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Persistent Systems Ltd.

BSE: 533179 Sector: IT
NSE: PERSISTENT ISIN Code: INE262H01013
BSE 00:00 | 23 Jul 3039.55 210.40
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NSE 00:00 | 23 Jul 3039.15 210.55
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OPEN 3021.00
PREVIOUS CLOSE 2829.15
VOLUME 115076
52-Week high 3125.00
52-Week low 707.80
P/E 42.26
Mkt Cap.(Rs cr) 23,231
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 3021.00
CLOSE 2829.15
VOLUME 115076
52-Week high 3125.00
52-Week low 707.80
P/E 42.26
Mkt Cap.(Rs cr) 23,231
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Persistent Systems Ltd. (PERSISTENT) - Auditors Report

Company auditors report

To the Members of Persistent Systems Limited

Report on the Audit of the Standalone Financial Statements Opinion

1\ We have audited the accompanying standalone financial statements of PersistentSystems Limited (‘the Company') which comprise the Balance Sheet as at 31 March2020 the Statement of Profit and Loss (including Other Comprehensive Income) the CashFlow Statement and the Statement of Changes in Equity for the year then ended and asummary of the significant accounting policies and other explanatory information

2\ 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 (‘Act') in the manner so required and give a true and fairview in conformity with the accounting principles generally accepted in India including inIndian Accounting Standards (‘Ind AS') specified under section 133 of the Act of thestate of affairs (financial position) of the Company as at 31 March 2020 and its profit(financial performance including other comprehensive income) its cash flows and thechanges in equity for the year ended on that date

Basis for Opinion

3\ We conducted our audit in accordance with the Standards on Auditing specified underSection 143(10) of the Act Our responsibilities under those standards are furtherdescribed in Auditor's Responsibilities for the Audit of the Financial Statements Sectionof our report We are independent of the Company in accordance with the Code of Ethicsissued by the Institute of Chartered Accountants of India (‘ICAI') together with theethical requirements that are relevant to our audit of the financial statements under theprovisions of the Act and the rules thereunder and we have fulfilled our other ethicalresponsibilities in accordance with these requirements and the Code of Ethics We believethat the audit evidence we have obtained is sufficient and appropriate to provide a basisfor our opinion

Key Audit Matters

4\ 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 periodThese matters were addressed in the context of our audit of the financial statements as awhole and in forming our opinion thereon and we do not provide a separate opinion onthese matters

5\ We have determined the matters described below to be the key audit matters to becommunicated in our report

Key audit matter How our audit addressed the key audit matter
Accuracy of revenues and onerous obligations in respect of fixed- price contracts Our audit work included but was not restricted to the following procedures:
Refer Notes 3(h)(i) notes forming part of the Standalone Financial Statements

The Company has entered into various fixed-price software development contracts for which revenue is recognized by the Company using the percentage of completion computed as per the Input method prescribed under Ind AS 115 Revenue from Contracts with Customers The said revenue recognition accounting policy involves exercise of significant judgement by the management and the following factors requiring significant auditor attention:

\ High inherent risk around accuracy of revenue given the customised and complex nature of these contracts and significant involvement of IT systems

\ High estimation uncertainty relating to determination of the progress of each contract costs incurred till date and additional costs required to complete the remaining contract

\ Identification and determination of onerous contracts and related obligations

\ Determination of unbilled revenue receivables and unearned revenue related to these contracts as at end of reporting period

Considering the materiality of the amounts involved and significant degree of judgement and subjectivity involved in the estimates as mentioned above we have identified revenue recognition for fixed price contracts and determination of onerous contracts and related provisions as a key audit matter for the current year audit

\ Obtained an understanding of the systems processes and controls implemented by management for recording and calculating revenue and the associated unbilled revenue unearned and deferred revenue balances and onerous contract obligations

\ Tested the design and operating effectiveness of related manual controls and involved auditor's experts to assess key information technology (IT) controls over:

- IT environment in which the business systems operate including access controls segregation of duties program change controls program development controls and IT operation controls;

- Testing the IT controls over the completeness and accuracy of cost/efforts and revenue reports generated by the system; and

- Testing the access and application controls pertaining to allocation of resources and budgeting systems which prevents the unauthorized changes to recording of efforts incurred and controls relating to the estimation of contract efforts required to complete the project

