To the Members of
Nippon Life India Asset Management Limited
REPORT ON THE AUDIT OF THE STANDALONE IND AS FINANCIAL STATEMENTS
We have audited the accompanying standalone Ind AS financial statementsof Nippon Life India Asset Management Limited ("the Company") which comprisethe Balance sheet as at March 31 2021 the Statement of Profit and Loss including thestatement of Other Comprehensive Income the Cash Flow Statement and the Statement ofChanges in Equity for the year then ended and notes to the standalone Ind AS financialstatements including a summary of significant accounting policies and other explanatoryinformation.
In our opinion and to the best of our information and according to theexplanations given to us the aforesaid standalone Ind AS financial statements give theinformation required by the Companies Act 2013 as amended ("the Act") in themanner so required and give a true and fair view in conformity with the accountingprinciples generally accepted in India of the state of affairs of the Company as at March31 2021 its profit including other comprehensive income its cash flows and the changesin equity for the year ended on that date.
Basis for Opinion
We conducted our audit of the standalone Ind AS financial statements inaccordance with the Standards on Auditing (SAs) as specified under section 143(10) of theAct. Our responsibilities under those Standards are further described in the 'Auditor'sResponsibilities for the Audit of the Standalone Ind AS Financial Statements' section ofour 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 ethicalrequirements that are relevant to our audit of the financial statements under theprovisions of the Act and the Rules thereunder and we have fulfilled our other ethicalresponsibilities in accordance with these requirements and the Code of Ethics. We believethat the audit evidence we have obtained is sufficient and appropriate to provide a basisfor our audit opinion on the standalone Ind AS financial statements.
Key Audit Matters
Key audit matters are those matters that in our professional judgmentwere of most significance in our audit of the standalone Ind AS financial statements forthe financial year ended March 31 2021. These matters were addressed in the context ofour audit of the standalone Ind AS financial statements as a whole and in forming ouropinion thereon and we do not provide a separate opinion on these matters. For eachmatter below our description of how our audit addressed the matter is provided in thatcontext.
We have determined the matters described below to be the key auditmatters to be communicated in our report. We have fulfilled the responsibilities describedin the Auditor's responsibilities for the audit of the standalone Ind AS financialstatements section of our report including in relation to these matters. Accordingly ouraudit included the performance of procedures designed to respond to our assessment of therisks of material misstatement of the standalone Ind AS financial statements. The resultsof our audit procedures including the procedures performed to address the matters belowprovide the basis for our audit opinion on the accompanying standalone Ind AS financialstatements.
|Key audit matters ||How our audit addressed the key audit matter |
|Revenue from management fee and portfolio management services (as described in Note 19 of the standalone Ind AS financial statements) || |
|TRevenue from operations is the most significant balance iRevenue from operations is the most significant balance in the statement of profit and loss. Revenue is made of a number of streams including: ||We have performed the following procedures in relation to revenue recognized during the year: |
|- Management fees Rs. 942.75 crore || Obtained and read the accounting policy for revenue recognition |
|- Portfolio Management Services Rs. 43.79 crore || Obtained an understanding of the significant revenue items and identified where there is a higher risk of error due to manual processes complex contractual terms and areas of judgement. |
|There are inherent risks in computing the different revenue streams including manual input of key contractual terms and the computation of applicable Assets Under Management ('AUM') which could result in errors. || Tested the design and operating effectiveness of key controls in place across the Company relevant to these revenue calculations including the assets under management set up and maintenance of contractual terms and fee billing. |
|The complex nature of contractual terms involving multiple schemes requires effective monitoring to ensure all financial terms and conditions are captured accurately and applied appropriately. || Obtained and assessed independent assurance reports for the relevant controls at the third-party administrators and considered whether there was any impact on our audit. |
|Any discrepancy in such computations could give rise to a material misstatement of the financial statements. || on a sample basis we agreed key inputs into the IT systems back to contracts and re-performed calculations involving manual processes. |
|Accordingly revenue is considered to be a key audit matter. || Recalculated Portfolio Management Services Fee in respect of certain sample contracts and compared with the actual fees charged by the Company for such contracts. |
|Impairment of Asset Management Rights (as described in Note 2.4 of the standalone Ind AS financial statements) ||We have performed the following procedures with respect to impairment of asset management rights: |
