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Persistent Systems Ltd.

BSE: 533179 Sector: IT
NSE: PERSISTENT ISIN Code: INE262H01013
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NSE 00:00 | 02 Dec 4345.25 21.35
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OPEN 4354.95
PREVIOUS CLOSE 4325.50
VOLUME 19827
52-Week high 4986.85
52-Week low 3091.65
P/E 46.29
Mkt Cap.(Rs cr) 33,210
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 4354.95
CLOSE 4325.50
VOLUME 19827
52-Week high 4986.85
52-Week low 3091.65
P/E 46.29
Mkt Cap.(Rs cr) 33,210
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 March 2022 theStatement of Profit and Loss (including Other Comprehensive Income) the Statement of CashFlow and the Statement of Changes in Equity for the year then ended and a summary of thesignificant 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 ('the Act') in the manner so required and give a true and fairview in conformity with the Indian Accounting Standards ('Ind AS') specified under section133 of the Act read with the Companies (Indian Accounting Standards) Rules 2015 and otheraccounting principles generally accepted in India of the state of affairs of the Companyas at 31 March 2022 and its profit (including other comprehensive income) its cash flowsand the changes 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 the Auditor's Responsibilities for the Audit of the Standalone 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 financial statementsunder the provisions of the Act and the rules thereunder and we have fulfilled our otherethical responsibilities in accordance with these requirements and the Code of Ethics. Webelieve that the audit evidence we have obtained is sufficient and appropriate to providea basis for 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 period.These 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.

Sr. No Key audit matter How our audit addressed the key audit matter
1. Accuracy of revenues and onerous obligations in respect of fixed-price contracts
Refer Notes 3.4 (i) notes forming part of the Standalone Financial Statements. Our audit work included but was not restricted to the following procedures:
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: • 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.
• High inherent risk around accuracy of revenue given the customised and complex nature of these contracts and significant involvement of IT systems. • Tested the design and operating effectiveness of related manual controls and involved auditor's experts to assess key information technology (IT) controls over:
• 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. > IT environment in which the business systems operate including access controls segregation of duties program change controls program development controls and IT operation controls; and
• Identification and determination of onerous contracts and related obligations. > Testing the IT controls over the completeness and accuracy of cost/efforts and revenue reports generated by the system; and
• Determination of unbilled revenue receivables and unearned revenue related to these contracts as at end of reporting period. > 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.
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. • 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.
2. Contingent liabilities relating to export incentive litigation
Refer Note 36 - notes forming part of the Standalone Financial Statements regarding dispute on export incentives scrips awarded to the Company Our audit work included but was not restricted to the following procedures:
The Company in previous years has deposited under protest k 296.55 million with the Directorate General of Foreign Trade pursuant to the summons received from the Directorate of Revenue Intelligence ('DRI') and have made a corresponding application with the relevant authorities. • 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
The Company has received Show Cause Notice ('SCN') from DRI in the previous years claiming that the Company is not eligible for the benefit under the scheme and if the Company has wrongfully claimed such benefits it will be liable for such consequential penalties. • Assessed the appropriateness of the Company's accounting policies relating to provisions and contingent liability disclosure in accordance with the applicable Indian Accounting Standards
The management based on their assessment and interpretation of various applicable rules regulations practices and precedents and based on various documents filed with relevant authorities to avail these claims believes that they have a strong case and the export incentives of k 296.55 million deposited under protest are fully recoverable. Accordingly the duty paid under protest has been presented as receivable from government authority and has been correspondingly disclosed under contingent liability. • Discussed developments during the year in the export incentive matter with the management and obtained opinion from the management's expert.
In view of the amounts involved and uncertainty pertaining to the final outcome of the matter requiring significant management judgement in determination of recoverability of the aforesaid balance with respect to the said litigation this matter has been considered as a key audit matter for the current year's audit. • Obtained the documents for various correspondences made between the Company and the respective departments.
• 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 unfavourable 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 in Note 36 to determine whether management has presented the facts and circumstances adequately.

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

6. The Company's Board of Directors are responsible for the other information. Theother information comprises the information included in the Annual Report but does notinclude the standalone financial statements and our auditor's report thereon. The AnnualReport is expected to be made available to us after the date of this auditor's report.

Our opinion on the standalone financial statements does not cover the other informationand we will not express any form of assurance conclusion thereon.

