The Members of
Mangal Credit & Fincorp Limited
Report on the Audit of the Standalone Financial Statements
We have audited the accompanying Standalone Financial Statements of M/S Mangal Credit & Fincorp Limited (the Company) which comprises the Balance Sheet as at March 31st 2019 the Statement of Profit and Loss the Statement of Cash Flows for the year then ended and notes to the financial statements including a summary of significant accounting policies and other explanatory information.
In our opinion and to the best of our information and according to the explanations given to us the aforesaid Standalone financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India and give;
a) true and fair view in case of the Balance Sheet of the state of affairs of the Company as at March 31 2019;
b) true balance of profit in case of Profit and Loss for the year ended on that date; and
c) true and fair view in case of the Cash Flow Statement for the year ended on that date.
Basis for Opinion
We conducted our audit in accordance with the Standards on Auditing specified under section 143(10) of the Companies Act 2013. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India together with the ethical requirements that are relevant to our audit of the financial statements under the provisions of the Companies Act 2013 and the Rules thereunder and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Emphasis of Matter
We draw attention to the following matters in the Notes to the financial statements:
Note No 20.1 to the Financial Statements stating the fact of non-provision of liability of Rs. 4075600/-arising on Income Tax Assessment for the A.Y. 2012-13 and A.Y. 2013-14 consequent upon search & seizure operations in the case of company on 01/10/2013.
Our opinion is not modified in respect of the above matters.
Key Audit Matters
Key audit matters are those matters that in our professional judgment were of most significance in our audit of financial statements of the current period. These matters are addressed in the context of our audit of the financial statements as a whole and in forming our opinion thereon and we do not provide a separate opinion on these matters. We have determined the matter described below to be the key audit matter to be communicated in our report.
|The key audit matter||Ow our audit addressed the key audit matter|
|Income Recognition Asset Classification (IRAC) and provisioning on loans & Advances and Investment as per the regulatory requirement|
|Our audit was focused on income recognition asset classification and provisioning pertaining to advances due to the materiality of the balances and associated impairment provisions.|
|Loans & Advances and Investment are the Largest class of assets forming 89.70% of the assets as on March 31 2019. Classification income recognition and loss provisioning on the same are based on objective parameters as prescribed by the regulations (Reserve Bank of India's Prudential norms and other guidelines0.||Our audit procedures included the assessment of controls over the approval disbursements and monitoring of loans and reveiewing the logic and assumptions used for compliance of the IRAC and provisioning norms and its operating effectiveness.|
|The management of the company exercise significant estimates and judgement to determine asset classification income recognition and provisioning for losses.||These included:|
| Evaluation of internal control system in adhering to the Relevant RBI guidelines regarding income recognition asset classification and provisioning pertaining to advances/ investment;|
| Evaluation of Controls over the timely recognition of nonperforming assets (NPA/NPI);|
| Operational existence and effectiveness of controls over provisioning calculation;|
| Overall controls on the loan approval disbursement and monitoring process in case of advances and controls over the purchase sale and hold decisions making system in case of investments|
| We tested all loans/investments to assess whether they had been identified as non-performing on a timely manner income recognized and provisioning made as per IRAC norms.|
| Verification of valuation classification provisioning and income recognition of investments by carrying our substantive test including arithmetic accuracy data accuracy and control over the financial reporting system.|
|Evaluation of uncertain tax positions|
|Our audit procedures mainly included:|
|The company has some uncertain tax positions including matters under dispute which involves significant judgment to determine the possible outcome of these disputes. (Reger Notes 32.1 to the Consolidated Financial Statements)|| Review of the management's judgment to understand the nature and status of legal disputes regulatory investigation and claims against banks not acknowledged as debt to determined whether or not as a provision should be recognized;|
| Review of legal opinions from their in house expert in this regard;|
| Independent checks to assess the adequacy of provisions and disclosure of contingent liability by comparing assumptions to historical data verification of claims settled and fresh demand during the year and in certain case representation from the management based on legal opinion.|
| Verification of these provisions and related disclosures of the contingent liability as per the RBI guidelines and policies of the Bank.|
Management's Responsibility For the Standalone Financial Statements
Management is responsible for the matters stated in Section 134(5) of the Companies Act 2013 (the Act) with respect to the preparation of these standalone financial statements that give a true and fair view of the financial position financial performance and cash flows of the Company in accordance with the accounting principles generally accepted in India including the Accounting Standards specified under Section 133 of the Act read with Rule 7 of the Companies (Accounts) Rules 2014. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the accuracy and completeness of the accounting records relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement whether due to fraud or error.
