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Panache Digilife Ltd.

BSE: 538424 Sector: Consumer
NSE: PANACHE ISIN Code: INE895W01019
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Panache Digilife Ltd. (PANACHE) - Auditors Report

Company auditors report

To the Shareholders of M/s. Panache Digilife Limited

We have audited the accompanying Standalone Ind AS financial statementsof M/s Panache Digilife Limited (the "Company") which comprise theBalance Sheet as at March 31 2020 and the Statement of Profit and Loss (including OtherComprehensive Income) the Statement of Cash Flows and the Statement of Changes in Equityfor the year then ended and a summary of significant accounting policies and otherexplanatory information (Hereinafter referred to as the "Standalone FinancialStatements").

Opinion

In our opinion and to the best of our information and according to theexplanations given to us by the management of the Company the aforesaid Standalone Ind ASFinancial Statements give the information required by the Companies Act 2013 ('the Act')in the manner so required and give a true and fair view in conformity with the accountingprinciples generally accepted in India of the state of affairs of the Company as at March312020 and its profit (including Other Comprehensive Income) changes in equity andstatement of cash flows for the year ended on that date.

Basis for Opinion

We conducted our audit of the standalone financial statements inaccordance with the Standards on Auditing (SAs) specified under section 143(10) of theCompanies Act 2013. Our responsibilities under those Standards are further described inthe Auditor's responsibilities for the Audit of the Standalone Ind AS FinancialStatements section of our report. We are independent of the Company in accordance with theCode of Ethics issued by the Institute of Chartered Accountants of India (ICAI) togetherwith the ethical requirements that are relevant to our audit of the Standalone Ind ASFinancial Statements under the provisions of the Companies Act 2013 and the Rules madethereunder and we have fulfilled our other ethical responsibilities in accordance withthese requirements and the ICAI's Code of Ethics. We believe that the audit evidenceobtained by us is sufficient and appropriate to provide a basis for our audit opinion onthe standalone financial statements.

Key Audit Matters

Key audit matters (KAM) 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.

We have determined the matters described below to be the key auditmatters to be communicated in our report

