To the Members of
Nippon Life India Asset Management Limited
(formerly known as Reliance Nippon Life Asset Management Limited)
Report on the Audit of the Standalone Ind AS Financial Statements
We have audited the accompanying standalone Ind AS financial statements of Nippon LifeIndia Asset Management Limited (formerly known as Reliance Nippon Life Asset ManagementLimited) ("the Company") which comprise the Balance sheet as at March 31 2020the Statement of Profit and Loss including the statement of Other Comprehensive Incomethe Cash Flow Statement and the Statement of Changes in Equity for the year then endedand notes to the standalone Ind AS financial statements including a summary ofsignificant 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 as amended ("the Act") in the manner sorequired and give a true and fair view in conformity with the accounting principlesgenerally accepted in India of the state of affairs of the Company as at March 31 2020its profit including other comprehensive income its cash flows and the changes in equityfor the year ended on that date.
Basis for Opinion
We conducted our audit of the standalone Ind AS financial statements in accordance withthe Standards on Auditing (SAs) as specified under section 143(10) of the Act. Ourresponsibilities 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 sufficientand 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 judgment were of mostsignificance in our audit of the standalone Ind AS financial statements for the financialyear ended March 31 2020. These matters were addressed in the context of our audit of thestandalone Ind AS financial statements as a whole and in forming our opinion thereon andwe do not provide a separate opinion on these matters. For each matter below ourdescription of how our audit addressed the matter is provided in that context. We havedetermined the matters described below to be the key audit matters to be communicated inour report. We have fulfilled the responsibilities described in the Auditor'sresponsibilities for the audit of the standalone Ind AS financial statements section ofour report including in relation to these matters. Accordingly our audit included theperformance of procedures designed to respond to our assessment of the risks of materialmisstatement of the standalone Ind AS financial statements. The results of our auditprocedures including the procedures performed to address the matters below provide thebasis for our audit opinion on the accompanying standalone Ind AS financial statements.
|Key audit matters ||How our audit addressed the key audit matter |
|Revenue recognition (as described in Note 19 of the standalone Ind AS financial statements) || |
|Revenue from operations is the most significant in the statement of profit and loss. Revenue is made of a number of streams including: ||We have performed balance the following procedures in relation to revenue recognised and accrued: |
|- Management fees ` 1089.36 crore || obtained and read the accounting policy for revenue recognition revenue items and identified understood the significant where there is a higher risk of error due to manual processes complex contractual terms and areas of judgement. |
|- Portfolio Management Services ` 42.31 crore || tested the operating across the Company relevant to these revenue calculations including the assets under management set up and maintenance of contractual terms and fee billing. |
|There are inherent risks in computing the different revenue streams including manual input of key contractual terms and the computation of applicable Assets Under || 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. |
|Management (AUM') which could result in errors. 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. || on a sample basis we agreed key inputs in to the IT systems back to contracts and re-performed calculations involving manual processes. |
|In addition to the complexity of interpreting the agreements there is a risk of error as the calculation involves manual components and may involve some complexity. || re-performed a sample of Portfolio Management Services Fee calculations to check that the said fees were appropriately calculated. We tested the data used by agreeing the basis of calculation to the contractual terms with the relevant agreements. |
|Any discrepancy in such computations could give rise to a material misstatement of the financial statements. Accordingly revenue is considered to be a key audit matter. || |
|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 31 2020 includes ` 240 crore of Asset Management Rights representing 8% 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 by comparing the carrying value of these assets to their recoverable amount to determine whether an impairment was required to be recognised. || evaluated the Company's valuation methodology applied in determining the recoverable amount. In making this assessment 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 to communicate in ourreport.
Information Other than the Financial Statements and Auditor's Report Thereon
The Company's Board of Directors is responsible for the other information. The otherinformation comprises the information included in the Director's Report CorporateGovernance Report Business Responsibility Report Management Discussion & AnalysisAnnual Return Report on CSR activities but does not include the standalone Ind ASfinancial statements and our auditor's report thereon. Our opinion on the standalone IndAS financial statements does not cover the other information and we do not express anyform of assurance conclusion thereon. In connection with our audit of the standalone IndAS financial statements our responsibility is to read the other information and in doingso consider whether such other information is materially inconsistent with the financialstatements or our knowledge obtained in the audit or otherwise appears to be materiallymisstated. 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.
Responsibilities of Management for the Standalone Ind AS Financial Statements
The Company's Board of Directors is responsible for the matters stated in section134(5) of the Act with respect to the preparation of these standalone Ind AS financialstatements that give a true and fair view of the financial position financial performanceincluding other comprehensive income cash flows and changes in equity of the Company inaccordance with the accounting principles generally accepted in India including theIndian Accounting Standards (Ind AS) specified under section 133 of the Act read with [theCompanies (Indian Accounting Standards) Rules 2015 as amended. 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 the 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 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 is responsible forassessing the Company's ability to continue as a going concern disclosing as applicablematters related to going concern and using the going concern basis of accounting unlessmanagement either intends to liquidate the Company or to cease operations or has norealistic alternative but to do so.