\ Selected a sample of contracts and performed a retrospective review of efforts incurred with estimated efforts to identify significant variations and verify whether those variations have been considered in estimating the remaining efforts to complete the contract

\ Reviewed a sample of contracts with unbilled revenues to identify possible delays in achieving milestones which require change in estimated efforts to complete the remaining performance obligations

\ Performed analytical procedures for reasonableness of incurred and estimated efforts

\ Evaluated management's identification of onerous contracts based on estimates tested as above

\ Evaluated the appropriateness of disclosures made in the financial statements with respect to revenue recognized during the year as required by applicable Indian Accounting Standards

Unbilled revenue in respect of revenue sharing arrangements i.e. Royalty income Our audit work included but was not restricted to the following procedures:
Refer Notes 3(h)(i) notes forming part of the Standalone Financial Statements

Royalty income from one of the main customers is accrued as a percentage of total onward sales made by the customer during the period

Recognition of royalty income for the period of three months before year end involves estimations made by the Company based on past trends and information available with the management during the particular period Such Royalty income is booked as unbilled receivable since actual sales for the aforesaid period by the customer is determined subsequent to the period end

Considering the materiality of the amounts involved and significant degree of judgement and subjectivity involved in the estimates of the unbilled revenue we have identified unbilled receivable in respect of revenue sharing arrangements as a key audit matter for the current year audit

\ Obtained an understanding of the systems processes and controls implemented by management for estimating revenue and the associated unbilled revenue

\ Tested the design and operating effectiveness of the internal controls relating to estimation of share of revenue involved in recognition of royalty income

\ Evaluated basis of estimation of aforesaid unbilled receivable from the terms of the contract and past trends and verified arithmetical accuracy of management computation

\ Assessed historical accuracy of the forecasts made by the management in earlier period/s

\ Performed analytical procedures for reasonableness of revenue and associated unbilled revenue recorded and disclosed as at year end

\ Evaluated the appropriateness of disclosures made in the financial statements with respect to unbilled revenue recognized during the year as required by applicable Indian Accounting Standards

Key audit matter

Impairment assessment of non-current investments in subsidiary company

How our audit addressed the key audit matter

Our audit work included but was not restricted to the following procedures:

As described in Note 6 to the standalone financial statements carrying value of investment as at 31 March 2020 in Persistent Systems Germany GmbH (investee) a subsidiary of the Company is T 1265.91 million. The management has noted impairment indicators on account of Company's share in net asset value of the investee being lower than the carrying value of investment in the said subsidiary company as at 31 March 2020.

In view of the above management's assessment of impairment of the said investment requires estimation and judgement with respect to certain inputs used and assumptions made to prepare the forecasted financial information of the subsidiary company which is used to calculate the recoverable value of the investment using discounted cash flow model.

Key assumptions used in management's assessment include expected growth rates estimates of future financial performance and discount rates among others as attributable to such subsidiary. Based on the management's assessment no impairment loss has been recognized on such investment.

Considering the materiality of the amounts involved and significant degree of judgement and subjectivity involved in the estimates and key assumptions used in determining the cash flows used in the impairment evaluation we have determined evaluation of need for impairment of the investment made in subsidiary as a Key audit matter.

\ Performed detailed discussions with the management to understand the impairment assessment process assumptions used and estimates made by management and tested the operating effectiveness of the controls implemented by management.

\ Reviewed the impairment indicators identified by the management and also obtained the impairment analysis carried out by the management.

\ We have assessed the methodology used by the management to estimate the recoverable value of investment in subsidiaries for which an impairment test was performed.

\ We evaluated the inputs used by the management with respect to revenue and cost growth trends among others for reasonableness thereof.

\ Obtained the cash flow forecast approved by the Board of Directors of the subsidiary company and evaluated the subsidiary's historical accuracy of forecasts made in earlier periods.

\ Evaluated the sensitivity analysis performed by management in respect of the key assumptions such as discount and growth rates. Also performed independent sensitivity analysis on such key assumptions.

\ Evaluated the appropriateness of disclosures made in the financial statements in relation to such investments as required by applicable Indian Accounting Standards.

Contingent liabilities relating to export incentive litigation Our audit work included but was not restricted to the following procedures:
Statements regarding dispute on export incentives availed by the Company that have been refunded under protest.

Based on management's judgement considering significant assumptions and assessments requiring interpretation of various applicable rules regulations practices and precedents export incentives of T 296.55 million refunded under protest and T 113.49 million accrued in earlier years has been disclosed as a contingent liability as at year end.

