applicable.
2. (A) As required by Section 143(3) of the Act we report that:
a) We have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purposes of our audit.
b) 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 standalone balance sheet the standalone statement of profit and loss (includingother comprehensive income) the standalone statement of changes in equity and thestandalone statement of cash flows dealt with by this Report are in agreement with thebooks of account.
d) In our opinion the aforesaid standalone financial statements comply with the Ind ASspecified under section 133 of the Act.
e) On the basis of the written representations received from the directors as on March31 2021 taken on record by the Board of Directors none of the directors is disqualifiedas on March 31 2021 from being appointed as a director in terms of Section 164(2) of theAct.
f) With respect to the adequacy of the internal financial controls with reference tofinancial statements of the Company and the operating effectiveness of such controlsrefer to our separate Report in "Annexure B".
(B) With respect to the other matters to be included in the Auditors' Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand to the best of our information and according to the explanations given to us:
a) The Company has disclosed the impact of pending litigations as at March 31 2021 onits financial position in its standalone financial statements - Refer Note no. 43 to thestandalone financial statements;
b) The Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses;
c) There has been no delay in transferring amounts required to be transferred to theInvestor Education and Protection Fund by the Company; and
d) The disclosures in the standalone financial statements regarding holdings as well asdealings in specified bank notes during the period from November 8 2016 to December 302016 have not been made in these financial statements since they do not pertain to thefinancial year ended March 31 2021.
(C) With respect to the matter to be included in the Auditors' Report under section197(16): In our opinion and according to the information and explanations given to us theremuneration paid by the company to its directors during the current year is in accordancewith the provisions of Section 197 of the Act. The remuneration paid to any director isnot in excess of the limit laid down under Section 197 of the Act. The Ministry ofCorporate Affairs has not prescribed other details under Section 197(16) which arerequired to be commented upon by us.
ANNEXURE A TO THE INDEPENDENT AUDITORS' REPORT - MARCH 31 2021
(Referred to in our report of even date)
i. (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.
(b) The Company has a regular programme of physical verification of its fixed assets bywhich all fixed assets are verified in a phased manner over a period of three years. Inour opinion this periodicity of physical verification is reasonable having regard to thesize of the Company and the nature of its assets. Pursuant to the programme certain fixedassets were physically verified by the management during the year. In our opinion andaccording to information and explanations given to us no material discrepancies werenoticed on such verification.
(c) In our opinion and according to the information and explanations given to us and onthe basis of our examination of the registered sale deeds and Court orders approvingschemes of arrangements/ amalgamations provided to us by the Company the title deeds ofimmovable properties are held in the name of the Company except for the following whichare not held in the name of the Company:
|Sr. No. ||Total no. of cases ||Type of Assets ||Gross Block as at March 31 2021 ||Net Block as at March 31 2021 ||Remarks |
|1 ||2 ||Freehold land ||302600000 ||302600000 ||Received on merger of the erstwhile Companies. Company is in the process of transferring the title deeds. |
|2 ||2 ||Building ||184034.373 ||143581443 ||Received on merger of the erstwhile Companies. Company is in the process of transferring the title deeds |
ii. The inventory has been physically verified by the management at reasonableintervals during the year. In our opinion the frequency of such verification isreasonable. The discrepancies noticed on verification between the physical stocks and thebook records were not material.
iii. In our opinion and according to the information and explanations given to us theCompany has not granted any loans secured or unsecured to companies firms limitedliability partnerships or other parties covered in the register maintained under Section189 of the Act. Accordingly paragraph 3(iii) of the Order is not applicable to theCompany.
iv. In our opinion and according to the information and explanations given to us theCompany has complied with the provisions of Sections 185 and 186 of the Act with respectto the loans given investments made guarantees given and security provided.
v. In our opinion and according to the information and explanations given to us theCompany has not accepted any deposits from the public during the year in terms of theprovisions of Sections 73 to 76 or any other relevant provisions of the Act and the rulesframed there under. Accordingly paragraph 3(v) of the Order is not applicable to theCompany.
vi. In our opinion and according to the information and explanations given to ushaving regard to the nature of the Company's business/activities paragraph 3(vi) of theOrder is not applicable to the Company.