In preparing the financial statements management is responsible for assessing the Company's ability to continue as a going concern disclosing as applicable matters related to going concern and using the going concern basis of accounting unless the management either intends to liquidate the Company or to cease operations or has no realistic alternative but to do so.
Those board of directors are also responsible for overseeing the Company's financial reporting process.
Our objective are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement whether due to fraud or error and to issue an auditor's report that includes are opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if individually or in aggregate they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements
As part of an audit in accordance with SAs we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
- Identify and assess the risks of material misstatement of the standalone financial statements whether due to fraud or error design and perform audit procedures responsive to those risks and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error as fraud may involve collusion forgery intentional omissions misrepresentations or the override of internal control.
- Obtain an understanding of internal financial controls relevant to the audit in order to design 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 Company has adequate internal financial controls system in place and the operating effectiveness of such controls.
- Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
- Conclude on the appropriateness of management's use of the going concern basis of accounting and based on the audit evidence obtained whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists we are required to draw attention in our auditor's report to the related disclosures in the standalone 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'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 standalone financial statements including the disclosures and whether the standalone financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Materiality is the magnitude of misstatements in the standalone financial statements that individually or in aggregate makes it probable that the economic decisions of a reasonably knowledgeable user of the financial statements may be influenced. We consider quantitative materiality and qualitative factors in (i) planning the scope of our audit work and in evaluating the results of our work; and (ii) to evaluate the effect of any identified misstatements in the financial statements.
We communicate with those charged with governance regarding among other matters the planned scope and timing of the audit and significant audit findings including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence and where applicable related safeguards.
From the matters communicated with those charged with governance we determine those matters that were of most significance in the audit of the standalone financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when in extremely rare circumstances we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
Report on Other Legal and Regulatory Requirements.
1) As required by Companies (Auditor's Report) Order 2016 (The Order) as amended issued by Central Government of India in terms of Sub Section (11) of Section 143 of Companies Act 2013 we enclose in the Annexure A a statement of matters specified in paragraph 3 & 4 of the said order to the extent applicable.
2) 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 best of 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 the Company so far as it appears from our examination of those books.
(c) The Balance Sheet the Statement of Profit and Loss and the Cash Flow Statement dealt with by this Report are in agreement with the books of account.
(d) In our opinion the aforesaid standalone financial statements comply with the Accounting Standards specified under Section 133 of the Act read with Rule 7 of the Companies (Accounts) Rules 2014.
(e) On the basis of the written representations received from the directors as on 31st March 2019 taken on record by the Board of Directors none of the directors is disqualified as on 31st March 2019 from being appointed as a director in terms of Section 164 (2) of the Act.
(f) With respect to the adequacy of the internal financial controls over financial Reporting of the Company and the operating effectiveness of such controls Refer to our separate Report in Annexure B.
(g) With respect to the other matters to be included in the Auditor's Report in Accordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinion and 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 financial position in its financial statements in Note 20 to the financial statements.
(ii) The Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses.
(iii) There has been no delay in transferring amounts required to be transferred to the Investor Education and Protection Fund by the Company.
|FOR MGB & Co. LLP|
|FRN - 101169W/W-100035|
|Place: Mumbai ||PARTNER|
|Date : 29.05.2019||M. NO. - 078146|
Annexure to the Auditors' Report
The Annexure referred to in Independent Auditors' Report to the members of the Company on the standalone financial statements for the year ended 31 March 2019 we report that:
a. The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets.
b. The Company has a regular programme of physical verification of its fixed assets by which fixed assets are verified in a phased manner over a period of three years. In accordance with this programme certain fixed assets were verified during the year and no material discrepancies were noticed on such verification. In our opinion this periodicity of physical verification is reasonable having regard to the size of the company and the nature of its assets.
c. According to the information and explanations given to us and on the basis of examination of the records of the company the title deeds of immovable properties are held in the name of the Company.
