To The Unitholders of Mindspace Business Parks REIT
REPORT ON THE AUDIT OF STANDALONE FINANCIAL STATEMENTS
We have audited the accompanying standalone financial statements of Mindspace BusinessParks REIT (the "REIT") which comprise the Standalone Balance Sheet as at March31 2021 the Standalone Statement of Profit and Loss including Other ComprehensiveIncome the Standalone Statement of Cash Flows and the Standalone Statement of Changes inUnitholders' Equity for the year then ended Standalone Statement of Net Assets at fairvalue as at March 31 2021 and Standalone Statement of Total Returns at fair value for theyear then ended Statement of Net Distributable Cash Flow for the year then ended and asummary 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 the aforesaid standalone financial statements give the information requiredby the Securities and Exchange Board of India (Real Estate Investment Trusts) Regulations2014 as amended from time to time including any guidelines and circulars issued thereunderread with SEBI Circular No. CIR/IMD/DF/146/2016 dated December 29 2016 (the "REITregulations") in the manner so required and give a true and fair view in conformitywith the Indian Accounting Standards as defined in Rule 2(1)(a) of the Companies (IndianAccounting Standards) Rules 2015 (as amended) to the extent not inconsistent with theREIT Regulations and other accounting principles generally accepted in India of the stateof affairs of the REIT as at March 31 2021 and its profit including other comprehensiveincome its cash flows its changes in unitholders' equity for the year ended March 312021 its net assets at fair value as at March 31 2021 total returns at fair value andthe net distributable cash flows of the REIT for the year ended on that date and otherfinancial information of the REIT.
Basis for Opinion
We conducted our audit of the standalone financial statements in accordance with theStandards on Auditing ("SA") issued by Institute of Chartered Accountants ofIndia (the "ICAI"). Our responsibilities under those Standards are furtherdescribed in the Auditor's Responsibility for the Audit of the Standalone FinancialStatements' section of our report. We are independent of the REIT in accordance with theCode of Ethics issued by the ICAI and we have fulfilled our other ethical responsibilitiesin accordance with these requirements and the ICAI's Code of Ethics. We believe that theaudit evidence obtained by us is sufficient and appropriate to provide a basis for ouraudit opinion on the standalone financial statements.
Emphasis of matter
We draw attention to note 2 which describes the Basis of preparation of standalonefinancial statements and note 12 which describes the presentation of "UnitCapital" as "Equity" instead of compound financial instrument to complywith the REIT Regulations. Our opinion is not modified in respect of this matter.
Key Audit Matter
Key audit matter is the matter that in our professional judgment was of mostsignificance in our audit of the standalone financial statements of the current period.
This matter was 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 this matter. We have determined the matter described below to be thekey audit matter to be communicated in our report.
|Key Audit Matter: ||Auditor's Response: |
|Fair Value of investments in special purpose vehicles (SPVs): ||Principal Audit Procedures Performed: |
|In accordance with REIT Regulations the REIT discloses Statement of Net Assets at Fair Value and Statement of Total ||Our audit procedures related to the forecasted market rent terminal capitalization rates and discount rate used to determine the fair value of investment properties included the following among others: |
|Returns at Fair Value which requires fair valuation of assets and liabilities. As at March 31 2021 the carrying value of total assets was Rs.177448 million out of which carrying value of investments in SPVs was Rs.153103 million representing 86% of carrying value of total asset. || We obtained the independent valuer's valuation reports to obtain an understanding of the source of information used by the independent valuer in determining these assumptions. |
|The fair value of investments in SPVs is primarily determined basis the fair value of the underlying investment properties as at March 31 2021. || We tested the reasonableness of inputs shared by management with the independent valuer by comparing it to source information used in preparing the inputs. |
|The fair value of investment properties is determined by an independent valuer using discounted cash flow method and mix of market approach and discounted cash flow method as applicable. || We evaluated the reasonableness of management's forecasted market rent by comparing it with sample of lease agreements for market rentals and contractual lease escalations. |
|While there are several assumptions that are required to determine the fair value of investment properties; assumptions with the highest degree of estimate subjectivity and impact on fair values are forecasted market rent terminal capitalization rate and discount rate. || With the assistance of our fair valuation specialist we evaluated the reasonableness of forecasted market rent terminal capitalization rates and discount rate by comparing it with market information such as recent market transactions for comparable properties market surveys by property consultants and broker quotes as applicable. |
|Auditing these assumptions required a high degree of auditor judgement as the estimates made by the independent valuer contains significant measurement uncertainty. || |
|Refer Statement of Net assets at fair value and Statement of total returns at fair value and note 4 Investments in the standalone financial statements. || |
Information Other than the Financial Statements and Auditor's Report Thereon
K. Raheja Corp Investment Manager LLP (the Investment Manager') acting inits capacity as an Investment Manager of REIT is responsible for the other information.The other information comprises the information included in the Annual Report but doesnot include the standalone financial statements consolidated financial statements and ourauditor's report thereon.