Those Board of Directors are also responsible for overseeing the Company's financialreporting process.
Auditor's Responsibilities for the Audit of the Standalone Ind AS Financial Statements
Our objectives are to obtain reasonable assurance about whether the standalone Ind ASfinancial 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 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 professional judgment andmaintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the standalone IndAS financial statements whether due to fraud or error design and perform auditprocedures responsive to those risks and obtain audit evidence that is sufficient andappropriate 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 the audit in orderto design audit procedures that are appropriate in the circumstances. Under section143(3)(i) of the Act we are also responsible for expressing our opinion on whether theCompany has adequate internal financial controls with reference to financial statements inplace 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 going concernbasis 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 the standaloneInd AS financial statements including the disclosures and whether the standalone Ind ASfinancial statements represent the underlying transactions and events in a manner thatachieves fair presentation. We communicate with those charged with governance regardingamong other matters the planned scope and timing of the audit and significant auditfindings including any significant deficiencies in internal control that we identify Wealso provide those charged with governance with a statement that we have complied withrelevant ethical requirements regarding independence and to communicate with them allrelationships 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 Ind AS financialstatements for the financial year ended therefore the key audit matters. We describe thesematters in our auditor's report unless law or regulation precludes public disclosure aboutthe matter or when in extremely rare circumstances we determine that a matter should notbe communicated in our report because the adverse consequences of doing so wouldreasonably be expected to outweigh the public interest 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 ofthe Act we give in the "Annexure 1" a statement on the matters specified inparagraphs 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 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 including the Statement ofOther Comprehensive Income the Cash Flow Statement and Statement of Changes in Equitydealt with by this Report are in agreement with the books of account;
(d) In our opinion the aforesaid standalone Ind AS financial statements comply withthe Accounting Standards specified under Section 133 of the Act read with Companies(Indian Accounting Standards) Rules 2015 as amended;
(e) On the basis of the written representations received from the directors as on March31 2020 taken on record by the Board of Directors none of the directors is disqualifiedas on March 31 2020 from being appointed as a director in terms of Section 164 (2) of theAct;
(f) With respect to the adequacy of the internal financial controls overfinancialreporting of the Company with reference to these standalone Ind AS financialstatements and the operating effectiveness of such controls refer to our separate Reportin "Annexure 2" to this report;
(g) In our opinion the managerial remuneration for the year ended March 31 2020 hasbeen paid / provided by the Company to its directors in accordance with the provisions ofsection 197 read with Schedule V to the Act;
(h) 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 as amended inour opinion and to the best of our information and according to the explanations given tous:
i. The Company has disclosed the impact of pending litigations on its financialposition in its standalone Ind AS financial statements Refer Note 33 to the standalone IndAS financial statements;
ii. The Company did not have any long-term contracts including derivative contracts forwhich 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.
For S.R. Batliboi & Co. LLP
Annexure 1 referred to in paragraph 1 under the heading "Report on Other Legal andRegulatory Requirements" of our Report of even date
Re: Nippon Life India Asset Management Limited (formerly known as Reliance Nippon LifeAsset Management Limited) ("the Company")
(i) (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.
(b) All fixed assets have not been physically verified by the management during theyear but there is a regular programme having regard to the size of the Company and thenature of its of verification assets. No material discrepancies were note don suchverification.
(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.
(ii) The Company's business does not involve inventories and accordingly therequirements under paragraph 3(ii) of the Order are not applicable to the Company.
(iii) According to the information and explanations given to us the Company has notgranted any loans secured or unsecured to companies firms Limited LiabilityPartnerships or other parties covered in the register maintained under section 189 of theCompanies Act 2013. Accordingly the provisions of clause 3(iii) (a) (b) and (c) of theOrder are not applicable to the Company and hence not commented upon.
(iv) In our opinion and according to the information and explanations given to usprovisions of section 185 and 186 of the Companies Act 2013 in respect of loans todirectors including entities in which they are interested and in respect of loans andadvances given investments made and guarantees and securities given have been compliedwith by the company.
(v) The Company has not accepted any deposits within the meaning of Sections 73 to 76of the Act and the Companies (Acceptance of Deposits) Rules 2014 (as amended).Accordingly the provisions of clause 3(v) of the Order are not applicable.
(vi) To the best of our knowledge and as explained the Central Government has notspecified the maintenance of cost records under clause 148(1) of the Companies Act 2013for the services of the Company.
