THE MEMBERS OF
NALIN LEASE FINANCE LIMITED Himatnagar CIN -L65910GJ1990PLC014516
Report on the Audit of the Standalone Financial Statements
We have audited the standalone financial statements of NALIN LEASE FINANCE LIMITED("the Company") which comprise the Balance Sheet as at 31st March2020 and the Statement of Profit and Loss Statement of Changes in Equity and Statementof Cash Flows for the year then ended and notes to the Financial Statements including 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 Ind AS financial statements give the informationrequired by the Companies Act 2013 ("the Act") in the manner so required andgive a true and fair view in conformity with the Indian Accounting Standards prescribedunder section 133 of the Act read with the Companies (Indian Accounting Standards) Rules2015 as amended ("Ind AS") and other accounting principles generally acceptedin India of the state of affairs of the Company as at March 31 2020 and its profit total comprehensive income changes in equity and its cash flows for the year ended onthat date.
Basis for Opinion
In our opinion the aforesaid Ind AS financial statements comply with the IndianAccounting Standards prescribed under section 133 of the Act read with rule 3 of theCompanies (Indian Accounting Standards) Rules 2015 and Companies (Indian AccountingStandards) Amendment Rules 2016;
We conducted our audit in accordance with the Standards on Auditing (SAs) specifiedunder 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 theFinancial 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 (ICAI) together with the ethical requirements that are relevant to our audit of thefinancial statements under the provisions of the Companies Act 2013 and the Rulesthereunder and we have fulfilled our other ethical responsibilities in accordance withthese requirements and the ICAI's Code of Ethics. We believe that the audit evidence wehave obtained is sufficient and appropriate to provide a basis for our opinion.
Emphasis of Matter
We draw attention to note 2.3 to the standalone Ind AS financial statements whichdescribes the uncertainty caused by Novel Coronavirus (COVID-19) pandemic with respect tothe company's estimates of impairment of loans to customers and that such estimates may beaffected by the severity and duration of the pandemic. Our opinion is not modified inrespect of this matter.
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.
|Key audit matters ||How our audit addressed the key audit matter |
|a) Transition to Ind AS accounting framework (as described in Note 43 of the Ind AS financial Statements) || |
|The company has adopted Ind AS from 1 April 2019 with an effective date of 1 April 2018 for such transition. For periods up to and including the year ended 31 March 2019 the Company had prepared and presented its financial statements in accordance with the erstwhile generally accepted accounting principles in India (Indian GAAP). To give effect of the transition to Ind AS these financial statements for the year ended 31 March 2020 together with the comparative financial information for the previous year ended 31 March 2019 and the transition date Balance Sheet as at 1 April 2018 have been prepared under Ind AS. ||Read the Ind AS impact assessment performed by the Management and the resultant changes made to the accounting policies considering the requirements of the new framework. |
|The transition has involved significant change in the Company's policies and processes for financial reporting including generation of supportable information and applying estimates to inter alia determine impact of Ind AS on accounting and disclosure requirements prescribed under extant Reserve Bank of India (RBI) directions. ||Evaluated the exemptions and exceptions allowed by Ind AS and applied by the Management in applying the first-time adoption principles of Ind AS 101 in respect of fair valuation of assets and liabilities existing as at transition date. |
|In view of the complexity involved Ind AS transition and the preparation of financial statements subsequent to the transition date have been areas of key focus in our audit. ||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. |
| ||Tested the disclosures prescribed under Ind AS. |
|b) Impairment of financial assets (expected credit losses) (as described in note 3.4 of the Ind AS financial statements) || |
|Ind AS 109 requires the Company to recognise impairment loss allowance towards its financial assets (designated at amortised cost) using the expected credit loss (ECL) approach. Such ECL allowance is required to be measured considering the guiding principles of Ind AS 109 including: ||We read and assessed the Company's accounting policies for impairment of financial assets and their compliance with Ind AS 109. |
|unbiased probability weighted outcome under various scenarios; ||We tested the criteria for staging of loans based on their past-due status to check compliance with requirement of Ind AS 109. Tested a sample of performing (stage 1) loans to assess whether any loss indicators were present requiring them to be classified under stage 2 or 3 and vice versa. |
|time value of money; || |
|impact arising from forward looking macro- economic factors and; || |