vii. (a) According to the information and explanations given to us and on the basis ofour examination of the records of the Company amounts deducted/accrued in the books ofaccount in respect of undisputed statutory dues including Goods and services taxProvident fund Employees' state insurance Income-tax Sales-tax Luxury tax Value addedtax Duty of customs Cess and other material statutory dues have generally been regularlydeposited during the year by the Company with the appropriate authorities. As explained tous the Company did not have any dues on account of Duty of excise. According to theinformation and explanations given to us no undisputed amounts payable in respect ofGoods and services tax Provident fund Employees' state insurance Income-tax Sales-taxLuxury tax Value added tax Duty of customs Cess and other material statutory dues werein arrears as at March 31 2021 for a period of more than six months from the date theybecame payable.
(b) According to the information and explanations given to us and based on ourexamination of the records of the Company there are no dues of Goods and services taxSales tax Value added tax and Duty of customs which have not been deposited on account ofany dispute. The following disputed dues in respect of Income-tax Luxury tax and Servicetax have not been deposited by the Company with the appropriate authorities:
|Name of the Statute ||Nature of the Dues ||Forum where dispute is pending ||Period to which amount relates ||Amount* (Rs. in Lakhs) |
|Income Tax Act 1961 ||Income tax Interest and Penalty ||High Court ||AY 1999 to 2011 ||31251 |
|Income Tax Act 1961 ||Income tax Interest and Penalty ||ITAT ||AY 2010 AY 2012 to 2016 ||42212 |
|Income Tax Act 1961 ||Income tax Interest and Penalty ||Commissioner of Income Tax- Appeals ||AY 2017 ||9929 |
|Finance Act 1994 ||Service Tax Interest and Penalty ||Appellate Authorities ||FY 2007 to 2016 ||3926 |
|Tamil Nadu Luxury Tax Act ||Luxury Tax ||Deputy Commissioner ||FY 2003 to 2006 ||64 |
| || ||Commissioner- Appeals ||FY 2011 to 2012 ||17 |
|Kerala Luxury Tax Act ||Luxury Tax ||Intelligence officer- Debikulam ||FY 2009 to 2011 ||659 |
| || ||Appeallate Commissioner ||FY 2010 to 2016 ||3270 |
| || ||High Court ||FY 2012 to 2015 ||1706 |
|Uttarakhand Luxury Tax Act ||Luxury Tax ||Appeallate Commissioner ||FY 2013 ||34 |
|Maharashtra Luxury Tax Act ||Luxury Tax ||Commissioner of Commercial taxes ||FY 2013 to 2014 ||42 |
|Rajasthan Luxury Tax Act ||Luxury Tax ||High Court ||FY 2011 to 2017 ||1763 |
|Rajasthan Value Added Tax Act ||Value Added Tax ||High Court ||FY 2015 to 2017 ||15 |
|Kerala Value Added Tax Act ||Value Added Tax ||Assistant Commissioner ||FY 2015 to 2017 ||23 |
* net of amounts paid under protest.
viii. According to the information and explanations given to us and based on therecords of the Company the Company has not defaulted in the repayment of loans orborrowings to banks. The Company did not have any outstanding loans or borrowing fromfinancial institutions or government or debenture holders during the year.
ix. According to the information and explanations given to us the Company did notraise money by way of initial public offer or further public offer (including debtinstruments) or term loans during the year. Accordingly paragraph 3(ix) of the Order isnot applicable to the Company.
x. According to the information and explanations given to us no fraud by the Companyand no material fraud on the Company by its officers or employees has been noticed orreported during the course of our audit.
xi. According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has paid/provided for managerialremuneration in accordance with the requisite approvals mandated by the provisions ofSection 197 read with Schedule V to the Act.
xii. In our opinion and according to the information and explanations given to us theCompany is not a nidhi company. Accordingly paragraph 3(xii) of the Order is notapplicable to the Company.
xiii. According to the information and explanations given to us and based on ourexamination of the records of the Company transactions with the related parties are incompliance with Sections 177 and 188 of the Act where applicable and details of suchtransactions have been disclosed in the Standalone Ind AS financial statements as requiredby the applicable accounting standards.
xiv. According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not made any preferentialallotment or private placement of shares or fully or partly convertible debentures duringthe year. Accordingly paragraph 3(xiv) of the Order is not applicable to the Company.
xv. According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not entered into non-cashtransactions with directors or persons connected with them. Accordingly paragraph 3(xv)of the Order is not applicable to the Company.
xvi. According to information and explanations given to us the Company is not requiredto be registered under section 45-IA of the Reserve Bank of India Act 1934. Accordinglyparagraph 3(xvi) of the Order is not applicable to the Company.
