To the Members of Onward Technologies Limited
Report on the Audit of the Standalone FinancialStatements
1. We have audited the accompanying standalone financial statements ofOnward Technologies Limited (the "Company") which comprise the balance sheet asat March 31 2020 and the statement of Profit and Loss ((including Other ComprehensiveIncome) statement of changes in equity and statement of cash flows for the year thenended and notes to the standalone financial statements including a summary ofsignificant accounfing policies and other explanatory informafion.
2. In our opinion and to the best of our informafion and according tothe explanafions given to us the aforesaid standalone financial statements give theinformafion required by the Companies Act 2013 (the "Act") in the manner sorequired and give a true and fair view in conformity with the accounfing principlesgenerally accepted in India of the state of affairs of the Company as at March 31 2020and total comprehensive income (comprising of profit and other comprehensive income)changes in equity and its cash flows for the year then ended.
Basis for opinion
3. We conducted our audit in accordance with the Standards on Audifing(SAs) specified under section 143(10) of the Act. Our responsibilifies under thoseStandards are further described in the Auditor's Responsibilifies for the Audit of thestandalone Financial Statements secfion of our report. We are independent of the Companyin accordance 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 responsibilifies 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.
Emphasis of matter
4. We draw your attention to Note 38 to the standalone financialstatements which explains the uncertainfies and the management's assessment of financialimpact on standalone financial statements of the Company due to lockdowns and otherrestrictions imposed by the Government of India and other condifions related to theoutbreak of Coronavirus (COVID-19) pandemic situafion which might impact the operafions ofthe Company for which a definifive assessment in subsequent period is highly dependentupon circumstances as they evolve. Our opinion is not modified in respect of this matter.
Key audit matters
5. Key audit matters are those matters that in our professionaljudgment were of most significance in our audit of the standalone financial statements ofthe current period. These matters were addressed in the context of our audit of thestandalone financial statements as a whole and in forming our opinion thereon and we donot provide a separate opinion on these matters.
|Key audit matter ||How our audit addressed the key audit matter |
|Transition from the Indian Accounting Standard Ind AS 17 to Ind AS 116 |
|Refer notes 1 (g) and 31 in the Standalone Financial Statements. ||Our audit procedures included the following: |
| Obtain an understanding of the process followed by the management and testing of the design and operating effectiveness of key controls around accounting for leases. |
|Effective from April 1 2019 the Company has adopted Ind AS 116 Leases". The Company has applied the standard retrospectively with the cumulative effect (if any) being recognised at the date of initial application in the retained earnings. |
| Review of the accounting policy and options elected as a part of transition process |
|The application of new standard leads to recognition of right of use asset and lease Liability at the present value of the remaining lease payments discounted at the incremental borrowing rate. || Evaluating the underlying lease contracts and ensuring that relevant data was recorded correctly for representative lease samples selected for testing. |
|In transition to new standard management has applied following judgements and estimates || Assessing the appropriateness of the assumptions of discount rates application of single discount rate for portfolio of leases in light of the market conditions publicly available information and consistency with other assumptions made in the preparation of standalone financial statements. |
| Identifying if contract conveys right to use the asset |
| Assessment of lease term considering options to renew and terminate the lease |
| Identification of incremental borrowing rate as discount rate || Recalculating the right of use the asset and lease liability workings for arithmetical accuracy for samples selected for testing |
|We have considered this to be a key audit matter as the transition to new standard is significant to our audit and the balances as on transition date as well as at balance sheet date are material to the standalone financial statements. Further implementation process requires extraction and processing of extensive data that required significant audit efforts to test the completeness and adequacy of such information. |
| Reviewing key service and supply contracts enquiries with finance personnel scanning of expense ledgers and testing reconciliation with operating lease commitments to identify any arrangement or expense in the nature of lease and ensure the completeness of the information collected by the management. |
| || Assessing whether disclosures made in the standalone financial statement are appropriate and are in line with the requirements of Ind AS 116. |
| ||Based on the above procedures performed we did not find any significant exceptions to accounting presentation and disclosures made by the management for transition to Ind AS 116. |
Assessment of Valuation of Employee Stock Options Scheme:
|Refer note 1 (t) and note 37 in the Standalone Financial ||Our audit procedures included the following: |
|Statements. || Obtaining an understanding of the Employee Stock Option Scheme testing the design and operating effectiveness of the key controls around it. |
|The Company has an Employee Stock Option Plans that are accounted for in accordance with Ind AS 102 "Share based payments". |
| Evaluation of competency and independence of management's expert through enquiry procedures |
|The management has engaged an independent expert who determines the value of options granted using Black and Scholes valuation model. The valuation model requires certain significant judgements like expected life of share option volatility and dividend yield etc. |
| Discussing with the Management's Expert the appropriateness of significant assumptions used in the valuation and independently evaluating the appropriateness of the valuation model and the key assumptions used as input in the valuation. |
