To The Members of
OCTAL CREDIT CAPITAL LIMITED
Report on the Audit of the Standalone Financial Statements
We have audited the accompanying Ind AS Standalone Financial Statements of OCTALCREDIT CAPITAL LIMITED("the Company") which comprise the Balance Sheet asat March31 2021 the Statement of Profit and Loss (including Other Comprehensive Income)the Statement of Changes in Equity and the Statement of Cash Flows for the year thenended and notes to the Ind AS financial statements including a summary of significantaccounting policies and other explanatory information (hereinafter referred to as"Ind AS financial statements").
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid Ind AS financial statements give the information required bythe Companies Act2013 ("the Act") in the manner so required and give a true andfair view inconformity with the accounting principles generally accepted in Indiaincluding the Indian Accounting Standards ("Ind AS") prescribed under section133 of the Act of the state of affairs of the Company as at March 31 2021 its Losses(including other comprehensive income) changes in equity and its cashflows for the yearended on that date.
Basis for opinion
We conducted our audit in accordance with the standards on auditing specified undersection 143 (10) of the Companies Act 2013. Our responsibilities under those Standardsare further 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 obtained is sufficient and appropriate toprovide a basis for our opinion on the 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 Ind AS Standalone Financial Statements of the currentperiod. These matters were addressed in the context of our audit of the Ind AS StandaloneFinancial Statements as a whole and in forming our opinion thereon and we do not providea separate opinion on these matters.
|Key Audit Matters ||Auditor's Response Principal Audit Procedures |
| ||We started our audit procedures with the understanding of the internal control environment related to Impairment loss allowance. |
|1. Impairment loss allowance of loans ||Our procedures over internal controls focused on recognition and measurement of impairment loss allowance. We assessed the design and tested theoperating effectiveness of the selected key controls implemented by the Company. |
|Impairment loss allowance of loans ("Impairment loss allowance") is a key audit matter as the company has significant credit risk exposure. The value of loans on the balance sheet is significant and there is a high degree of complexity and judgment involved for the Company in estimating individual and collective credit impairment provisions write-offs against these loans and to additionally determine the potential impact of unprecedented COVID-19 pandemic on asset quality and provision of the Company. || |
| ||We also assessed whether the impairment methodology used by the Company is in accordance with the assumptions and methodology approved by the Board of Directors of the Company which is based on and in compliance with Ind AS 109"Financial instruments". More particularly we assessed the approach of the Company regarding the definition of default Probability of Default Loss Given Default and incorporation of forward-looking information for the calculation of ECL. |
|The Company s model to calculate expected credit loss ("ECL") is inherently complex and judgment is applied in determining the three- stage impairment model ("ECL Model") including the selection and input of forward- looking information. ECL provision calculations require the use of large volumes of data. The completeness and reliability of data can significantly impact the accuracy of the modelled impairment provisions. The accuracy of data flows and the implementation of related controls are critical for the integrity of the estimated impairment provisions. || |
| ||For loans which are assessed for impairment ona portfolio basis we performed particularly thefollowing procedures: |
| ||- tested the reliability of key data inputs and related management controls; |
| ||- checked the stage classification as at the balance sheet date as per definition of default; |
| ||- validated the ECL model and calculation; |
| ||- calculated the ECL provision manually for a selected sample. |
The Company s Board of Directors is responsible for the other information. The otherinformation comprises the information included in the Management Discussion and AnalysisBoard s Report including Annexures to Board s Report Report on Corporate Governance butdoes not include the Ind AS financial statements and our auditor s report thereon. Theabove mentioned other information are expected to be made available to us after the dateof this auditor s report.
Our opinion on the Ind AS financial statements does not cover the other information andaccordingly we do not express any form of assurance conclusion thereon.
In connection with our audit of the Ind AS financial statements our responsibility isto read the other information identified above when it becomes available and in doing soconsider whether the other information is materially inconsistent with the Ind ASfinancial statements or our knowledge obtained in the audit or otherwise appears to bematerially misstated.
When we read the other information if we conclude that there is a materialmisstatement therein we are required to communicate the matter to those charged withgovernance.
Management's responsibility for the Standalone 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 Ind AS financial statementsthat give a true and fair view of the financial position financial performance (includingother comprehensive income) changes in equity and cash flows of the Company in accordancewith the accounting principles generally accepted in India including Ind AS prescribedunder section 133 of the Act read with the Companies (Indian Accounting Standards) Rules2015 as amended. This responsibility also includes maintenance of adequate accountingrecords in accordance with the provisions of the Act for safeguarding of the assets of theCompany and for preventing and detecting frauds and other irregularities; selection andapplication of appropriate accounting policies; making judgments and estimates that arereasonable and prudent; and design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the accuracy andcompleteness of the accounting records relevant to the preparation and presentation ofthe Ind AS financial statements that give a true and fair view and are free from materialmisstatement whether due to fraud or error.
