To the Members of Nila Infrastructures Limited
Report on the Audit of the Standalone Financial Statements
We have audited the standalone financial statements of Nila Infrastructures Limited("the Company") which comprise the standalone balance sheet as at 31 March2020 and the standalone statement of profit and loss (including other comprehensiveincome) standalone statement of changes in equity and standalone statement of cash flowsfor the year then ended and notes to the standalone financial statements including asummary of the significant accounting policies and other explanatory information (hereinafter referred to as " the standalone financials statements").
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 31 March 2020 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 Auditor's Responsibilities for the Audit of the Standalone FinancialStatements section of our report. We are independent of the Company in accordance with theCode of Ethics issued by the Institute of Chartered Accountants of India together with theethical requirements that are relevant to our audit of the standalone financial statementsunder the provisions of the Act and the Rules thereunder and we have fulfilled our otherethical responsibilities in accordance with these requirements and the Code of Ethics. Webelieve that the audit evidence we have obtained is sufficient and appropriate to providea 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 Matter Recognition of contract revenue and margins:
|The key audit matter ||How the matter was addressed in our audit |
|Revenue from construction projects represents significant portion of the revenue from operations of the Company. ||Our procedures included the following: |
|We identified recognition of contract revenue and margins as a key audit matter because the estimation of the contract revenue and total cost to complete the contract is inherently subjective complex and requires significant management judgment. The same may get subsequently changed due to change in prevailing circumstances contract variations and changes to key assumptions and could result in significant variance in the revenue and profit or loss from a contract for the reporting period. || Obtained an understanding of management's process for analysing long term contracts the risk associated with the contract and any key judgments. |
| || Evaluating the design and implementation of relevant controls over contract revenue and cost estimation process through a combination of procedures involving inquiry observations and inspection of evidence. |
|Refer note 3 (g) to the standalone financial statements on accounting policy for revenue recognition. || We selected a sample of contracts to test using a risk based criteria which included individual contracts with: |
| ||- significant revenue recognised during the year; |
| ||- significant contract asset balances held at the year-end; or |
| ||- low profit margins. |
| || For the sample contracts selected as above verified underlying documents such as original contract and its amendments key contract terms and milestones for verifying the estimation of contract revenue and costs and /or any change in such estimation. |
| || Evaluating retrospective results for contracts completed during the current year to ensure there is no management bias in estimated contract revenue and costs. |
| || Involved internal specialist to evaluate adequacy of specific key assumptions considered by management in determining contract revenue. |
| || Considered the adequacy of the disclosures in note 37 to the standalone financial statements. |
|Recoverability of carrying value of loans and investments in subsidiary joint ventures and associate: || |
|The assessment of recoverable value of the Company's investment in and loans receivable from subsidiary joint ventures and associate involves significant judgement. These include assumptions such as discount rates future business plan recoverability of its receivables and growth rate. || Tested operating effectiveness of controls over the impairment analysis performed by the management. |
| || Evaluated net worth and past performance of the Company to whom loans were given or investment made. |
|We focused on this area as a key audit matter due to judgements involved in forecasting future cash flows and the selection of assumptions. || Challenged the significant assumptions and judgements used in impairment analysis such as forecast revenue margins terminal growth and discount rates especially in light of the existing economic situation due to COVID-19 |
|Refer note 7 and 38 to the standalone Financial Statements. || |
| || Involved internal specialist to evaluate adequacy of specific key assumptions considered by management in determining the recoverable value of its loans and investments. |
| || Performing sensitivity analysis on key assumptions including discount rates and estimated future growth. |
| || Evaluated accuracy of disclosure in the financial statements. |
Information Other than the Standalone Financial Statements and Auditors' Report Thereon
The Company's management and Board of Directors are responsible for the otherinformation. The other information comprises the information included in the Director'report Corporate Governance Report and management discussion and Analysis included inthe Company's annual report but does not include the financial statements and ourauditors' report thereon.
Our opinion on the standalone financial statements does not cover the other informationand we do not express any form of assurance conclusion thereon.