Key Audit Matter How our audit addressed the Key audit Matter
Adoption of Ind AS 116 Leases
As described in Note-1 (15) to the Standalone financial statements the company has adopted Ind AS 116 Leases in the current year. The application and transition to this accounting standard is complex and is an area of focus in our audit since application of the same is based on a significant level of judgements and estimates including the determination of discount rates and lease term. Ind AS 116 introduces a new lease accounting model wherein lessees are required to recognise a right-of-use (ROU) asset and a lease liability arising from a lease on the balance sheet. The lease liabilities are initially measured by discounting future lease payments during the lease term as per the contract/ arrangement. Our audit procedures on adoption of Ind AS 116 include:
Additionally the standard mandates detailed disclosures in respect of transition. Refer to Note No.1(15) and Note No.49 of the Standalone Ind AS Financial Statements • Assessed and tested new processes and controls established by the management in identifying lease arrangements with respect to the new lease accounting standard (Ind AS 116);
• Assessed the company's evaluation on identification of leases based on the contractual arrangements and our knowledge of business;
• Upon transition as at 01st April 2019:
i) Evaluated the method of transition and related adjustments;
ii) Tested completeness of the lease data by reconciling the Company's operating lease commitments to data used in computing ROU asset and the lease liabilities. Hi) Assessed the appropriateness of practical expedients used while transitioning to Ind AS 116.
• Additionally we performed the following procedures i) Assessed the key terms and conditions of each lease with the underlying lease contracts;
ii) Evaluated the computation of lease liabilities and challenged the key estimates such as discount rates and the lease term.
• Assessed and tested the presentation and disclosures provided by the management in the Standalone Ind AS Financial Statements relating to Ind AS 116 including disclosures relating to transition and practical expedients applied.
Financial Assistance provided to of Wholly owned Subsidiary- Technofy Digital Private Limited
With a view to expand the business of the We have carried out the following audit procedures to organization and increase their geographical address our Key audit considerations with respect to the reach the Company has incorporated a said matter;- wholly owned subsidiary. Tested whether the company has complied with the subsidiary has increased the compliance provisions of the companies act while providing such considerations of the company with respect financial assistance to the subsidiary to consolidation related party transactions
• Understood the objective of management behind the With a view to provide financial assistance to incorporation of such subsidiary and evaluated the the subsidiary for its initial phase of compliance with different laws and regulations for operations the company has provided a loan incorporation of subsidiary. to Subsidiary to the tune of Rs.597.79 lakhs • Evaluated the appropriateness of the value of debt covenants etc. Further the company guarantee provided in the financial statements by the had to evaluate the recoverability of the management by> financial assistance provided to such
• Evaluated the business model of the newly as on 31.03.2020 which shall be repayable incorporated wholly owned subsidiary and assessed the by the subsidiary on demand and has also ability of the subsidiary to generate enough cash flows provided Corporate Guarantee of Rs.1200 m future' order to repay the loan provided by the company thereby determining whether any provision Lakhs for enabling the company to raise for credit losses were required on such loan provided. further capital from external sources like 5 Verified whether the company has complied with its banks and Financial institutions at lower debt covenants while providing such financial costs. assistance to its subsidiary. i) Assessing the qualification and capabilities of the subsidiary in the initial stages of business expert appointed by the management for the which involved a significant level of purpose of valuation of such guarantee to judgement determine the extent of reliance to be placed upon Refer Note-1 (11) and Note-53 to the the report provided by such expert. .
Incorporation of such wholly owned . ii) Verifying the appropriateness of data used by the Standalone financial statements expert. For the purpose of valuation of guarantee Testing the appropriateness and practical feasibility of assumptions used by the expert while determining the value of guarantee.
iii) Checking the appropriateness of the method used by the expert to determine the value of the guarantee.
• Assessed and tested the presentation and disclosures provided by the management in the Standalone Ind AS
Financial Statements relating to such Financial assistance provided by the company to its wholly owned subsidiary.
Impairment of Foreign Subsidiary We carried out procedures to understand management's process for identifying impairment triggers and considered management's assessment of impairment in the mentioned area. Our audit procedures included the following:
As described in Note-7(b) to the Standalone financial statements Owing to continuous losses in subsidiary the Management anticipates that the possibility of recoverability of investment in the subsidiary is low and hence the cost of investment in such subsidiary has been impaired as per the provisions of Ind AS 36 "Impairment of Assets". • Assessing internal controls designed for identification of impairment indicators.
• Evaluating the appropriateness of the Company's judgment regarding identification of assets which may be impaired.
• Obtained specific representations detailing the basis on which impairment was determined.
• Considered the completeness and accuracy of the disclosures which are included in Note- 1(8) and Note - 7 of the standalone financial statements.

Information Other than the Standalone Financial Statements andAuditor's Report

The Board of Directors of the Company are responsible for thepreparation of other information. The other information comprise the information includedin the Management Discussion and Analysis Board's Report including Annexures toBoard's Report Business Responsibility Report Corporate Governance andShareholder's Information but does not include the standalone financial statementsand our auditor's report.

Our opinion on the standalone financial statements does not cover theother information and we do not express any form of assurance conclusion thereon. Inconnection with our audit of the standalone financial statements our responsibility is toread the other information and in doing so consider whether the other information ismaterially inconsistent with the standalone financial statements or our knowledge obtainedduring the course of our audit or otherwise appears to be materially misstated.

If based on the work we have performed we conclude that there ismaterial misstatement of this other information we are required to report that fact. Wehave nothing to report in this regard.

Management's Responsibility for the Standalone FinancialStatements

The Company's Board of Directors are responsible for the mattersstated in section 134(5) of the Companies Act 2013 (the "Act") with respect tothe preparation of these standalone financial statements that give a true and fair view ofthe financial position financial performance total comprehensive income cash flows andchanges in equity of the Company including its joint operation companies in accordancewith the Ind AS and accounting principles generally accepted in India.