In view of the amounts involved and uncertainty pertaining to the final outcome of the matter requiring significant management judgement in determination of recognition of provision or disclosure of contingent liability with respect to the said litigation this matter is considered as a key audit matter for the current year's audit.

\ Obtained an understanding of the Company's process and the underlying controls for identification and monitoring of the pending litigations and completeness of such litigations for financial reporting

\ Assessed the appropriateness of the Company's accounting policies relating to provisions and contingent liability disclosures in accordance with the applicable Indian Accounting Standards.

\ Discussed developments during the year in the export incentive matter with the management and obtained opinion from the management's expert.

\ Involved auditor's expert to test the management's underlying assumptions in estimating the export incentive benefits and the possible outcome of the matters. This involved assessing the probability of an unfavorable outcome of a given proceeding and the reliability of estimates of related amounts which involved consideration of legal precedence and other rulings and expert opinion obtained by the management.

\ Assessed adequacy and appropriateness of the contingent liability disclosure made in Note 36 to determine whether management has presented the facts and circumstances adequately.

Implementation of new ERP IT system

During the current year with effect from 01 October 2019 the Company has implemented a new ERP IT System namely' "Oracle's- Fusion" across all locations including overseas locations covering certain key business processes including financial information reporting process.

The Company is highly dependent on information technology (IT) systems for carrying on its operations including automated interfaces between the various sub- systems.

The Company's accounting and financial reporting processes are dependent on the automated controls enabled by IT systems which impacts key financial accounting and reporting items. The migration has resulted in a significant change in the Company's process and the related controls.

Due to its importance and bearing on operating procedures and financial accounting controls and significant management efforts with regards to transition and migration of data and required integration with continued other legacy IT systems which required increased audit efforts and robust discussions with the management and those charged with governance the implementation of new ERP has been considered as a key audit matter for the current year audit.

Our audit work included but was not limited to the following procedures performed with the help of auditor's experts where necessary:

\ Obtained an understanding of the systems processes and underlying controls of the new ERP system from the management and management's implementation experts.

\ Obtained an understanding of the processes and controls implemented by management during the data migration process and integration of the new ERP with continued other legacy IT systems.

\ Discussed assessed and evaluated the appropriateness of IT access and segregation of duties in the new IT system.

\ Performed walkthroughs to test design and also tested operating effectiveness of automated controls including the IT general controls and key IT application controls in the financial reporting module of the new IT system.

\ Verified the SOC 1-Type II report provided by Oracle for Oracle Fusion Cloud Services-Oracle Fusion ERP.

\ Obtained and reviewed exception report from the management with respect to data migration and re- performed reconciliations between old sub-ledgers and general ledgers and data migrated to the new system.

Information other than the Financial Statements and Auditor's Report thereon

6\ The Company's Board of Directors is responsible for the other information. The otherinformation comprises the information included in the Annual Report but does not includethe financial statements and our auditor's report thereor The Annual Report is expected tobe made available to us after the date of this auditor's report.

Our opinion on the financial statements does not cover the other information and wewill not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements our responsibility is to readthe other information identified above when it becomes available and in doing soconsider whether the other information is materially inconsistent with the financialstatements or our knowledge obtained in the audit or otherwise appears to be materiallymisstated.

When we read the Annual Report if we conclude that there is a material misstatementtherein we are required to communicate the matter to those charged with governance.

Responsibilities of Management and Those Charged with Governance for the StandaloneFinancial Statements

7\ The Company's Board of Directors is responsible for the matters stated in Section134(5) of the Act with respect to the preparation of these standalone financial statementsthat give a true and fair view of the state of affairs (financial position profit or loss(financial performance including other comprehensive income) changes in equity and cashflows of the Company in accordance with the accounting principles generally accepted inIndia including the Ind AS specified unde Section 133 of the Act. This responsibilityalso includes maintenance of adequate accounting records in accordance with the provisionsof the Act for safeguarding of the assets of the Company and for preventing and detectingfrauds and both irregularities; selection and application of appropriate accountingpolicies; making judgments and estimates that are reasonable and prudent; and designimplementation and maintenance of adequate internal financial controls that wereoperating effectively for ensuring the accuracy and completeness of the accountingrecords relevant to the preparation and presentation of the financial statements thatgive a true and fair view and are free from material misstatement whether due to fraud orerror.