In preparing the Ind AS financial statements management is responsible for assessingthe
Company s ability to continue as a going concern disclosing as applicable mattersrelated to going concern and using the going concern basis of accounting unless managementeither intends to liquidate the Company or to cease operations or has no realisticalternative but to do so.
Those Board of Directors are also responsible for overseeing the Company s financialreporting process.
Auditor's responsibilities for the audit of the Ind AS 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 Companies Act 2013 we are also responsible for expressing our opinion on whetherthe company has adequate internal financial controls system in place and the operatingeffectiveness of such controls
Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management s use of the going concern basisof accounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the Company sability to continue as a going concern. If we conclude that a material uncertainty existswe are required to draw attention in our auditor s report to the related disclosures inthe Standalone Financial Statements or if such disclosures are inadequate to modify ouropinion. 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 tocontinue 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 alsoprovide those charged with governance with a statement that we have complied with relevantethical 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 withthose charged with governance we determine those matters that were of most significancein the audit of the Standalone Financial Statements of the current period and aretherefore the key audit matters. We describe these matters in our auditor s report unlesslaw or regulation 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
As required by the Companies (Auditor s Report) Order 2016 ("the Order")issued by the Central Government of India in terms of sub-section (11) of section 143 ofthe Companies Act 2013 we give in the Annexure "A" a statement on the mattersspecified in paragraphs 3 and 4 of the Order to the extent applicable. As required bySection 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 Other ComprehensiveIncome) the Statement of Changes in Equity and the Statement of Cash Flows dealt with bythis report are in agreement with the books of account;
(d) In our opinion the aforesaid Standalone Financial Statements comply with the IndAS prescribed under section 133 of the Act read with the Companies (Indian AccountingStandards) Rules 2015 as amended;
(e) On the basis of the written representations received from the directors as on March31 2021 taken on record by the board of directors none of the directors is disqualifiedas on March 31 2021 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 over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate Report in "Annexure B".
(g) With respect to the other matters to be included in the Auditor s Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand to the best of our information and according to the explanations given to us;
i. The Company does not have any pending litigations which would impact its StandaloneFinancial Statements;
ii. The Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses; and
iii. There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company.
Annexure -A to the Independent Auditors' Report
Referred to in paragraph 1 under the heading Report on Other Legal & RegulatoryRequirement of our report of even date to the Standalone Financial Statements of theCompany for the year ended March 31 2021:
1) (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets;
(b) The Fixed Assets have been physically verified by the management in a phasedmanner designed to cover all the items over a period of three years which in ouropinion is reasonable having regard to the size of the company and nature of itsbusiness. Pursuant to the program a portion of the fixed asset has been physicallyverified by the management during the year and no material discrepancies between the booksrecords and the physical fixed assets have been noticed.
(c) According to the information and explanation received by us as the company owns noimmovable properties the requirement on reporting whether title deeds of immovableproperties held in the name of the company is not applicable.
2) (a) The management has conducted the physical verification of inventory atreasonable intervals.
(b) As explained to us no material discrepancies have been noticed on physicalverification of inventories as compared to the book records.
3) The company has given loans to Two (2) companies covered in the register maintainedunder section 189 of the Companies Act 2013. In our opinion the terms and conditions onwhich loans have been granted to companies firms or other parties listed in the registersmaintained under section 189 of the Companies Act 2013 are not prejudicial to theinterest of the company.
The parties have been regular in the payment of interest.
There is no overdue amount of loan granted to companies firms or limited liabilitypartnerships or other parties listed in the registers maintained under section 189 of theCompanies Act 2013.
4) In our opinion and according to the information and explanations given to us thecompany has complied with the provisions of section 185 and 186 of the Companies Act 2013In respect of loans investments guarantees and security.
5) The Company has not accepted any deposits from the public and hence the directivesissued by the Reserve Bank of India and the provisions of Sections 73 to 76 or any otherrelevant provisions of the Act and the Companies (Acceptance of Deposit) Rules 2015 withregard to the deposits accepted from the public are not applicable.
6) As informed to us the maintenance of Cost Records has not been specified by theCentral Government under sub-section (1) of Section 148 of the Act in respect of theactivities carried on by the company.
7) (a) According to information and explanations given to us and on the basis of ourexamination of the books of account and records the Company has been generally regularin depositing undisputed statutory dues including Provident Fund Employees StateInsurance Income-Tax Sales tax Service Tax Duty of Customs Duty of Excise Valueadded Tax Cess and any other statutory dues with the appropriate authorities.
(b)According to the information and explanations given to us no undisputed amountspayable in respect of the above were in arrears as at March 31 2021 for a period of morethan six months from the date on when they become payable.