This responsibility also includes maintenance of adequate accountingrecords in accordance with the provisions of the Act for safeguarding the assets of therespective Company and for preventing and detecting frauds and other irregularities;selection and application of appropriate accounting policies; making judgments andestimates that are reasonable and prudent; and design implementation and maintenance ofadequate internal financial controls that were operating effectively for ensuring theaccuracy and completeness of the accounting records relevant to the preparation andpresentation of the standalone financial statements that give a true and fair view and arefree from material misstatement whether due to fraud or error.

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.

The Board of Directors is also responsible for overseeing theCompany's financial reporting process.

Auditor's Responsibility for the Audit of the Standalone FinancialStatements

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 materialif individually or in the aggregate they could reasonably be expected to influence theeconomic decisions of users taken on the basis of these standalone financial statements.

As part of an audit in accordance with SAs we exercise professionaljudgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of thestandalone 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 financial control relevantto the audit in order to design audit procedures that are appropriate in thecircumstances. Under section 143(3)(i) of the Act we are also responsible for expressingour opinion on whether the Company has adequate internal financial controls systems 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 thegoing concern basis of accounting and based on the audit evidence obtained whether amaterial uncertainty exists related to events or conditions that may cast significantdoubt on Company's ability to continue as a going concern. If we conclude that amaterial uncertainty exists we are required to draw attention in our auditor'sreport to the related disclosures in the standalone financial statements or if suchdisclosures are inadequate to modify our opinion. Our conclusions are based on the auditevidence obtained up to the date of our auditor's report. However future events orconditions may cause the Company to cease to continue as a going concern.

• Evaluate the overall presentation structure and content of thefinancial statements including the disclosures and whether the standalone financialstatements represent the underlying transactions and events in a manner that achieves fairpresentation.

• Obtain sufficient appropriate audit evidence regarding thefinancial information of the Company and its joint operations to express an opinion on thestandalone financial statements. We are responsible for the direction supervision andperformance of the audit of the standalone financial statements of such entities includedin the standalone financial statements.

Materiality

Materiality is the magnitude of misstatements in the standalonefinancial statements that individually or in aggregate makes it probable that theeconomic decisions of a reasonably knowledgeable user of the standalone financialstatements may be influenced.

We consider quantitative materiality and qualitative factors in (i)planning the scope of our audit work and in evaluating the results of our work; and (ii)to evaluate the effect of any identified misstatements in the standalone financialstatements.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor's Report) Order 2016issued by the Central Government of India in terms of Section 143(11) of the CompaniesAct 2013 we enclose herewith; ‘Annexure- A' a statement on the mattersspecified in paragraphs 3 and 4 of the said Order.

2. As required by Section 143(3) of the Act we report that:

a. We have sought and obtained all the information and explanationswhich to the best of our knowledge and belief were necessary for the purpose of our audit;

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 Statement of Changes in Equity and the 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 Section 133 of the Act read with Rule 7 ofthe Companies (Accounts) Rules 2014;

e. On the basis of written representations received from the directorsas on 31st March 2020 and taken on record by the Board of Directors none ofthe directors is disqualified as on 31st March 2020 from being appointed as adirector in terms of Section 164(2) of the Companies Act 2013; and

f. Our Opinion on the adequacy of the Internal Financial Controls ofthe company over the financial reporting and the operating effectiveness of such controlshas been given by us in a separate report in ‘Annexure-B'.

g. With respect to the other matters to be included in theAuditor's Report in accordance with Rule 11 of the Companies (Audit and Auditors)Rules 2014 in our opinion and to the best of our information and according toexplanations given to us:

(i) The Company has disclosed that there are no pending litigationswhich would impact its standalone financial statements.