|The Company's balance sheet as at March 312021 includes Rs. 240 crore of Asset Management Rights representing 7.30% of total assets. || Obtained and read the accounting policy on impairment of asset management rights |
|As a result an impairment assessment was required to be performed by the Company in terms of Ind AS 36 by comparing the carrying value of these assets to their recoverable amount to determine whether an impairment was required to be recognised. || Read the Company's valuation methodology applied in determining the recoverable amount. We also assessed the objectivity competence and independence of Company's specialists involved in the process. |
|For the purpose of the above impairment testing value in use has been determined by forecasting and discounting future cash flows. Furthermore the value in use is highly sensitive to changes in some of the inputs used for forecasting the future cash flows. || Evaluated the assumptions around the key drivers of the cash flow forecasts including discount rates expected growth rates and terminal growth rates used. |
|Further the determination of the recoverable amount involved judgment due to inherent uncertainty in the assumptions supporting the recoverable amount of these assets. || Assessed the recoverable value computed by the Company's specialists based on the various scenarios. |
|Accordingly the impairment of Asset Management Rights was determined to be a key audit matter in our audit of the standalone Ind AS financial statements. || Discussed potential changes in key drivers as compared to previous year / actual performance with management to evaluate whether the inputs and assumptions used in the cash flow forecasts were reasonable. |
| || Read and assessed the specific disclosures made in the financial statements with regards to managements evaluation of the uncertainties arising from COVID-19. |
We have determined that there are no other key audit matters tocommunicate in our report.
INFORMATION OTHER THAN THE FINANCIAL STATEMENTS AND AUDITOR'S REPORTTHEREON
The Company's Board of Directors is responsible for the otherinformation. The other information comprises the information included in the Director'sReport Corporate Governance Report Business Responsibility Report Management Discussion& Analysis Annual Return Report on CSR activities but does not include thestandalone Ind AS financial statements and our auditor's report thereon.
Our opinion on the standalone Ind AS financial statements does notcover the other information and we do not express any form of assurance conclusionthereon.
In connection with our audit of the standalone Ind AS financialstatements our responsibility is to read the other information and in doing so considerwhether such other information is materially inconsistent with the financial statements orour knowledge obtained in the audit or otherwise appears to be materially misstated. Ifbased on the work we have performed we conclude that there is a material misstatement ofthis other information we are required to report that fact. We have nothing to report inthis regard.
RESPONSIBILITIES OF MANAGEMENT FOR THE STANDALONE IND AS FINANCIALSTATEMENTS
The Company's Board of Directors is responsible for the matters statedin section 134(5) of the Act with respect to the preparation of these standalone Ind ASfinancial statements that give a true and fair view of the financial position financialperformance including other comprehensive income cash flows and changes in equity of theCompany in accordance with the accounting principles generally accepted in Indiaincluding the Indian Accounting Standards (Ind AS) specified under section 133 of the Actread with the Companies (Indian Accounting Standards) Rules 2015 as amended. Thisresponsibility also includes maintenance of adequate accounting records in accordance withthe provisions of the Act for safeguarding of the assets of the Company and for preventingand detecting frauds and other irregularities; selection and application of appropriateaccounting policies; making judgments and estimates that are reasonable and prudent; andthe design implementation and maintenance of adequate internal financial controls thatwere operating effectively for ensuring the accuracy and completeness of the accountingrecords relevant to the preparation and presentation of the standalone Ind AS financialstatements that give a true and fair view and are free from material misstatement whetherdue to fraud or error.
In preparing the standalone Ind AS financial statements management isresponsible 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 management either intends to liquidate the Company or to ceaseoperations or has no realistic alternative but to do so.
Those Board of Directors are also responsible for overseeing theCompany's financial reporting process.
AUDITOR'S RESPONSIBILITIES FOR THE AUDIT OF THE STANDALONE IND ASFINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about whether thestandalone Ind AS financial statements as a whole are free from material misstatementwhether due to fraud or error and to issue an auditor's report that includes our opinion.Reasonable assurance is a high level of assurance but is not a guarantee that an auditconducted in accordance with SAs will always detect a material misstatement when itexists. Misstatements can arise from fraud or error and are considered material ifindividually or in the aggregate they could reasonably be expected to influence theeconomic decisions of users taken on the basis of these standalone Ind AS financialstatements.