In connection with our audit of the standalone financial statements our responsibilityis to read the other information and in doing so consider whether the other informationis materially inconsistent with the standalone financial statements or our knowledgeobtained 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 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.
Auditor's 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 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 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 company hasadequate internal financial controls with reference to financial statements in place andthe 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.
Auditor's Responsibilities for the Audit of the Standalone Financial Statements
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 auditor's 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 auditor's 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 "AnnexureA" a statement on the matters specified in paragraphs 3 and 4 of the Order to theextent applicable.
(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 book.
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 31March 2020 taken on record by the Board of Directors none of the directors isdisqualified as on 31 March 2020 from being appointed as a director in terms of Section164(2) of the Act.
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:
i. The Company does not have any pending litigations which would impact its financialposition.
ii. The Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses.
iii. There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company.
iv. The disclosures in the standalone financial statements regarding holdings as wellas dealings in specified bank notes during the period from 8 November 2016 to 30 December2016 have not been made in these financial statements since they do not pertain to thefinancial year ended 31 March 2020.
(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.
To the Independent Auditor's Report - 31 March 2020
(Referred to in our report of even date)
With reference to the "Annexure A" referred to in the Independent Auditor'sReport to the members of the Company on the standalone financial statements for the yearended 31 March 2020 we report the following:
(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 annually. In our opinion this periodicity of physicalverification is reasonable having regard to the size of the Company and the nature of itsassets. In accordance with this programme fixed assets were physically verified by themanagement during the year. According to the information and explanations given to us nomaterial discrepancies were noticed on such verification.
(c) According to the information and explanations given to us and the records examinedby us including registered titled deeds we report that the title deeds comprising ofall of immovable properties of land and buildings which are freehold are held in the nameof the Company as at Balance sheet date.
(ii) Inventories have been physically verified by the management during the year. Inour opinion the frequency of such verification is reasonable. The discrepancies noticedon verification between the physical stocks and the book records were not material andhave been properly dealt with in the books of account.
(iii) The company has granted unsecured loans to companies and limited liabilitypartnership firm covered in the register maintained under Section 189 of the CompaniesAct 2013 ('the Act'). The Company has not granted any loans secured or unsecured tofirms or parties covered in the register required to be maintained under Section 189 ofthe Act.
(a) According to the information and explanations given to us and based on the auditprocedures conducted by us we are of the opinion that rate of interest and other termsand conditions of aforesaid loans granted by the Company are not prima facie prejudicialto the interest of Company.
(b) According to the information and explanations given to us and based on the auditprocedures conducted by us the aforesaid loans granted by the Company and interestpayable thereon are repayable as stipulated. The borrowers have been regular in payment ofprincipal and interest as stipulated.
(c) There are no overdue amounts of more than 90 days in respect of aforesaid loansgranted by the Company.
(iv) In our opinion and according to the information and explanations given to us theCompany has not granted any loans or provided any guarantees or security to the partiescovered under Section 185 of the Act during the year. Accordingly compliance underSection 185 of the Act is not applicable to the Company. According to the information andexplanations given to us the Company is engaged in the business of providinginfrastructural facilities and accordingly the provisions of Section 186 (exceptsubsection (1) of Section 186) of the Act are not applicable to the Company. In ouropinion and according to the information and explanations given to us the Company hasmade investment referred in Section 186(1) of the Act and have complied with theprovisions of Section 186 of the Act.
(v) In our opinion and according to the information and explanations given to us theCompany has not accepted any deposit from public as per the directives issued by theReserve Bank of India and the provisions of Sections 73 to 76 or any other relevantprovisions of the Act and the rules framed thereunder. Accordingly paragraph 3 (v) of theOrder is not applicable to the Company.
(vi) We have broadly reviewed the cost records maintained by the Company pursuant tothe rules prescribed by the Central Government for the maintenance of cost records underSection 148(1) of the Act and are of the opinion that prima facie the prescribed accountsand records have been made and maintained. However we have not made a detailedexamination of the cost records with a view to determine whether they are accurate orcomplete.