8\ In preparing the financial statements management is responsible for assessing theCompany'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.

9\ The Board of Directors are also responsible for overseeing the Company's financialreporting process.

Auditor's Responsibilities for the Audit of the Financial Statements

10\ Our objectives are to obtain reasonable assurance about whether the financialstatements as a whole are free from material misstatement whether due to fraud or errorand to issue an auditor's report that includes our opinion. Reasonable assurance is a highlevel of assurance but is not a guarantee that an audit conducted in accordance withStandards on Auditing will always detect a material misstatement when it exists.Misstatements can arise from fraud or error and are considered material if individuallyor in the aggregate they could reasonably be expected to influence the economic decisionsof users taken on the basis of these financial statements.

11\ As part of an audit in accordance with Standards on Auditing we exerciseprofessional judgment and maintain professional skepticism throughout the audit. We also:

\ Identify and assess the risks of material misstatement of the financial statementswhether due to fraud or error design and perform audit procedures responsive to thoserisks and obtain audit evidence that is sufficient and appropriate to provide a basis forour opinion. The risk of not detecting a material misstatement resulting from fraud ishigher than for one resulting from error as fraud may involve collusion forgeryintentional omissions misrepresentations or the override of internal control.

\ Obtain an understanding of internal control relevant to the audit in order to designaudit procedures that are appropriate in the circumstances. Under Section 143(3)(i) of theAct we are also responsible for expressing our opinion on whether the Company hasadequate internal financial controls system in place and the operating effectiveness ofsuch controls.

\ Evaluate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures made by management.

\ Conclude on the appropriateness of management's use of the going concern basis ofaccounting 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 financial statements or if such disclosures are inadequate to modify our opinion.Our conclusions are based on the audit evidence obtained up to the date of our auditor'sreport. However future events or conditions may cause the Company to cease to continue asa going concern.

\ Evaluate the overall presentation structure and content of the financial statementsincluding the disclosures and whether the financial statements represent the underlyingtransactions and events in a manner that achieves fair presentation.

12\ We communicate with those charged with governance regarding among other mattersthe planned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit.

13\ 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.

14\ From the matters communicated with those charged with governance we determinethose matters that were of most significance in the audit of the financial statements ofthe current period and are therefore the key audit matters. We describe these matters inour auditor's report unless law or regulation precludes public disclosure about the matteror when in extremely rare circumstances we determine that a matter should not becommunicated in our report because the adverse consequences of doing so would reasonablybe expected to outweigh the public interest benefits of such communication.

Other Matter

15\ The standalone financial statements of the Company for the year ended 31 March 2019and for the quarter ended 30 June 2019 were audited by the predecessor auditor DeloitteHaskins & Sells LLP who have expressed an unmodified opinion on these standalonefinancial statements and standalone condensed financial statements vide their auditreports dated 27 April 2019 and 25 July 2019 respectively. Our opinion is not modified inrespect of this matter.

Report on Other Legal and Regulatory Requirements

16\ As required by Section 197(16) of the Act we report that the Company has paidremuneration to its directors during the year in accordance with the provisions of andlimits laid down under Section 197 read with Schedule V to the Act.

17\ As required by the Companies (Auditor's Report) Order 2016 (‘the order')issued the by Central Government of India in terms of Section 143(11) of the Act we givein Annexure A a statement on the matters specified in paragraphs 3 and 4 of the Order.

18\ Further to our comments in Annexure A as required by Section 143(3) of the Act wereport that:

a. we have sought and obtained all the information and explanations which to the bestof our knowledge and belief wer necessary for the purpose 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 financial statements dealt with by this report are in agreement withthe books of account;

d. in our opinion the aforesaid standalone financial statements comply with Ind ASspecified under Section 133 of the Act;

e. on the basis of the written representations received from the directors and taken onrecord by the Board of Directors none of the directors is disqualified as on 31 March 2020from being appointed as a director in terms of Section 164(2) of the Act;

f. we have also audited the internal financial controls over financial reporting(IFCoFR) of the Company as on 31 March 2020 in conjunction with our audit of thestandalone financial statements of the Company for the year ended on tha' date and ourreport dated 05 May 2020 as per Annexure B expressed an unmodified opinion;

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 (as amended) inour opinion and to the best of our information and according to th explanations given tous:

i. the Company as detailed in note 36 to the standalone financial statements hasdisclosed the impact of pending litigations on its financial position as at 31 March 2020;

ii. the Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses as at 31 March 2020;

iii. there has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company during the year ended 31 March2020;

iv. the disclosure requirements relating to holdings as well as dealings in specifiedbank notes were applicable for the period from 8 November 2016 to 30 December 2016 whichare not relevant to these standalone financial statements. Hence reporting under thisclause is not applicable.