ANNEXURE B TO THE INDEPENDENT AUDITORS' REPORT ON THE STANDALONE FINANCIAL STATEMENTSOF MAHINDRA HOLIDAYS & RESORTS INDIA LIMITED FOR THE YEAR ENDED MARCH 31 2021
Report on the internal financial controls with reference to the aforesaid standalonefinancial statements under Clause (i) of Sub-section 3 of Section 143 of the CompaniesAct 2013 (Referred to in paragraph 2 (A) (f) under Report on Other Legal andRegulatory Requirements' section of our report of even date) Opinion
We have audited the internal financial controls with reference to financial statementsof Mahindra Holidays & Resorts India Limited ("the Company") as of March 312021 in conjunction with our audit of the standalone financial statements of the Companyfor the year ended on that date.
In our opinion the Company has in all material respects adequate internal financialcontrols with reference to financial statements and such internal financial controls wereoperating effectively as at March 31 2021 based on the internal financial controls withreference to financial statements criteria established by the Company considering theessential components of internal control stated in the Guidance Note on Audit of InternalFinancial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India (the "Guidance Note").
Management's Responsibility for Internal Financial Controls
The Company's management and the Board of Directors are responsible for establishingand maintaining internal financial controls based on the internal financial controls withreference to financial statements criteria established by the Company considering theessential components of internal control stated in the Guidance Note. 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 (hereinafter referred to as"the Act").
Our responsibility is to express an opinion on the Company's internal financialcontrols with reference to financial statements based on our audit. We conducted our auditin accordance with the Guidance Note and the Standards on Auditing prescribed undersection 143(10) of the Act to the extent applicable to an audit of internal financialcontrols with reference to financial statements. Those Standards and the Guidance Noterequire that we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether adequate internal financial controls with reference tofinancial statements were established and maintained and whether such controls operatedeffectively in all material respects. Our audit involves performing procedures to obtainaudit evidence about the adequacy of the internal financial controls with reference tofinancial statements and their operating effectiveness.
Our audit of internal financial controls with reference to financial statementsincluded obtaining an understanding of such internal financial controls assessing therisk that a material weakness exists and testing and evaluating the design and operatingeffectiveness of internal control based on the assessed risk. The procedures selecteddepend on the auditors' judgement including the assessment of the risks of materialmisstatement of the standalone financial statements whether due to fraud or error. Webelieve that the audit evidence we have obtained is sufficient and appropriate to providea basis for our audit opinion on the Company's internal financial controls with referenceto financial statements.
Meaning of Internal Financial controls with Reference to Financial Statements
A company's internal financial controls with reference to financial statements 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 controlswith reference to financial statements include those policies and 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 financial statements in accordance with generally accepted accountingprinciples and that receipts and expenditures of the company are being made only inaccordance with authorisations of management and directors of the company; and
(3) provide reasonable assurance regarding prevention or timely detection ofunauthorised acquisition use or disposition of the company's assets that could have amaterial effect on the financial statements.
Inherent Limitations of Internal Financial controls with Reference to FinancialStatements
Because of the inherent limitations of internal financial controls with reference tofinancial statements including the possibility of collusion or improper managementoverride of controls material misstatements due to error or fraud may occur and not bedetected. Also projections of any evaluation of the internal financial controls withreference to financial statements to future periods are subject to the risk that theinternal financial controls with reference to financial statements may become inadequatebecause of changes in conditions or that the degree of compliance with the policies orprocedures may deteriorate.
|For B S R & Co LLP |
|Chartered Accountants |
|Firm's Registration No: 101248W/W-100022 |
|Koosai Lehery |
|Membership No. 112399 |
|UDIN: 21112399AAAAAV5582 |
|Mumbai May 3 2021 |