(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 Provident fund Employees' StateInsurance Income-tax Cess and other material statutory dues have been generallyregularly depositedduring the year by the Company with the appropriate authorities thoughthere have been slight delays in a few cases. As explained to us the Company did not haveany dues on account of Wealth Tax Sales-tax Service-tax Duty of Customs Duty of exciseand Value added tax during the year.
There are no undisputed amounts payable in respect of Provident fund Professional taxIncome-tax Duty of customs Duty of excise Goods and service tax and other materialstatutory dues were in arrears as at 31 March 2020 for a period of more than six monthsfrom the date they became payable. Further as explained in note 35(b) to the standalonefinancial statements the Company is currently unable to determine the extent of arrearsof such provident fund due as at 31 March 2020 for a period of more than six months fromthe date they become payable.
(b) According to the information and explanations given to us there are no dues ofIncome-tax Goods and Service tax and Cess as at 31 March 2020 which have not beendeposited with the appropriate authorities on account of any dispute.
(viii) In our opinion and according to the information and explanations given to usthe Company has not defaulted in repayment of loans and borrowings to banks and financialinstitutions. The Company did not have any dues to government and debenture holders duringthe year.
(ix) According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not raised any money by way ofinitial public offer or further public offer (including debt instruments) during the year.In our opinion and according to the information and explanations given to us the termloans taken by the Company were applied for the purpose for which they were raised.
(x) During the course of our examination of the books and records of the Companycarried out in accordance with the generally accepted auditing practices in India andaccording to the information
and explanations given to us we have neither come across any instance of materialfraud by the Company or on the Company by its officers or employees noticed or reportedduring the year nor have we been informed of any such case by the management.
(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 as prescribed under Section 406 of the Act. Accordinglyparagraph 3 (xii) of the Order is not applicable 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. The details of suchrelated party transactions have been disclosed in the standalone financial statements asrequired by the applicable Indian 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 any non-cashtransactions with directors or persons connected with them. Accordingly paragraph 3 (xv)of the Order is not applicable to the Company.
(xvi) In our opinion and according to the information and explanations given to us theCompany is not required to be registered under Section 45-IA of the Reserve Bank of IndiaAct 1934. Accordingly paragraph 3 (xvi) of the Order is not applicable to the Company.
To the Independent Auditor's Report - 31 March 2020
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 1 (A) (f) under 'Report on Other Legal and RegulatoryRequirements' section of our report of even date)
We have audited the internal financial controls with reference to standalone financialstatements of Nila Infrastructures Limited ("the Company") as of 31 March 2020in conjunction with our audit of the standalone financial statements of the Company forthe 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 31 March 2020 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 specified under Section 143(10) of the Act to the extentapplicable to an audit of internal financial controls with reference to financialstatements. Those Standards and the Guidance Note require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetheradequate internal financial controls with reference to financial statements wereestablished and maintained and whether such controls operated effectively in all materialrespects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls with reference to financial statements and their operatingeffectiveness. Our audit of internal financial controls with reference to financialstatements included obtaining an understanding of such internal financial controlsassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditor's judgement including the assessment of the risks ofmaterial misstatement of the standalone financial statements whether due to fraud orerror.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's internal financial controls withreference to standalone financial statements.
Meaning of Internal Financial controls with Reference to Standalone FinancialStatements
A company's internal financial controls with reference to standalone financialstatements is a process designed to provide reasonable assurance regarding the reliabilityof financial reporting and the preparation of standalone financial statements for externalpurposes in accordance with generally accepted accounting principles. A company's internalfinancial controls with reference to standalone financial statements include thosepolicies and procedures that (1) pertain to the maintenance of records that in reasonabledetail accurately and fairly reflect the transactions and dispositions of the assets ofthe company; (2) provide reasonable assurance that transactions are recorded as necessaryto permit preparation of standalone financial statements in accordance with generallyaccepted accounting principles and that receipts and expenditures of the company arebeing made only in accordance with authorisations of management and directors of thecompany; 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 standalone financial statements.
Inherent Limitations of Internal Financial controls with Reference to StandaloneFinancial Statements
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.