(ii) The Company did not have any long term contracts for which therewere any material foreseeable losses;

(iii) The Company is not required to transfer any amount to theInvestor Education and Protection Fund by the Company.

Report on the matters specified in paragraphs 3 and 4 of the Companies(Auditor's Report) Order

2016 issued by the Central Government of India in terms of Section143(11) of the Companies Act

2013

(i) In respect of Property Plant and Equipment:

a) The Company has maintained proper records showing full particularsincluding quantitative details and situation of Property Plant and Equipment on the basisof available information.

b) As explained to us all the Property Plant and Equipment have beenphysically verified by the management in a phased manner over a period of 2 years; whichin our opinion is reasonable having regard to the size of the company and the nature ofits assets.Pursuant to the program certain Property Plant and Equipmentwere physicallyverified by the management during the year. According to the information and explanationsgiven to us no material discrepancies were noticed on such verification.

c) Based on the information & explanation given to us and therecords examined by us and based on the examination of registered sale deed/transferdeed/conveyance deed provided to us we report that the title deeds comprising all theimmovable properties of land and buildings(lncluding land whose title deeds have beenpledged as security against loan taken by the company) are held in the name of theCompany or in the erstwhile name as at balance sheet date except for the property situatedat Bhiwandi which is registered office of the company which has been taken on lease by thecompany.

(ii) a) The physical verification of inventory & spares has beenconducted at reasonable intervals by the management and no material discrepancies werenoticed on such verification between physical stock and book records.

(iii) In our opinion and according to the information and explanationsgiven to us we are of the opinion that the terms & condition on which the unsecuredloans have been granted to the subsidiary companies were not prima facieprejudicial to the interest of the Company.

(iv) In our opinion and according to the information and explanationsgiven to us the Company has complied with the provisions of Sections 185 and 186 of theCompanies Act 2013 in respect of grant of loans making investments and providingguarantees and securities as applicable.

(v) According to the information and explanations given to us theCompany has not accepted any deposits from the public to which the directives issued bythe Reserve Bank of India and the provisions of Section 73 to Section 76 or any otherrelevant provisions of the Companies Act 2013 and the rules framed there under areapplicable.

(vi) According to the information and explanations given to us theCompany is not required to maintain any cost records as specified by the CentralGovernment under sub-section (1) of section 148 of the Companies Act 2013.

(vii) a. According to the information and explanations given to us theCompany is regular in depositing undisputed statutory dues including Provident fundEmployee's State Insurance Corporation Income tax VAT CST Custom duty Cess GSTand any other statutory dues with the appropriate authorities during the year.

b. According to the information and explanations given to us noundisputed amounts payable in respect of such statutory dues were outstanding as on 31stMarch 2020 for a period of more than six months from the date they became payable.

(viii) On the basis of our examination and according to the informationand explanations given to us the Company has not defaulted in re-payment of its dues tothe Banks and no amounts were borrowed by the Company through Debentures from anyfinancial institution.

(ix) In our opinion and according to the information and explanationsprovided by the management the Company has utilized term loans & other borrowing forthe purpose for which it was obtained.

(x) Based on the audit procedures performed for the purpose ofreporting the true & fair view of the financial statements and according toinformation & explanations provided by the management no fraud on or by the Companyhas been noticed or reported during the course of our audit.

(xi) In our opinion and according to the information and explanationsgiven to us the company has paid/provided managerial remuneration in accordance with therequisite approvals mandated by the provisions of Section 197 read with Schedule V of theAct.

(xii) In our opinion and according to the information and explanationgiven to us the company is not a Nidhi company. Therefore provisions of clause 3(xii) ofthe Order is not applicable to our company.

(xiii) All the transactions with related parties are in compliance withsections 177 and 188 of Companies Act 2013 where applicable for all transactions withrelated parties & details of related party transactions have been disclosed in theStandalone Ind AS Financial Statements as required by the applicable accounting standards.