2. The company is a NBFC Company primarily engaged in rendering loans services. Accordingly it does not hold any physical inventories. Thus paragraph 3(ii) of the order is not applicable to the Company.
3. The Company has granted loan to 8 body corporates covered in the register maintained under section 189 of the Companies Act 2013 ('the Act').
a. In our opinion the rate of interest and other terms and conditions on which the loans had been granted to the bodies corporate listed in the register maintained under Section 189 of the Act were not prima facie prejudicial to the interest of the Company.
b. In the case of the loans granted to the bodies corporate listed in the register maintained under section 189 of the Act the borrowers have been regular in the payment of the principal and interest as stipulated.
c. There are no overdue amounts in respect of the loan granted to a body corporate listed in the register maintained under section 189 of the Act.
4. In our opinion and according to the information and explanations given to us the Company has complied with the provisions of section 185 and 186 of the Act with respect to the loans and investments made.
5. The Company has not accepted any deposits from the public.
6. The Central Government has not prescribed the maintenance of cost records under Section 148(1) Act for any of the services rendered by the Company.
a. According to the information and explanations given to us and on the basis of our examination of the records of the Company amounts deducted/ accrued in the books of account in respect of undisputed statutory dues including provident fund income tax sales tax wealth tax service tax duty of customs value added tax cess and other material statutory dues have been regularly deposited during the year by the Company with the appropriate authorities. As explained to us the Company did not have any dues on account of employees' state insurance and duty of excise.
According to the information and explanations given to us no undisputed amounts payable in respect of provident fund income tax sales tax wealth tax service tax duty of customs value added tax cess goods and service tax and other material statutory dues were in arrears as at 31 March 2019 for a period of more than six months from the date they became payable.
b. According to the information and explanations given to us there are no material dues of duty of customs which have not been deposited with the appropriate authorities on account of any dispute. However according to information and explanations given to us the following dues of income tax sales tax duty of excise service tax and value added tax have not been deposited by the Company on account of disputes:
|Name of the statue||Nature of dues||Amount (in Rs.)||Period to which the amount relates||Forum where dispute is pending|
|Income Tax Act 1961||Income Tax & Interest||3078810||A.Y. 201415||CIT(A)|
|Income Tax Act 1961||Income Tax & Interest||996790||A.Y. 201314||CIT(A)|
8. According to the records of the company examined by us and the information and explanations given to us the company has not defaulted in repayment of dues to any financial institutions bank and Government or Debenture holder as at the balance sheet date.
9. Based on our audit procedures and according to the information given by the management the company has not raised any money by way of initial public offer or further public offer (including debt instruments) or taken any term loans during the year. Hence the clause 3 (ix) of the order is not applicable and hence not commented upon.
10. According to the information and explanations given to us no material fraud by the Company or on the Company by its officers or employees has been noticed or reported during the course of our audit.
11. According to the information and explanations given to us and based on our examination of the records of the Company the Company has paid/provided for managerial remuneration in accordance with the requisite approvals mandated by the provisions of section 197 read with Schedule V of the Act.
12. In our opinion and according to the information and explanations given to us the company is not a nidhi company. Accordingly paragraph 3(xii) of the order is not applicable.
13. According to the information and explanations given to us and based on our examination of the records of the company transactions with the related parties are in compliance with sections 177 and 188 of the act where applicable and details of such transactions have been disclosed in the financial statements as required by the applicable accounting standards.
14. Based on the audit procedures performed and the information and explanations given by the management the company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year under review. Accordingly the provisions of clause 3(xiv) of the order are not applicable to the company and hence not commented upon.
15. According to the information and explanations given to us and based on our examination of the records of the company the company has not entered into non-cash transactions with directors or persons connected with him. Accordingly paragraph 3(xv) of the order is not applicable.
16. The company is registered under section 45-IA of the Reserve Bank of India Act 1934.
|FOR MGB & Co. LLP|
|FRN - 101169W/W-100035|
|Date : 29.05.2019||M. NO. - 078146|