|availability of reasonable and supportable information without undue costs. || |
|Applying these principles involves significant estimation in various aspects such as: || |
|grouping of borrowers based on homogeneity by using appropriate statistical techniques; ||We evaluated the reasonableness of the Management estimates by understanding the process of ECL estimation and tested the controls around data extraction and validation. |
|staging of loans and estimation of behavioral life; ||Tested the ECL model including assumptions and underlying computation. |
|determining macro-economic factors impacting credit quality of receivables; ||Assessed the floor/minimum rates of provisioning applied by the Company for loan products with inadequate historical defaults. |
|estimation of losses for loan products with no/minimal historical defaults. ||Audited disclosures included in the Ind AS financial statements in respect of expected credit losses. |
|Considering the significance of such allowance to the overall financial statements and the degree of estimation involved in computation of expected credit losses this area is considered as a key audit matter. || |
Information Other than the Standalone Financial Statements and Auditor's
Report thereon (Other Information)
The Company's Board of Directors is responsible for the other information. The otherinformation comprises the information included in the Corporate Overview Board's ReportManagement Discussion and Analysis Report and Report on Corporate Governance in the AnnualReport of the Company for the financial year 2019-20 but does not include the standalonefinancial statements and our auditor's report thereon.
Our opinion on the financial statements does not cover the other information and we donot 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 financial statements or our knowledge obtained in theaudit or otherwise appears to be materially misstated. If based on the work we haveperformed we conclude that there is a material misstatement of this other information; weare required to report that fact. We have nothing to report in this regard.
Responsibilities of Management and those charged with governance for the Standalone IndAS Financial 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 financial statements that give a true and fair view of the financialposition financial performance changes in equity and cash flows of the Company inaccordance with the accounting principles generally accepted in India including theaccounting Standards 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 wereoperating effectively for ensuring the accuracy and completeness of the accountingrecords relevant to the preparation and presentation of the financial statement that givea true and fair view and are free from material misstatement whether due to fraud orerror.
In preparing the financial statements management is responsible for assessing the
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 managementeither intends to liquidate the Company or to cease operations or has no realisticalternative but to do so.
Those charged with governance are also responsible for overseeing the Company'sfinancial reporting process.
Auditor's Responsibilities for the Audit of the Standalone Ind AS 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 a part of an audit in accordance with SAs we exercise professional judgment andmaintain professional skepticism throughout the audit.
(a) Identify and assess the risks of material misstatement of the financial statementswhether due to fraud or error design and perform audit procedures responsive to thoserisks and obtain audit evidence that is sufficient and appropriate to provide a basis forour opinion. The risk of not detecting a material misstatement resulting from fraud ishigher than for one resulting from error as fraud may involve collusion forgeryintentional omissions misrepresentations or the override of internal control.
(b) 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.
(c) Evaluate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures made by management.
(d) 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 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 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 Company to cease to continue asa going concern.
(e) Evaluate the overall presentation structure and content of the financialstatements including the disclosures and whether the financial statements represent theunderlying transactions and events in a manner that achieves fair presentation.
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 financial statements of thecurrent period and are therefore the key audit matters. We describe these matters in ourauditor's report unless law or regulation precludes public disclosure about the matter orwhen 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
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 Companies Act 2013 we give in the "Annexure - A" a statement onthe matters specified in paragraphs 3 and 4 of the Order to the extent applicable.
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 Balance Sheet the Statement of Profit and Loss and the Cash Flow Statementdealt with by this Report are in agreement with the books of account.