|Further accounting for these options also require management to estimate the expected forfeiture before vesting of options. |
| Checking the adequacy of the management estimate for expected forfeiture with regard to historical accuracy |
|We have determined this to be a key audit matter considering the judgements involved in underlying estimates and assumptions and expense during the year is material to the standalone financial statements. || Ensuring the arithmetical accuracy of the expense accounted during the year based on fair value arrived. |
| Assessing whether disclosures made in the standalone financial statements are appropriate and are in line with the requirements of Ind AS 102 |
| ||Based on the above audit procedures we did not find any significant exceptions in respect of assessment of valuation of Employee Stock Options Scheme. Further disclosures made are appropriate and are in line with the requirements of Ind AS 102. |
|Assessment of Valuation of Investment in Preference Shares |
|Refer note 1 (l) note 5 and note 33 in the Standalone Financial Statements. ||Our audit procedures included the following: |
| Obtaining an understanding of the management's investment valuation process and testing of the design and operating effectiveness of key controls around it. |
|As at March 31 2020 the Company has investment in preference shares of a subsidiary amounting to Rs. 988.21 lakhs which are carried at fair value through profit and loss in accordance with requirements of Ind AS 109. |
| Evaluation of the competence and independence of Management's expert through enquiry procedures |
|This investment has been classified as Level 3 in the fair value hierarchy. Valuation has been carried out by independent valuer. || Assessing the reasonableness of valuation model and key assumptions/inputs used in the valuation such as cash flow projections market multiples terminal growth rate and discount rate through comparing it with comparable industries and market information available. |
|Valuation of level 3 investments is inherently subjective since these are valued using inputs other than quoted prices in an active market which are generally not observable. Key inputs used in the valuation are cash flow projections market multiples growth rate terminal rate discount rate etc. Given the inherent subjectivity in the valuation of level 3 investments overall amount of investment in standalone financial statements and the nature and extent of audit procedures involved we determined this to be a key audit matter. || Involvement of auditor's valuation expert to assess the methodologies used and reasonableness of key assumptions used by the management |
| Performing sensitivity analysis on the key assumptions such as growth rate including terminal growth rate discount rate to determine whether any reasonable and foreseeable change in assumptions would lead to significant change in the fair value of investment |
| Validation of the source data and testing the arithmetical accuracy of the calculation of valuation of investments. |
| ||Based on above audit procedures we consider that the management's assessment of the fair valuation of investments in preference shares is reasonable. |
|Assessment of the impairment to the carrying value of investment in wholly owned subsidiaries |
|Refer to note 1(h) and note 5 in the Standalone Financial Statements. ||Our audit procedures included the following: |
| Obtaining an understanding of the management's |
|The Company has gross investments amounting to Rs 1792.84 lakhs in Onward eServices Limited and Onward Technologies GmbH which are the wholly owned subsidiaries of the Company. ||process around the impairment assessment including the budgeting process and valuation workings and testing the design and operating effectiveness key controls around it |
|During the year subsidiary companies have incurred losses and have accumulated losses as at year end which is considered as an indicator of impairment as per Ind AS 36. || Assessing the appropriateness of the methodology and the valuation model used by management to derive the value in use of investments |
| Assessing the historical accuracy of the Company's forecasts by comparing the forecasts with the actual performance |
|Management has made evaluation of impairment risk in carrying value of investment in subsidiaries using estimated discounted cash flows (value in use) model and concluded that impairment provision made as on balance is adequate and no additional provision is required against these investments. |
| Testing the mathematical accuracy of the underlying calculations and comparing the forecasts with the latest Board-approved budgets |
|We considered this as a key audit matter in our audit considering the significant value of the investments and management judgements involved in assessing the appropriateness of the valuation methodology estimates of future cash flows and assumptions like Weighted Average Cost of Capital (WACC) growth rate terminal value used in the valuation model. || Assessing the appropriateness of key assumptions like sales and EBITDA growth rates terminal growth rate and Weighted Average Cost of Capital (WACC) used by the Management by comparing the same with comparable industry and market information available. |
|We considered this as a key audit matter in our audit considering the significant value of the investments and management judgements involved in assessing the appropriateness of the valuation methodology estimates of future cash flows and assumptions like Weighted Average Cost of Capital (WACC) growth rate terminal value used in the valuation model. || Performing a sensitivity analysis over the key assumptions as mentioned above to determine whether any reasonable and foreseeable change in assumptions to assess their potential impact on impairment results and ranges of possible outcomes of the recoverable amounts. |
|Based on the above procedures performed we consider that management's assessment of impairment to the carrying value of investments in wholly owned subsidiaries is reasonable. |
6. The Company's Board of Directors is responsible for the otherinformation. The other information comprises the information included in the Director'sreport but does not include the standalone financial statements and our auditor's reportthereon.