Our opinion on the standalone financial statements does not cover the otherinformation and we do not express any form of assurance conclusion thereon.
In connection with our audit of the standalone financial statements ourresponsibility is to read the other information and in doing so consider whether theother information is materially inconsistent with the standalone financial statements orour knowledge obtained during the course of our audit or otherwise appears to bematerially 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 Governing Board of the Investment Manager (the "Management") isresponsible for the preparation of these standalone financial statements that give a trueand fair view of the financial position financial performance including othercomprehensive income cash flows changes in unitholders' equity net assets at fairvalue total returns at fair value and the net distributable cash flows of the REIT inaccordance with the REIT Regulations the Indian Accounting Standards as defined in Rule2(1)(a) of the Companies (Indian Accounting Standards) Rules 2015 (as amended) and otheraccounting principles generally accepted in India to the extent not inconsistent withREIT Regulations. This responsibility also includes maintenance of adequate accountingrecords for safeguarding the assets of the REIT and for preventing and detecting fraudsand other irregularities; selection and application of appropriate accounting policies;making judgments and estimates that are reasonable and prudent; and design implementationand maintenance of adequate internal financial controls that were operating effectivelyfor ensuring the accuracy and completeness of the accounting records relevant to thepreparation and presentation of the standalone financial statement that give a true andfair view and are free from material misstatement whether due to fraud or error.
In preparing the standalone financial statements the Governing Board of InvestmentManager is responsible for assessing the REIT's ability to continue as a going concerndisclosing as applicable matters related to going concern and using the going concernbasis of accounting unless the Management either intends to liquidate the REIT or to ceaseoperations or has no realistic alternative but to do so.
The Management is also responsible for overseeing the financial reporting process ofREIT.
Auditor's Responsibility 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 auditor's 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 financial control relevant to the audit inorder to design audit procedures that are appropriate in the circumstances but not forthe purpose of expressing an opinion on the effectiveness of the REIT's internal control.
Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures made by the 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 REIT'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 standalone 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 REIT to cease tocontinue 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.
Obtain sufficient appropriate audit evidence regarding the Standalone financialstatements of the REIT to express an opinion on the standalone financial statements.
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 standalone financial statements may be influenced. Weconsider quantitative materiality and qualitative factors in (i) planning the scope of ouraudit work and in evaluating the results of our work; and (ii) to evaluate the effect ofany identified 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 REIT regulations we report that:
a) We have obtained all the information and explanations which to the best of ourknowledge and belief were necessary for the purposes of our audit.
b) The Standalone Balance Sheet the Standalone Statement of Profit and Loss includingOther Comprehensive Income the Standalone Statement of Cash Flows the StandaloneStatement of Changes in Unitholders' Equity and Statement of Net Distributable Cashflowsdealt with by this Report are in agreement with the relevant books of account of the REIT.
c) In our opinion the aforesaid standalone financial statements comply with the IndianAccounting Standards as defined in Rule 2(1)(a) of the Companies (Indian AccountingStandards) Rules 2015 (as amended) to the extent not inconsistent with REIT Regulationsand other accounting principles generally accepted in India.
for Deloitte Haskins & Sells LLP
(Firm's Reg. No. 117366W/W-100018)