To the Members of Niyogin Fintech Limited
Report on the Audit of the Standalone Financial Statements
We have audited the standalone financial statements of Niyogin Fintech Limited (theCompany') which comprise the standalone balance sheet as at 31 March 2020 and thestandalone statement of profit and loss (including other comprehensive income) thestandalone statement of changes in equity and the standalone statement of cash flows forthe year then ended and notes to the standalone financial statements including a summaryof the significant accounting policies and other explanatory information.
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone financial statements give the information requiredby the Companies Act 2013 (the 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 loss 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')specified under section 143 (10) of the Act. Our responsibilities under those SAs arefurther described in the Auditor's Responsibilities for the Audit of the StandaloneFinancial 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 together with the ethical requirements that are relevant to our audit of thestandalone financial statements under the provisions of the Act and the Rules thereunderand we have fulfilled our other ethical responsibilities in accordance with theserequirements and the Code of Ethics. We believe that the audit evidence we have obtainedis sufficient and appropriate to provide a basis for our opinion on the Standalonefinancial statements.
Emphasis of matter
As described in Note 46 (a) to the standalone financial statements in respect ofaccounts overdue but standard as at 29 February 2020 where moratorium benefit has beengranted the staging of those accounts as at 31 March 2020 is based on the days past duestatus as on 29 February 2020 in accordance with Reserve Bank of India COVID-19 RegulatoryPackage.
As described in Note 46 (b) to the standalone financial statements the extent to whichthe COVID-19 pandemic will impact the Company's financial performance is dependent onfuture developments which are highly uncertain.
Our opinion is not modified in respect of the above matters.
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
|Key audit matter ||How the matter was addressed in our audit |
|Transition date accounting || |
|Refer the accounting policies in the standalone financial statements: Significant Accounting Policies Basis of preparation' and notes 49 and 50 to the standalone financial statements ||Our audit procedures included the following: |
|Effective 1 April 2019 the Company has adopted the Indian Accounting Standards (Ind AS') notified by the Ministry of Corporate Affairs with the transition date of 1 April 2018. || Assessed the design implementation and operating effectiveness of key internal controls over management's evaluation of transition date choices and exemptions availed in line with the principles under Ind AS 101. |
|The following are the major impact areas for the Company upon transition: || Evaluated management's transition date choices and exemptions for compliance / acceptability under Ind AS 101. |
| Classification and measurement of financial assets and financial liabilities || Understood the methodology implemented by management to give impact on the transition. |
| Measurement of loan losses (expected credit losses) || Assessed the accuracy of the computations. |
| Accounting for loan fees and costs || Assessed areas of significant estimates and management judgment in line with principles under Ind AS. |
| Accounting for employee stock option plan || |
| Accounting for actuarial gain / loss on post- employment benefit Migration to the new accounting framework i.e. Ind AS is a complicated process involving multiple decision points upon transition. Ind AS 101 First Time Adoption prescribes choices and exemptions for first time application of Ind AS principles at the transition date. || |
|We identified transition date accounting as a key audit matter because of significant degree of management judgment and application on the areas noted above. || |
|Impairment of loans and advances to customers || |
|Charge: Rs. 1371.12 Lakh for year ended 31 March 2020 || |
|Provision: Rs. 1616.96 Lakh as at 31 March 2020 || |
|Refer to the accounting policies in the standalone financial statements: Note 3.6 to the standalone financial statements: Significant Accounting Policies' and Note 7 to the standalone financial statements: Loans' || |
|Subjective estimate || |
|Recognition and measurement of impairment of loans and advances involve significant management judgement. ||Our audit procedures included the following: |
|Under Ind AS 109 Financial Instruments allowance for loan losses are determined using expected credit loss (ECL') model. The Company's impairment allowance is derived from estimates including the historical default. ||Design / controls |
|Management exercises judgement in determining the quantum of loss based on a range of factors. || Evaluated the appropriateness of the impairment principles based on the requirements of Ind AS 109 our business understanding and industry practice. |
|The most significant areas are: || Understood management's revised processes systems and controls implemented in relation to impairment allowance process particularly in view of COVID-19 regulatory package. |
| Determination of exposure at default || Evaluated management's controls over collation of relevant information used for determining estimates for mnagement overlays on account of COVID- 19. |
| Loan staging criteria || Tested the controls over Governance Framework' in line with RBI guidance. |
| Calculation of probability of default || Assessed the design and implementation of key internal financial controls over loan impairment process used to calculate the impairment charge. |
| Consideration of probability weighted scenarios and forward looking macro- economic factors || Tested review controls over measurement of impairment allowances and disclosures in the standalone financial statements. |