As part of an audit in accordance with SAs we exercise professionaljudgment and maintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of thestandalone Ind AS financial statements whether due to fraud or error design and performaudit procedures responsive to those risks and obtain audit evidence that is sufficientand appropriate to provide a basis for our opinion. The risk of not detecting a materialmisstatement resulting from fraud is higher than for one resulting from error as fraudmay involve collusion forgery intentional omissions misrepresentations or the overrideof internal control.
Obtain an understanding of internal control relevant to theaudit in order to design audit procedures that are appropriate in the circumstances. Undersection 143(3)(i) of the Act we are also responsible for expressing our opinion onwhether the Company has adequate internal financial controls with reference to financialstatements in place and the operating effectiveness of such controls.
Evaluate the appropriateness of accounting policies used and thereasonableness of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the goingconcern basis of accounting and based on the audit evidence obtained whether a materialuncertainty exists related to events or conditions that may cast significant doubt on theCompany's ability to continue as a going concern. If we conclude that a materialuncertainty exists we are required to draw attention in our auditor's report to therelated disclosures in the financial statements or if such disclosures are inadequate tomodify our opinion. Our conclusions are based on the audit evidence obtained up to thedate of our auditor's report. However future events or conditions may cause the Companyto cease to continue as a going concern.
Evaluate the overall presentation structure and content of thestandalone Ind AS financial statements including the disclosures and whether thestandalone Ind AS financial statements represent the underlying transactions and events ina manner that achieves fair presentation.
We communicate with those charged with governance regarding amongother matters the planned scope and timing of the audit and significant audit findingsincluding any significant deficiencies in internal control that we identify during ouraudit.
We also provide those charged with governance with a statement that wehave complied with relevant ethical requirements regarding independence and tocommunicate with them all relationships and other matters that may reasonably be thoughtto bear on our independence and where applicable related safeguards.
From the matters communicated with those charged with governance wedetermine those matters that were of most significance in the audit of the standalone IndAS financial statements for the financial year ended March 31 2021 and are therefore thekey audit matters. We describe these matters in our auditor's report unless law orregulation precludes public disclosure about the matter or when in extremely rarecircumstances we determine that a matter should not be communicated in our report becausethe adverse consequences of doing so would reasonably be expected to outweigh the publicinterest benefits of such communication.
REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS
1. 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 of the Act we give in the "Annexure 1" a statement on thematters specified in paragraphs 3 and 4 of the Order.
2. As required by Section 143(3) of the Act we report that:
(a) We have sought and obtained all the information and explanationswhich to the best of our knowledge and belief were necessary for the purposes of ouraudit;
(b) In our opinion proper books of account as required by law havebeen 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 including theStatement of Other Comprehensive Income the Cash Flow Statement and Statement of Changesin Equity dealt with by this Report are in agreement with the books of account;
(d) In our opinion the aforesaid standalone Ind AS financialstatements comply with the Accounting Standards specified under Section 133 of the Actread with Companies (Indian Accounting Standards) Rules 2015 as amended;
(e) On the basis of the written representations received from thedirectors as on March 31 2021 taken on record by the Board of Directors none of thedirectors is disqualified as on March 31 2021 from being appointed as a director in termsof Section 164 (2) of the Act;
(f) With respect to the adequacy of the internal financial controlsover financial reporting of the Company with reference to these standalone Ind ASfinancial statements and the operating effectiveness of such controls refer to ourseparate Report in "Annexure 2" to this report;
(g) In our opinion the managerial remuneration for the year endedMarch 31 2021 has been paid / provided by the Company to its directors in accordance withthe provisions of section 197 read with Schedule V to the Act;
(h) With respect to the other matters to be included in the Auditor'sReport in accordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 asamended in our opinion and to the best of our information and according to theexplanations given to us:
i. The Company has disclosed the impact of pending litigations on itsfinancial position in its standalone Ind AS financial statements - Refer Note 33 to thestandalone Ind AS financial statements;
ii. The Company did not have any long-term contracts includingderivative contracts for which there were any material foreseeable losses;
iii. There were no amounts which were required to be transferred to theInvestor Education and Protection Fund by the Company.