(xiv) According to the information & explanations provided to us& on overall examination of balance sheet the company has not made any preferentialallotment or private placement of shares or fully or partly convertible debentures duringthe year under review & hence reporting requirement under clause 3(xiv) of the Orderis not applicable to the company.

(xv) According to the information & explanations provided to usbythe management the company has not entered into any non-cash transactions with directorsor persons connected with him as referred to in Section 192 of the Act.

(xvi) The company is not required to be registered under section 45-IAof the Reserve Bank of India Act 1934.

Report on the Internal Financial Controls under Clause (i) ofSub-section 3 of Section 143 of the Companies Act 2013 ("the Act")

We have audited the internal financial controls over financialreporting of Panache Digilife Limited ("the Company") as of 31stMarch 2020 in conjunction with our audit of the Standalone Ind AS financial statements ofthe Company for the year ended on that date.

Management's Responsibility for Internal Financial Controls

The Company's management is responsible for establishing andmaintaining internal financial controls based on the internal control over financialreporting criteria established by the Company considering the essential components ofinternal control stated in the Guidance Note on Audit of Internal Financial Controls overFinancial Reporting issued by the Institute of Chartered Accountants of India. Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of its business including adherence to company's policies the safeguardingof its assets the prevention and detection of frauds and errors the accuracy andcompleteness of the accounting records and the timely preparation of reliable financialinformation as required under the Companies Act 2013.

Auditors' Responsibility

Our responsibility is to express an opinion on the Company's internalfinancial controls over financial reporting based on our audit. We conducted our audit inaccordance with the Guidance Note on Audit of Internal Financial Controls Over FinancialReporting (the "Guidance Note") and the Standards on Auditing issued by ICAIand deemed to be prescribed under section 143(10) of the Companies Act 2013 to theextent applicable to an audit of internal financial controls both applicable to an auditof Internal Financial Controls and both issued by the Institute of Chartered Accountantsof India. Those Standards and the Guidance Note require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetheradequate internal financial controls over financial reporting was established andmaintained and if such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence aboutthe adequacy of the internal financial controls system over financial reporting and theiroperating effectiveness. Our audit of internal financial controls over financial reportingincluded obtaining an understanding of internal financial controls over financialreporting assessing the risk that a material weakness exists and testing and evaluatingthe design and operating effectiveness of internal control based on the assessed risk. Theprocedures selected depend on the auditor's judgment including the assessment of therisks of material misstatement of the standalone Ind AS financial statements whether dueto fraud or error.

We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our audit opinion on the Company's internalfinancial controls system over financial reporting.

Meaning of Internal Financial Controls over Financial Reporting

A company's internal financial control over financial reporting is aprocess designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of standalone financial statements for external purposes inaccordance with generally accepted accounting principles. A company's internal financialcontrol over financial reporting includes those policies and procedures that:

(1) Pertain to the maintenance of records that in reasonable detailaccurately and fairly reflect the transactions and dispositions of the assets of thecompany;

(2) provide reasonable assurance that transactions are recorded asnecessary to permit preparation of standalone Ind AS financial statements in accordancewith generally accepted accounting principles and that receipts and expenditures of thecompany are being made only in accordance with authorisations of management and directorsof the company; and

(3) provide reasonable assurance regarding prevention or timelydetection of unauthorized acquisition use or disposition of the company's assets thatcould have a material effect on the standalone Ind AS financial statements.

Inherent Limitations of Internal Financial Controls over FinancialReporting

Because of the inherent limitations of internal financial controls overfinancial reporting including the possibility of collusion or improper managementoverride of controls material misstatements due to error or fraud may occur and not bedetected. Also projections of any evaluation of the internal financial controls overfinancial reporting to future periods are subject to the risk that the internal financialcontrol over financial reporting may become inadequate because of changes in conditionsor that the degree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion the Company has in all material respects an adequateinternal financial controls system over financial reporting and such internal financialcontrols over financial reporting were operating effectively as at 31st March2020 based on the internal control over financial reporting 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.

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