Our opinion on the standalone financial statements does not cover theother information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the standalone financial statementsour responsibility is to read the other information and in doing so consider whether theother information is materially inconsistent with the standalone 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 in this regard.
Responsibilities of management and those chargedwith governance for the standalone financial statements
7. The Company's Board of Directors is 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 financial position standalonefinancial performance standalone changes in equity and standalone cash flows of theCompany in accordance with the accounting principles generally accepted in Indiaincluding the Accounting Standards 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 the accuracy and completeness of the accountingrecords relevant to the preparation and presentation of the standalone financialstatements that give a true and fair view and are free from material misstatement whetherdue to fraud or error.
8. In preparing the standalone 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 Directorsare also responsible for overseeing the Company's financial reporting process.
Auditor's responsibilities for the audit of thestandalone financial statements
9. Our objectives are to obtain reasonable assurance about whether thestandalone financial statements as a whole are free from material misstatement whetherdue 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 financial statements.
10. As part of an audit in accordance with SAs we exerciseprofessional judgment and maintain professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of thestandalone 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 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 standalonefinancial statements 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 standalone financial statements or if such disclosures areinadequate to modify our opinion. Our conclusions are based on the audit evidenceobtained up to the date of our auditor's report. However future events or conditions maycause the Company to cease to continue as a going concern.
Evaluate the overall presentation structure and content of thestandalone financial statements including the disclosures and whether the standalonefinancial statements represent the underlying transactions and events in a manner thatachieves fair presentation.
11. 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.
12. We also provide those charged with governance with a statement thatwe have 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.
13. From the matters communicated with those charged with governancewe determine those matters that were of most significance in the audit of the standalonefinancial statements of the current period and are therefore the key audit matters. Wedescribe these matters in our auditor's report unless law or regulafion precludes publicdisclosure about the matter or when in extremely rare circumstances we determine that amatter should not be communicated in our report because the adverse consequences of doingso would reasonably be expected to outweigh the public interest benefits of suchcommunicafion.
Report on other legal and regulatory requirements
14. As required by the Companies (Auditor's Report) Order 2016("the Order") issued by the Central Government of India in terms of sub-secfion(11) of section 143 of the Act we give in the "Annexure B" a statement on thematters specified in paragraphs 3 and 4 of the Order to the extent applicable.
15. As required by Secfion 143(3) of the Act we report that:
a) We have sought and obtained all the informafion 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 have beenkept 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 othercomprehensive income) the Statement of Changes in Equity and Cash Flow Statement dealtwith by this Report are in agreement with the books of account.
d) In our opinion the aforesaid standalone financial statements complywith the Accounting Standards specified under Secfion 133 of the Act.
e) On the basis of the written representafions received from thedirectors as on March 31 2020 taken on record by the Board of Directors none of thedirectors is disqualified as on March 31 2020 from being appointed as a director in termsof Secfion 164 (2) of the Act.
f) With respect to the adequacy of the internal financial controls withreference to standalone financial statements of the Company and the operafingeffectiveness of such controls refer to our separate Report in "Annexure A".
g) 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 inour opinion and to the best of our informafion and according to the explanafions given tous:
i. The Company has disclosed the impact of pending lifigafions on itsfinancial posifion in its standalone financial statements - Refer Note 29(a) to thestandalone financial statements;
ii. The Company has long term contracts as at March 31 2020 for whichthere are no material foreseeable
losses. The company did not have any derivative contracts as at March31 2020.
iii. There were no amounts which were required to be transferred to theInvestor Educafion and Protecfion Fund by the Company during the year ended March 312020.
iv. The reporting on disclosures relafing to Specified Bank Notes isnot applicable to the Company for the year ended March 31 2020.
16. The Company has provided for managerial remuneration in accordancewith the requisite approvals mandated by the provisions of Section 197 read with ScheduleV to the Act.
| ||For Price Waterhouse Chartered Accountants LLP |
| ||Firm Registration Number: 012754N/N500016 |
| ||Neeraj Sharma |
| ||Partner |
|Place: Pune ||Membership Number : 108391 |
|Date: May 15 2020 ||UDIN: 20108391AAAADE7621 |