Annexure 1 referred to in paragraph 1 under the heading "Report onOther Legal and Regulatory Requirements" of our Report of even date Re: Nippon LifeIndia Asset Management Limited ("the Company")
(i) (a) The Company has maintained proper records showing fullparticulars including quantitative details and situation of fixed assets.
(b) All fixed assets have not been physically verified by themanagement during the year but there is a regular programme of verification which in ouropinion is reasonable having regard to the size of the Company and the nature of itsassets. No material discrepancies were noted on such verification.
(c) According to the information and explanations given by themanagement the title deeds of immovable properties included in property plant andequipment/ fixed assets are held in the name of the company.
(ii) The Company's business does not involve inventories andaccordingly the requirements under paragraph 3(ii) of the Order are not applicable to theCompany.
(iii) According to the information and explanations given to us theCompany has not granted any loans secured or unsecured to companies firms LimitedLiability Partnerships or other parties covered in the register maintained under section189 of the Companies Act 2013. Accordingly the provisions of clause 3(iii) (a) (b) and(c) of the Order are not applicable to the Company and hence not commented upon.
(iv) In our opinion and according to the information and explanationsgiven to us provisions of section 185 and 186 of the Companies Act 2013 in respect ofloans to directors including entities in which they are interested and in respect of loansand advances given investments made and guarantees and securities given have beencomplied with by the company.
(v) The Company has not accepted any deposits within the meaning ofSections 73 to 76 of the Act and the Companies (Acceptance of Deposits) Rules 2014 (asamended). Accordingly the provisions of clause 3(v) of the Order are not applicable.
(vi) To the best of our knowledge and as explained the CentralGovernment has not specified the maintenance of cost records under clause 148(1) of theCompanies Act 2013 for the services of the Company.
(vii) (a) Undisputed statutory dues including provident fundemployees' state insurance income-tax sales-tax service tax duty of custom duty ofexcise value added tax goods and service tax cess and other statutory dues havegenerally been regularly deposited with the appropriate authorities though there has beena slight delay in a few cases.
(b) According to the information and explanations given to us noundisputed amounts payable in respect of provident fund employees' state insuranceincome-tax service tax sales-tax duty of custom duty of excise value added tax goodsand service tax cess and other statutory dues were outstanding at the year end for aperiod of more than six months from the date they became payable.
(c) According to the information and explanations given to us thereare no dues of income tax sales-tax service tax customs duty excise duty value addedtax and cess which have not been deposited on account of any dispute.
(viii) Based on our audit procedures performed for the purpose ofreporting the true and fair view of the financial statements and according to informationand explanations given by the management we are of the opinion that the Company has notdefaulted in repayment of dues to a financial institution bank or debenture holders orgovernment.
(ix) In our opinion and according to information and explanations givenby the management monies raised by the company by way of initial public offer wereapplied for the purpose for which they were raised.
(x) Based upon the audit procedures performed for the purpose ofreporting the true and fair view of the financial statements and according to theinformation and explanations given by the management we report that no fraud by theCompany or no fraud on the Company by the officers and employees of the Company has beennoticed or reported during the year.
(xi) According to the information and explanations given by themanagement the managerial remuneration has been paid / provided in accordance with therequisite approvals mandated by the provisions of section 197 read with Schedule V to theCompanies Act 2013.
(xii) In our opinion the Company is not a Nidhi company. Thereforethe provisions of clause 3(xii) of the order are not
applicable to the Company and hence not commented upon.
(xiii) According to the information and explanations given by themanagement transactions with the related parties are in compliance with section 177 and188 of Companies Act 2013 where applicable and the details have been disclosed in thenotes to the financial statements as required by the applicable accounting standards.
(xiv) According to the information and explanations given to us and onan overall examination of the balance sheet the Company has not made any preferentialallotment or private placement of shares or fully or partly convertible debentures duringthe year under review and hence not commented upon.