(d) In our opinion the aforesaid standalone financial statements comply with theAccounting Standards specified under Section 133 of the Act read with Companies (IndianAccounting Standards) Rules 2015 as amended Except Ind AS-19 on retirement benefits asprovision for gratuity is not based on actuarial valuation but on other rational basiswhile provision for other benefits such as leave encashment has not been made the effectof the same cannot be quantified to that extent profit for the year and balance of Profit& Loss account is overstated.
(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 termsof Section 164 (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) 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 does not have any pending litigations which would impact its financialposition in its Standalone Ind AS financial statements;
(ii) The Company did not have any long-term contracts including derivative contractsfor which there were any material foreseeable losses;
(iii) There were no amounts which were required to be transferred to the InvestorEducation and Protection Fund by the company.
Annexure-A to Independent Auditors' Report
Annexure A referred to in paragraph (1) under the heading Report on other legaland regulatory requirements' of our report of even date
(1) (a)The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.
(b) Fixed assets have been physically verified by the Management during the year and nomaterial discrepancies were identified on such verification.
(c) According to the information and explanations given by the Management the titledeeds of immovable properties included in property plant and equipment/fixed assets areheld in the name of the Company.
(2) The Company's business does not involve inventories except stationery &
Adhesive Stamp and accordingly the requirements under clause 3(ii) of the Order arenot applicable to the Company and hence not commented upon.
(3) The Company has not granted any loans secured or unsecured to companies firms orother parties covered in the register maintained under Section 189 of the Act.
(4) In our opinion and according to the information and explanations given to us thereare no loans investments guarantees and securities granted in respect of whichprovisions of section 185 and 186 of the Act are applicable and hence not commented upon.
(5) In our opinion and according to the information and explanations given to us theCompany being a non-banking financial company registered with the Reserve Bank of Indiathe provisions of sections 73 to 76 or any other relevant provisions of the Act and theCompanies (Acceptance of Deposits) Rules 2014 as amended with regard to the depositsaccepted are not applicable to the Company. We are informed by the Management that noorder has been passed by the Company Law Board National Company Law Tribunal or ReserveBank of India or any Court or any other Tribunal on the Company in respect of theaforesaid deposits.
(6) To the best of our knowledge and as explained the Central Government has notspecified the maintenance of cost records under section 148(1) of the Act for theservices of the Company.
(7) (a)Undisputed statutory dues including provident fund employees' state insuranceincome tax goods and service tax duty of custom duty of excise value added tax cessand other statutory dues applicable to the Company have generally been regularly depositedwith the appropriate authorities.
(b) According to the information and explanations given to us no undisputed amountspayable in respect of provident fund employees' state insurance income tax goods andservice tax duty of custom duty of excise value added tax cess and other statutorydues applicable to the Company were outstanding at the year end for a period of morethan six months from the date they became payable.
(8) In our opinion and according to the information and explanations given by theManagement the Company has not defaulted in repayment of loans or borrowings to afinancial institution or bank or dues to debenture holders.
(9) According to the information and explanations given by the Management the Companyhas not raised any money by way of initial public offer or further public offer. Furthermonies raised by the Company by way of cash credit were applied for the purpose for whichthose were raised.
(10) Based upon the audit procedures performed for the purpose of reporting on the trueand fair view of the financial statements and according to the information andexplanations given by the Management we report that no fraud by the Company or nomaterial fraud on the Company by the officers and employees of the Company has beennoticed or reported during the year.
(11) According to the information and explanations given by the Management themanagerial remuneration has been paid/provided in accordance with the requisite approvalsmandated by the provisions of section 197 read with Schedule V to the Act.
(12) In our opinion the Company is not a nidhi company. Therefore the provisions ofclause 3(xii) of the Order are not applicable to the Company and hence not commented upon.
(13) According to the information and explanations given by the Managementtransactions with the related parties are in compliance with section 177 and 188 of theAct where applicable and the details have been disclosed in the notes to the financialstatements as required by the applicable accounting standards.