|The application of ECL model requires several data inputs. This increases the risk of completeness and accuracy of the data that has been used to create assumptions in the model. || |
|In some cases data is unavailable and reasonable alternatives have been applied to allow calculations to be performed. || |
|Impact of COVID-19 || |
|On 11 March 2020 the World Health Organisation declared Novel Coronavirus (COVID-19) outbreak to be a pandemic. ||Substantive tests |
|We have identified the impact of and uncertainty related to the COVID 19 pandemic as a key element and consideration for recognition and measurement of impairment of loans and advances on account of: || Assessed the appropriateness of management's rationale for determination of criteria for SICR considering both: adverse effects of COVID 19 and mitigants in the form of RBI / Government financial relief package. |
|- Short-term and long-term macroeconomic effect on businesses in the country and globally and its consequential first order and cascading negative impact on revenue and employment generation opportunities; || Assessed the appropriateness of macroeconomic factors and management overlays to calibrate the risks that are not yet fully captured by the existing model. |
|- impact of the pandemic on the Company's customers and their ability to repay dues; and || We used our modelling specialist to test the model methodology and reasonableness of assumptions used including management overlays. |
|- application of regulatory package announced by Reserve Bank of India (RBI') on asset classification and provisioning. || We focused on appropriate application of accounting principles and reasonableness of assumptions used in the model. |
|Management has conducted a qualitative assessment of significant increase in credit risk (SICR') of the loan portfolio with respect to the moratorium benefit to borrowers prescribed by the RBI and considered updated macroeconomic variable and the use of management overlays to reflect potential impact of COVID-19 on expected credit losses on its loan portfolio. || Performed test of details over calculation of impairment allowance for assessing the completeness accuracy and relevance of data. |
| || Model calculations were tested through re- performance where possible. |
| || Appropriateness of management's judgments was also independently reconsidered in respect of calculation methodologies economic factors and period of historical default rates used. |
| || Assessed the factual accuracy and |
| || appropriateness of the disclosures are made in standalone financial statement regarding impact of COVID-19. |
The Company's management and the Board of Directors are responsible for the otherinformation. The other information comprises the information included in the Company'sannual report but does not include the standalone financial statements and our auditor'sreport thereon. The other information is expected to be made available to us after thedate of this auditor's report.
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 identified above when it becomes available and in doingso consider whether the other information is materially inconsistent with the statementstandalone financial statements or our knowledge obtained in the audit or otherwiseappears to be materially misstated. When we read the annual report if we conclude thatthere is a material misstatement therein we are required to communicate the matter tothose charged with governance.
Management's and the Board of Directors' Responsibility for the Standalone FinancialStatements
The Company's management and the Board of Directors are responsible for the mattersstated in section 134 (5) of the Act with respect to the preparation of these standalonefinancial statements that give a true and fair view of the state of affairs profit/lossand other comprehensive income changes in equity and cash flows 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. 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; anddesign implementation and maintenance of adequate internal financial controls that wereoperating effectively for ensuring accuracy and completeness of the accounting recordsrelevant to the preparation and presentation of the standalone financial statements thatgive a true and fair view and are free from material misstatement whether due to fraud orerror.
In preparing the standalone financial statements management and the 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 assessthe risks of material misstatement of the standalone financial statements whether due tofraud or error design and perform audit procedures responsive to those risks and obtainaudit evidence that is sufficient and appropriate to provide a basis for our opinion. Therisk of not detecting a material misstatement resulting from fraud is higher than for oneresulting from error as fraud may involve collusion forgery intentional omissionsmisrepresentations or the override of internal control. Obtain an understanding ofinternal control relevant to the audit in order to design audit procedures that areappropriate in the circumstances. Under section 143 (3) (i) of the Act we are alsoresponsible for expressing our opinion on whether the company has adequate internalfinancial controls with reference to the standalone financial statements in place and theoperating 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 management and the Board of Directors. Conclude on the appropriateness ofmanagement and the Board of Directors use of the going concern basis of accounting andbased on the audit evidence obtained whether a material uncertainty exists related toevents or conditions that may cast significant doubt on the
Company'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 standalone financial statements or if such disclosures areinadequate to modify our opinion.