For Walker Chandiok & Co LLP
Chartered Accountants
Firm Registration No.: 001076N/N500013
Bharat Shetty
Partner
Membership No.: 106815
UDIN No:20106815AAAABD6071
Place: Mumbai
Date: 05 May 2020

Annexure ‘A' to the Independent Auditor's Report of even date to the members ofPersistent Systems Limited on the standalone financial statements for the year ended 31March 2020

Based on the audit procedures performed for the purpose of reporting a true and fairview on the standalone financial statements of the Company and taking into considerationthe information and explanations given to us and the books of account and other recordsexamined by us in the normal course of audit and to the best of our knowledge and beliefwe report that:

i. a. The Company has maintained proper records showing full particulars includingquantitative details and situation of property plant and equipment.

b. The Company has a regular program of physical verification of its property plantand equipment under which property plant and equipment are verified in a phased mannerover a period of three years which in our opinion is reasonable having regard to thesize of the Company and the nature of its assets. In accordance with this program certainproperty plant and equipment were verified during the year and no material discrepancieswere noticed on such verification.

c. The title deeds of all the immovable properties (which are included under the headplant and equipment and Right of use asset') are held in the name of the Company.

ii. The Company does not have any inventory. Accordingly the provisions of clause3(ii) of the Order are not applicable.

iii. The Company has not granted any loan secured or unsecured to companies firmsLimited Liability Partnerships (LLPs) or other parties covered in the register maintainedunder Section 189 of the Act. Accordingly the provisions of clauses 3(iii) (a) 3(iii)(b) and 3(iii)(c) of the Order are not applicable.

iv. In our opinion the Company has complied with the provisions of Sections 185 and186 of the Act in respect of loans investments guarantees and security.

v. In our opinion the Company has not accepted any deposits within the meaning ofSections 73 to 76 of the Act and the Companies (Acceptance of Deposits) Rules 2014 (asamended). Accordingly the provisions of clause 3(v) of the Order are not applicable.

vi. The Central Government has not specified maintenance of cost records undersub-section (1) of Section 148 of the Act in respect of Company's products/servicesAccordingly the provisions of clause 3(vi) of the Order are not applicable.

vii. a. Undisputed statutory dues including provident fund employees' state insuranceincome-tax sales-tax service tax duty of customs duty of excise goods and servicestax value added tax cess and other material statutory dues as applicable havegenerally been regularly deposited to the appropriate authorities though there has been aslight delay in a few cases. Further no undisputed amounts payable in respect thereofwere outstanding at the year-end for a period of more than six months from the date theybecame payable.

b. The dues outstanding in respect of income-tax sales-tax service-tax duty ofcustoms duty of excise and value added tax on account of any dispute are as follows:

Statement of Disputed Dues

Name of the statute Nature of dues Amount million) Amount paid under Protest (^ million) Period to which the amount relates Forum where dispute is pending
The Income Tax Act 1961 Income tax 28.69 - 2009-10 Honourable High Court
The Income Tax Act 1961 Income tax 19.06 - 2010-11 Honourable High Court
The Income Tax Act 1961 Income tax 12.52 - 2008-09 Honourable High Court
The Customs Act 1962 Export incentive 296.55 296.55 2015-16 2016-17 and 2017-18 Directorate of Revenue Intelligence
Maharashtra Value added Tax Act 2002 Sales Tax 26.51 23.44 2005-06 and 2013-14 Joint Commissioner (Appeals)
The Finance Act 1994 Service tax 173.78 165.58 2014-15 Central Excise and Service Tax Appellate Tribunal

viii. The Company has not defaulted in repayment of loans or borrowings to any bank orfinancial institution or government during the year. The Company did not have anyoutstanding debentures during the year.

ix. In our opinion the Company did not raise moneys by way of initial public offer orfurther public offer (including debt instruments). In our opinion the term loans wereapplied for the purposes for which the loans were obtained.

x. No fraud by the Company or on the Company by its officers or employees has beennoticed or reported during the period covered by our audit.