(14) According to the information and explanations given to us and on an overallexamination of the balance sheet the Company has not made any preferential allotment orprivate placement of shares or fully or partly convertible debentures during the year.
(15) According to the information and explanations given by the Management the Companyhas not entered into any non-cash transactions with directors or persons connected withhim as referred to in section 192 of the Act.
(16) According to the information and explanations given to us we report that theCompany has registered as required under section 45-IA of the Reserve Bank of India Act1934.
Annexure-B to Independent Auditors' Report
Annexure B referred to in paragraph 2(f) under the heading Report on other legaland regulatory requirements' of our report of even date. Report on Internal FinancialControls under clause (i) of sub-section 3 of section 143 of the Companies Act 2013 (theAct')
We have audited the internal financial controls over financial reporting of Nalin LeaseFinance Ltd. (the Company') as of 31 March 2020 in conjunction with our audit of thestandalone Ind AS 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. These responsibilities includethe design implementation and maintenance of adequate internal financial controls thatwere operating effectively for ensuring the orderly and efficient conduct of its businessincluding adherence to the Company's policies the safeguarding of its assets theprevention and detection of frauds and errors the accuracy and completeness of theaccounting records and the timely preparation of reliable financial information asrequired under the Act.
Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting with reference to these standalone Ind AS financialstatements based on our audit. We conducted our audit in accordance with the Guidance Noteon Audit of Internal Financial Controls Over Financial Reporting (the GuidanceNote') and the Standards on Auditing as specified under section 143(10) of the Act to theextent applicable to an audit of internal financial controls and both issued by theInstitute of Chartered Accountants of India. Those Standards and the Guidance Note requirethat we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether adequate internal financial controls over financialreporting with reference to these standalone Ind AS financial statements was establishedand maintained and if such controls operated effectively in all material respects. Ouraudit involves performing procedures to obtain audit evidence about the adequacy of theinternal financial controls over financial reporting with reference to these standaloneInd AS financial statements and their operating effectiveness. Our audit of internalfinancial controls over financial reporting included obtaining an understanding ofinternal financial controls over financial reporting with reference to these standaloneInd AS financial statements assessing the risk that a material weakness exists andtesting and evaluating the design and operating effectiveness of internal control based onthe assessed risk. The procedures selected depend on the auditor's judgment including theassessment of the risks of material misstatement of the financial statements whether dueto fraud or error. We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our audit opinion on the internal financial controlsover financial reporting with reference to these standalone Ind AS financial statements.
Meaning of internal financial controls over financial reporting with reference to thesestandalone Ind AS financial statements
A Company's internal financial control over financial reporting with reference to thesestandalone Ind AS financial statements is a process designed to provide reasonableassurance regarding the reliability of financial reporting and the preparation offinancial statements for external purposes in accordance with generally acceptedaccounting principles. A Company's internal financial control over financial reportingwith reference to these standalone Ind AS financial statements includes those policies andprocedures 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 over financial reporting withreference to these standalone Ind AS financial statements
Because of the inherent limitations of internal financial controls over financialreporting with reference to these standalone Ind AS financial statements including thepossibility of collusion or improper management override of controls materialmisstatements due to error or fraud may occur and not be detected. Also projections ofany evaluation of the internal financial controls over financial reporting with referenceto these standalone Ind AS financial statements to future periods are subject to the riskthat the internal financial control over financial reporting with reference to thesestandalone Ind AS financial statements may become inadequate because of changes inconditions or that the degree of compliance with the policies or procedures maydeteriorate.
In our opinion the Company has in all material respects an adequate internalfinancial controls over financial reporting with reference to these standalone Ind ASfinancial statements and such internal financial controls over financial reporting withreference to these standalone Ind AS financial statements were operating effectively as at31 March 2020 based on the internal control over financial reporting criteria establishedby the Company considering the essential components of internal control stated in theGuidance Note on Audit of Internal Financial Controls Over Financial Reporting issued bythe Institute of Chartered Accountants of India.