Our conclusions are based on the audit evidence obtained up to the date of ourauditor's report.
However future events or conditions may cause the Company to cease to continue as agoing 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 othermatters 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 we havecomplied with relevant ethical requirements regarding independence and to communicatewith them all relationships and other matters that may reasonably be thought to bear onour independence and where applicable related safeguards.
From the matters communicated with those charged with governance we determinethose matters that were of most significance in the audit of the standalone financialstatements of the current period and are therefore the key audit matters. We describethese matters in our auditor's report unless law or regulation precludes public disclosureabout the matter or when in extremely rare circumstances we determine that a mattershould not be communicated in our report because the adverse consequences of doing sowould reasonably be expected to outweigh the public interest benefits of suchcommunication.
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 in terms of section 143 (11) of the Act we give in theAnnexure A' a statement on the matters specified in paragraphs 3 and 4 of the Orderto the extent 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 books.
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 tothe standalone financial statements of the Company and the operating effectiveness of suchcontrols refer to our separate Report in Annexure B'.
(B) 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;
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 Investor
Education and Protection Fund by the Company; and iv. The disclosures in the standalonefinancial statements regarding holdings as well as dealings in specified bank notes duringthe period from 8 November 2016 to 30 December 2016 have not been made in these standalonefinancial statements since they do not pertain to the financial year ended 31 March 2020.
(C) With respect to the matter to be included in the Auditor's Report under section 197(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.
Annexure A to the Independent Auditor's Report of even date on the standalone financialstatements of Niyogin Fintech Limited
The Annexure referred to in the Independent Auditor's Report to the members of NiyoginFintech Limited (the Company') on the standalone financial statements for the yearended 31 March 2020 we report that:
(i) a. The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.
b. The Company has a regular program of physical verification of its fixed assets bywhich all the fixed assets are verified once in year. In our opinion this periodicity ofphysical verification is reasonable having regard to the size of the Company and thenature of its assets. According to the information and explanation given to us nomaterial discrepancies were noticed on such verification.
c. The Company does not have any immovable property held in its name. Accordingly theprovision of clause 3 (i) (c) of the Order is not applicable to the Company.
(ii) The Company's business does not involve holding of any inventories. Accordinglythe provision of clause 3 (ii) of the Order is 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 (the Act')
Accordingly the provision of clause 3 (iii) of the Order is not applicable to theCompany. (iv) According to the information and explanations given to us the Company hasnot granted any loans made investments or provided guarantees under section 185 and 186of the Act. Accordingly the provision of clause 3 (iv) of the Order is not applicable.
(v) According to the information and explanations given to us the Company has notaccepted any deposits from the public to which the directives issued by Reserve Bank ofIndia and the provisions of Section 73 to Section 76 or any other relevant provisions ofthe Act and the rules framed there under apply. Accordingly clause 3 (iv) of the Order isnot applicable to the Company.
(vi) The Central Government has not prescribed the maintenance of cost records undersub section (1) of section 148 of the Act for any of the services rendered by the Company.Accordingly the provision of clause 3 (vi) of the Order is not applicable.
(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 income taxgoods and service tax cess and other material statutory dues have generally beenregularly deposited during the year by the Company with the appropriate authorities thoughthere has been a delay in one case. As explained to us the Company did not have any dueson account of employee's state insurance duty of customs duty of excise sales tax andvalue added tax.
b) According to the information and explanations given to us no undisputed amountspayable in respect of provident fund income tax goods and service tax cess and othermaterial statutory dues were in arrears as at 31 March 2020 for a period of more than sixmonths from the date they became payable.
c) There are no dues of income tax and goods and service tax which have not beendeposited on account of any dispute.
(viii) In our opinion and according to the information and explanations given to usthe Company did not have any have any loans or borrowings from financial institutionsbanks government or debenture holders during the year. Accordingly clause 3 (viii) ofthe Order is not applicable to the Company.