(xv) Based on our audit procedures performed for the purpose ofreporting the true and fair view of the financial statements and according to theinformation and explanations given by the management the Company has not entered into anynon-cash transactions with directors or persons connected with them.
(xvi) According to the information and explanations given to us theprovisions of section 45-IA of the Reserve Bank of India Act 1934 are not applicable tothe Company.
|For S.R. Batliboi & Co. LLP |
|Chartered Accountants |
|ICAI Firm Registration Number: 301003E/E300005 |
|per Shrawan Jalan |
|Membership Number: 102102 |
|Place of Signature: Mumbai |
|Date: April 27 2021 |
Annexure 2 to the Independent Auditor's Report of even date on thefinancial statements of Nippon Life India Asset Management Limited
Report on the Internal Financial Controls under Clause (i) ofSub-section 3 of Section 143 of the Companies Act 2013 ("the Act")
To the Members of Nippon Life India Asset Management Limited
We have audited the internal financial controls over financialreporting of Nippon Life India Asset Management Limited ("the Company") as ofMarch 31 2021 in conjunction with our audit of the financial statements of the Companyfor the year ended on that date.
Management's Responsibility for Internal Financial Controls
The Company's Management is responsible for establishing andmaintaining internal financial controls based on the internal control over financialreporting criteria established by the Company considering the essential components ofinternal control stated in the Guidance Note on Audit of Internal Financial Controls OverFinancial Reporting issued by the Institute of Chartered Accountants of India. 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 the Company's policies the safeguardingof its 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.
Our responsibility is to express an opinion on the Company's internalfinancial controls over financial reporting based on our audit. We conducted our audit inaccordance with the Guidance Note on Audit of Internal Financial Controls Over FinancialReporting (the "Guidance Note") and the Standards on Auditing as specified undersection 143(10) of the Companies Act 2013 to the extent applicable to an audit ofinternal financial controls and both issued by the Institute of Chartered Accountants ofIndia. 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 over financial reporting was established andmaintained and if such controls operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence aboutthe adequacy of the internal financial controls
system over financial reporting and their operating effectiveness. Ouraudit of internal financial controls over financial reporting included obtaining anunderstanding of internal financial controls over financial reporting assessing the riskthat a material weakness exists and testing and evaluating the design and operatingeffectiveness of internal control based on the assessed risk. The procedures selecteddepend on the auditor's judgement including the assessment of the risks of materialmisstatement of the financial statements whether due to 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 controlssystem over financial reporting.
Meaning of Internal Financial Controls Over Financial Reporting
A company's internal financial control over financial reporting is aprocess designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles. A company's internal financial control overfinancial reporting includes those policies and procedures that
(1) pertain to the maintenance of records that in reasonable detailaccurately and fairly reflect the transactions and dispositions of the assets of thecompany;
(2) provide reasonable assurance that transactions are recorded asnecessary to permit preparation of financial statements in accordance with generallyaccepted accounting principles and that receipts and expenditures of the company arebeing made only in accordance with authorizations of management and directors of thecompany; and
(3) provide reasonable assurance regarding prevention or timelydetection of unauthorized acquisition use or disposition of the company's assets thatcould have a material effect on the financial statements.
Inherent Limitations of Internal Financial Controls Over FinancialReporting
Because of the inherent limitations of internal financial controls overfinancial reporting 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 overfinancial reporting to future periods are subject to the risk that the internal financialcontrol over financial reporting may become inadequate because of changes in conditionsor that the degree of compliance with the policies or procedures may deteriorate.
In our opinion the Company has in all material respects an adequateinternal financial controls system over financial reporting and such internal financialcontrols over financial reporting were operating effectively as at March 31 2021 basedon the internal control over financial reporting criteria established by the Companyconsidering the essential components of internal control stated in the Guidance Note onAudit of Internal Financial Controls Over Financial Reporting issued by the Institute ofChartered Accountants of India
|For S.R. Batliboi & Co. LLP |
|Chartered Accountants |
|ICAI Firm Registration Number: 301003E/E300005 |
|per Shrawan Jalan |
|Membership Number: 102102 |
|Place of Signature: Mumbai |
|Date: April 27 2021 |