(vii) (a) Undisputed statutory dues including provident fund employees' stateinsurance income-tax sales-tax service tax duty of custom duty of excise value addedtax goods and service tax cess and other statutory dues have generally been regularlydeposited with the appropriate authorities though there has been a slight delay in a fewcases.
(b) According to the information and explanations given to us no undisputed amountspayable in respect of provident fund employees' state insurance income-tax service taxsales-tax duty of custom duty of excise value added tax goods and service tax cessand other statutory dues were outstanding at the year end for a period of more than sixmonths from the date they became payable.
(c) According to the information and explanations given to us there are no dues ofincome tax sales-tax service tax customs duty excise duty value added tax and cesswhich have not been deposited on account of any dispute.
(viii) Based on our audit procedures performed for the purpose of reporting the trueand fair view of the financial statements and according to information and explanationsgiven by the management we are of the opinion that the Company has not defaulted inrepayment of dues to a financial institution bank or debenture holders or government.
(ix) In our opinion and according to information and explanations given by themanagement monies raised by the company by way of initial public offer were applied forthe purpose for which they were raised.
(x) Based upon the audit procedures performed for the purpose of reporting the true andfair view of the financial statements and according to the information and explanationsgiven by the management we report that no fraud by the Company or no fraud on the Companyby the officers and employees of the Company has been noticed or reported during the year.
(xi) According to the information and explanations given by the management themanagerial remuneration has been paid / provided in accordance with the requisiteapprovals mandated by the provisions of section 197 read with Schedule V to the CompaniesAct 2013.
(xii) 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.
(xiii) According to the information and explanations given by the managementtransactions with the related parties are in compliance with section 177 and 188 ofCompanies Act 2013 where applicable and the details have been disclosed in the notes tothe financial statements as required by the applicable accounting standards.
(xiv) 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 yearunder review and hence not commented upon.
(xv) Based on our audit procedures performed for the purpose of reporting the true andfair view of the financial statements and according to the information and explanationsgiven by the management the Company has not entered into any non-cash transactions withdirectors or persons connected with them.
(xvi) According to the information and explanations given to us the provisions ofsection 45-IA of the Reserve Bank of India Act 1934 are not applicable to the Company.
Annexure 2 to the Independent Auditor's Report of even date on the financial statementsof Nippon Life India Asset Management Limited
(formerly known as Reliance Nippon Life Asset Management Limited)
Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section143 of the Companies Act 2013 ("the Act")
To the Members of Nippon Life India Asset Management Limited (formerly known asReliance Nippon Life Asset Management Limited)
We have audited the internal financial controls over financial reporting of Nippon LifeIndia Asset Management Limited (formerly known as Reliance Nippon Life Asset ManagementLimited) ("the Company") as of March 31 2020 in conjunction with our audit ofthe 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 theorderlyandefficientconduct 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 Companies Act 2013.
Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting based on our audit. We conducted our audit in accordancewith the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting(the "Guidance Note") and the Standards on Auditing as specifiedunder section143(10) of the Companies Act 2013 to the extent applicable to an audit ofinternalfinancialcontrols 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 about the adequacy ofthe internal financial controls system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls over financial reporting includedobtaining an understanding of internal financial controls over financial reportingassessing 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 financial statements whether due to fraud or error.sufficient and appropriate to provide a basis for our audit opinion onWebelievethattheauditevidencewehaveobtainedis the internal financial controls system overfinancial reporting.
Meaning of Internal Financial Controls Over Financial Reporting
A company's internal financial control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. A company's internal financial control and procedures 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) providereasonable assurance that transactions are recorded as necessary to permit preparation offinancial statements in accordance with generally accepted accounting principles and thatreceipts and expenditures of the company are being made only in accordance withauthorizations of management and directors of the company; and (3) provide reasonableassurance regarding prevention or timely detection of unauthorized acquisition use ordisposition of the company's assets that could have a material effect on the financialstatements.
Inherent Limitations of Internal Financial Controls Over Financial Reporting
Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over financial therisk that the internal financial control over financial reporting may become or that thedegree of compliance with the policies or procedures may deteriorate.
In our opinion the Company has in all material respects an adequate internalfinancial and such internal financial controls over financial reporting were operatingeffectively as at March 31 2020 based on the internal control over financial reportingcriteria established by the Company considering the essential components of internalcontrol stated in the Guidance Note on Audit of Internal Financial Controls Over FinancialReporting issued by the Institute of Chartered Accountants of India
| ||For S.R. Batliboi & Co. LLP |
| ||Chartered Accountants |
| ||ICAI Firm Registration Number: 301003E/E300005 |
| ||per Shrawan Jalan |
|Place of Signature: Mumbai ||Partner |
|Date: May 15 2020 ||Membership Number: 102102 |