(ix) According to the information and explanations given to us the Company has notraised moneys by way of initial public offer or further public offer and term loans duringthe year. Accordingly clause 3 (ix) of the Order is not applicable to the Company. (x)During the course of our examination of the books and records of the Company carried outin accordance with the generally accepted auditing practices in India and according tothe explanation and information given to us no material fraud by the Company or on theCompany by its officers or employees has been noticed or reported during the year.
(xi) According to the information and explanations give 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. Accordingly the provision of clause 3 (xii) of the Orderis not applicable.
(xiii) According to the information and explanations given to us and on the basis ofour examination of the records of the Company transactions with the related parties arein compliance with section 177 and 188 of the Act where applicable and the details havebeen disclosed in the standalone financial statements as required by the applicableaccounting 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 the provision of clause 3 (xiv) of the Order is not applicable.
(xv) According to the information and explanations given to us and based on ourexamination of the records the Company has not entered into any non-cash transactionswith directors or persons connected with him during the year. Accordingly clause 3 (xv)of the Order is not applicable to the Company.
(xvi) The Company is required to be registered under section 45-IA of the Reserve Bankof India Act 1934 and it has obtained certificate of registration.
Annexure B to the Independent Auditor's report on the standalone financial statementsof Niyogin Fintech Limited for the year ended 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 the standalonefinancial statements of Niyogin Fintech 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 the standalone financial statements and such internal financialcontrols were operating effectively as at 31 March 2020 based on the internal financialcontrols with reference to the standalone financial statements criteria established by theCompany considering the essential components of internal control stated in the GuidanceNote on Audit of Internal Financial Controls Over Financial Reporting issued by theInstitute of Chartered Accountants 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 the standalone financial statements criteria established by the Companyconsidering the essential components of internal control stated in the Guidance Note.These responsibilities include the design implementation and maintenance of adequateinternal financial controls that were operating effectively for ensuring the orderly andefficient conduct of its business including adherence to company's policies thesafeguarding of its assets the prevention and detection of frauds and errors theaccuracy and completeness of the accounting records and the timely preparation ofreliable financial information as required under the Companies Act 2013 (hereinafterreferred to as the Act').
Our responsibility is to express an opinion on the Company's internal financialcontrols with reference to the standalone financial statements based on our audit. Weconducted our audit in accordance with the Guidance Note and the Standards on Auditingprescribed under section 143 (10) of the Act to the extent applicable to an audit ofinternal financial controls with reference to the standalone financial statements. ThoseStandards and the Guidance Note require that we comply with ethical requirements and planand perform the audit to obtain reasonable assurance about whether adequate internalfinancial controls with reference to the standalone financial statements were establishedand maintained and whether such controls operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls with reference to the standalone financial statements andtheir operating effectiveness. Our audit of internal financial controls with reference tothe standalone financial statements included obtaining an understanding of such internalfinancial controls assessing the risk that a material weakness exists and testing andevaluating the design and operating effectiveness of internal control based on theassessed risk.
The procedures selected depend on the auditor's judgement including the assessment ofthe risks of material misstatement of the standalone financial statements whether due tofraud or error.
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 the standalone financial statements.
Meaning of Internal Financial controls with Reference to the Standalone FinancialStatements
A company's internal financial controls with reference to the standalone financialstatements is a process designed to provide reasonable assurance regarding the reliabilityof financial reporting and the preparation of the standalone financial statements forexternal purposes in accordance with generally accepted accounting principles. A company'sinternal financial controls with reference to the standalone financial statements includethose policies 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) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of the standalone financial statements in accordance with generally acceptedaccounting principles and that receipts and expenditures of the company are being madeonly in accordance 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 standalone financial statements.
Inherent Limitations of Internal Financial controls with Reference to the StandaloneFinancial Statements
Because of the inherent limitations of internal financial controls with reference tothe standalone financial statements including the possibility of collusion or impropermanagement override of controls material misstatements due to error or fraud may occurand not be detected. Also projections of any evaluation of the internal financialcontrols with reference to the standalone financial statements to future periods aresubject to the risk that the internal financial controls with reference to the standalonefinancial statements may become inadequate because of changes in conditions or that thedegree of compliance with the policies or procedures may deteriorate.
| ||For B S R & Co. LLP |
| || |
| ||Firm's Registration No:101248W/W-100022 |
| ||Sameer Mota |
|Mumbai || |
|12 May 2020 ||Membership No. 109928 |
| ||UDIN: 20109928AAAABG8830 |