xi. Managerial remuneration has been paid and provided by the Company in accordancewith the requisite approvals mandated by the provisions of Section 197 of the Act readwith Schedule V to the Act.

xii. In our opinion the Company is not a Nidhi Company. Accordingly provisions ofclause 3(xii) of the Order are not applicable.

xiii. In our opinion all transactions with the related parties are in compliance withSections 177 and 188 of the Act where applicable and the requisite details have beendisclosed in the financial statements etc. as required by the applicable Ind AS.

xiv. During the year the Company has not made any preferential allotment or privateplacement of shares or fully or partly convertible debentures.

xv. In our opinion the Company has not entered into any non-cash transactions with thedirectors or persons connected with them covered under Section 192 of the Act.

xvi. The Company is not required to be registered under Section 45-IA of the ReserveBank of India Act 1934.

For Walker Chandiok & Co LLP
Chartered Accountants
Firm Registration No.: 001076N/N500013
Bharat Shetty
Partner
Membership No.: 106815
UDIN No:20106815AAAABD6071
Place: Mumbai
Date: 05 May 2020

Annexure ‘B' to the Independent Auditor's Report of even date to the members ofPersistent Systems Limited on the standalone financial statements for the year ended 31March 2020

Independent Auditor's Report on the Internal Financial Controls under Clause (i) ofSub-section 3 of Section 143 of the

Companies Act 2013 (‘the Act')

1\ In conjunction with our audit of the standalone financial statements of PersistentSystems Limited (the Company) as at and for the year ended 31 March 2020 we have auditedthe internal financial controls over financial reporting (‘IFCoFR') of the Company asat that date.

Responsibilities of Management and Those Charged with Governance for Internal FinancialControls

2\ The Company's Board of Directors is responsible for establishing and maintaininginternal financial controls based on the internal control over financial reportingcriteria established by the Company considering the essential components of internalcontrol stated in the Guidance Note on Audit of Internal Financial Controls over FinancialReporting issued by the Institute of Chartered Accountants of India (ICAI). Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of the Company's business including adherence to policies the safeguarding ofits 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 Act.

Auditor s Responsibility for the Audit of the Internal Financial Controls

3\ Our responsibility is to express an opinion on the Company's IFCoFR based on ouraudit. We conducted our audit in accordance with the Standards on Auditing issued by theInstitute of Chartered Accountants of India (ICAI) prescribed under Section 143(10) of theAct to the extent applicable to an audit of IFCoFR and the Guidance Note on Audit ofInternal Financial Controls Over Financial Reporting (the Guidance Note) issued by theICAI. Those Standards and the Guidance Note require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetheradequate IFCoFR were established and maintained and if such controls operated effectivelyin all material respects.

4\ Our audit involves performing procedures to obtain audit evidence about the adequacyof the IFCoFR and their operating effectiveness. Our audit of IFCoFR includes obtaining anunderstanding of IFCoFR assessing the risk that a material weakness exists and testingand evaluating the design and operating effectiveness of internal control based on theassessed risk. The procedures selected depend on the auditor's judgement including theassessment of the risks of material misstatement of the financial statements whether dueto fraud or error.

5\ We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's IFCoFR.

Meaning of Internal Financial Controls over Financial Reporting

6\ A company's IFCoFR is a process designed to provide reasonable assurance regardingthe reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles. A company'sIFCoFR include those policies and procedures that (1) pertain to the maintenance ofrecords that in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the company; (2) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles and that receipts andexpenditures of the company are being made only in accordance with authorisations ofmanagement 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 financial statements.

Inherent Limitations of Internal Financial Controls over Financial Reporting

7\ Because of the inherent limitations of IFCoFR including the possibility ofcollusion or improper management override of controls material misstatements due to erroror fraud may occur and not be detected. Also projections of any evaluation of the IFCoFRto future periods are subject to the risk that the IFCoFR may become inadequate because ofchanges in conditions or that the degree of compliance with the policies or proceduresmay deteriorate.

Opinion

8\ In our opinion the Company has in all material respects adequate internalfinancial controls over financial reporting and such controls were operating effectivelyas at 31 March 2020 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.

For Walker Chandiok & Co LLP
Chartered Accountants
Firm Registration No.: 001076N/N500013
Bharat Shetty
Partner
Membership No.: 106815
UDIN No:20106815AAAABD6071
Place: Mumbai
Date: 05 May 2020

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