(c) According to the information and explanation given to us there are no dues ofincome tax sales tax service tax duty of customs duty of excise value added taxoutstanding on account of any dispute.
8) According to records of the company the company has not borrowed from financialinstitutions or banks or government issued debentures till 31st March 2021. Hence in ouropinion the questions of reporting on defaults in repayment of loans or borrowing to afinancial institutions bank government or dues to debentures.
9) Based upon the audit procedures performed and the information and explanations givenby the management the company has not raised moneys by way of initial public offer orfurther public offer including debt instruments and term Loans. Accordingly theprovisions of clause 3 (ix) of the Order are not applicable to the Company and hence notcommented upon.
10) Based upon the audit procedures performed and the information and explanationsgiven by the management we report that no fraud by the Company or on the company by itsofficers or employees has been noticed or reported during the year.
11) Based upon the audit procedures performed and the information and explanationsgiven by the management the managerial remuneration has been paid or provided inaccordance with the requisite approvals mandated by the provisions of section 197 readwith Schedule V to the Companies Act;
12) In our opinion the Company is not a Nidhi Company. Therefore the provisions ofclause 4 (xii) of the Order are not applicable to the Company.
13) 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 and details of suchtransactions have been disclosed in the Standalone Financial Statements as required by theapplicable accounting standards.
14) Based upon the audit procedures performed and the information and explanationsgiven by the management the company has not made any preferential allotment or privateplacement of shares or fully or partly convertible debentures during the year underreview. Accordingly the provisions of clause 3 (xiv) of the Order are not applicable tothe Company and hence not commented upon.
15) Based upon the audit procedures performed and the information and explanationsgiven by the management the company has not entered into any non-cash transactions withdirectors or persons connected with him. Accordingly the provisions of clause 3 (xv) ofthe Order are not applicable to the Company and hence not commented upon.
16) The Company is a Non Banking Financial Company and is required to be registeredunder section 45 IA of the Reserve Bank of India Act 1934 and accordingly have obtainedthe required registration certificate from the Reserve Bank of India.
"Annexure B" to the Independent Auditor's Report of even date on the Ind ASStandalone Financial Statements of OCTAL CREDIT CAPITAL LIMITED
Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section143 of the Companies Act 2013 ("the Act")
We have audited the internal financial controls over financial reporting of OCTALCREDIT CAPITAL LIMITED ("the Company") as of March 31 2021 in conjunctionwith our audit of the Ind AS Standalone Financial Statements of the Company for the yearended on that date.
Management's Responsibility for Internal Financial Controls
The Company s management is responsible for establishing and maintaining internalfinancial controls based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal Financial Controls over Financial Reportingissued by the Institute of Chartered Accountants of India. These responsibilities includethe design implementation and maintenance of adequate internal financial controls thatwere operating effectively for ensuring the orderly and efficient conduct of its businessincluding adherence to company s policies the safeguarding of its assets the preventionand detection of frauds and errors the accuracy and completeness of the accountingrecords and the timely preparation of reliable financial information as required underthe 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 issued by ICAI and deemedto be prescribed under section 143(10) of the Companies Act 2013 to the extentapplicable to an audit of internal financial controls both 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 auditinvolves performing procedures to obtain audit evidence about the adequacy of the internalfinancial 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 Standalone Financial Statements whether due to fraud or error. Webelieve that the audit evidence we have obtained is sufficient and appropriate to providea basis for our audit opinion on the Company s 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 Standalone Financial Statements for external purposes in accordance withgenerally accepted accounting principles. A company's internal financial control overfinancial reporting includes those policies and procedures that (1) pertain to themaintenance of records that in reasonable detail accurately and fairly reflect thetransactions and dispositions of the assets of the company; (2) provide reasonableassurance that transactions are recorded as necessary to permit preparation of StandaloneFinancial Statements in accordance with generally accepted accounting principles and thatreceipts and expenditures of the company are being made only in accordance withauthorisations of management and directors of the company; and (3) provide reasonableassurance regarding prevention or timely detection of unauthorised acquisition use ordisposition of the company's assets that could have a material effect on the StandaloneFinancial Statements.
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 financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.
In our opinion the Company has in all material respects an adequate internalfinancial controls system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at March 31 2021 based on theinternal control over financial reporting criteria established by the Company consideringthe essential components of internal control stated in the Guidance Note on Audit ofInternal Financial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India.
|Place:- 5 & 6 Fancy Lane 3rd Floor ||For VASUDEO & ASSOCIATES |
|Room No. 9 Kolkata- 700 001 ||Chartered Accountants |
|Dated: The 14th Day of May 2021 ||CA. SAURABH MODI |
| ||(Partner) |
|UDIN- ||Membership. No. 303815 |
| ||Firm Reg No. 319299E |