In connection with our audit of the standalone financial statements our responsibilityis to read the other information identified above when it becomes available and in doingso consider whether the other information is materially inconsistent with the standalonefinancial statements or our knowledge obtained in the audit or otherwise appears to bematerially misstated.

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 accompanying standalone financial statements have been approved by the Company'sBoard of Directors. The Company's Board of Directors are responsible for the mattersstated in section 134(5) of the Act with respect to the preparation and presentation ofthese standalone financial statements that give a true and fair view of the financialposition financial performance including other comprehensive income changes in equityand cash flows of the Company in accordance with the Ind AS specified under section 133 ofthe Act and other accounting principles generally accepted in India. 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 other 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 the Board of Directors are responsible forassessing the Company's ability to continue as a going concern disclosing as applicablematters related to going concern and using the going concern basis of accounting unlessthe Board of Directors either intend to liquidate the Company or to cease operations orhas no realistic alternative but to do so.

9. Those Board of Directors are also responsible for overseeing the Company's financialreporting process. Auditor's Responsibilities for the Audit of the Standalone FinancialStatements

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 specified undersection 143(10) of the Act we exercise professional judgment and maintain professionalskepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financialstatements whether due to fraud or error design and perform audit procedures responsiveto those risks and obtain audit evidence that is sufficient and appropriate to provide abasis for our opinion. The risk of not detecting a material misstatement resulting fromfraud is higher than for one resulting from error as fraud may involve collusionforgery intentional omissions misrepresentations or the override of internal control;

• 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 Act we are also responsible for expressing our opinion on whether the Company hasadequate internal financial controls system with reference to financial statements inplace and the operating effectiveness 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 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 financialstatements including the disclosures and whether the financial statements represent theunderlying transactions and events in a manner that achieves fair presentation;

• Obtain sufficient appropriate audit evidence regarding the financialinformation/financial statements of the Company to express an opinion on the financialstatements.

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.

Report on Other Legal and Regulatory Requirements

15. As required by section 197(16) of the Act based on our audit we report that theCompany has paid remuneration to its directors during the year in accordance with theprovisions of and limits laid down under section 197 read with Schedule V to the Act.

16. As required by the Companies (Auditor's Report) Order 2020 ('the Order') issued bythe Central Government of India in terms of section 143(11) of the Act we give in theAnnexure 'A' a statement on the matters specified in paragraphs 3 and 4 of the Order tothe extent applicable.

17. Further to our comments in Annexure A as required by section 143(3) of the Actbased on our audit we report to the extent applicable that:

a) We have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purpose of our audit of theaccompanying standalone financial statements;

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 March2022 from being appointed as a director in terms of section 164(2) of the Act;

f) With respect to the adequacy of the internal financial controls with reference tofinancial statements of the Company as on 31 March 2022 and the operating effectiveness ofsuch controls refer to our separate Report in Annexure B wherein we have expressed anunmodified opinion; and

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 the 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 2022;

ii. the Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses as at 31 March 2022;

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 March2022;

iv. (a) The management has represented that to the best of its knowledge and beliefno funds have been advanced or loaned or invested (either from borrowed funds orsecurities premium or any other sources or kind of funds) by the Company to or in anyperson(s) or entity(ies) including foreign entities ('the intermediaries') with theunderstanding whether recorded in writing or otherwise that the intermediary shallwhether directly or indirectly lend or invest in other persons or entities identified inany manner whatsoever by or on behalf of the Company ('the Ultimate Beneficiaries') orprovide any guarantee security or the like on behalf the Ultimate Beneficiaries;

(b) The management has represented that to the best of its knowledge and belief nofunds have been received by the Company from any person(s) or entity(ies) includingforeign entities ('the Funding Parties') with the understanding whether recorded inwriting or otherwise that the Company shall whether directly or indirectly lend orinvest in other persons or entities identified in any manner whatsoever by or on behalf ofthe Funding Party ('Ultimate Beneficiaries') or provide any guarantee security or thelike on behalf of the Ultimate Beneficiaries; and

(c) Based on such audit procedures performed as considered reasonable and appropriatein the circumstances nothing has come to our attention that causes us to believe that themanagement representations under sub-clauses (a) and (b) above contain any materialmisstatement.

V. The dividend declared and paid during the year ended 31 March 2022 by the Company isin compliance with section 123 of the Act.

Annexure A referred to in Paragraph 14 of the Independent Auditor's Report of even dateto the members of Persistent Systems Limited on the standalone financial statements forthe year ended 31 March 2022

In terms of the information and explanations sought by us and given by the Company andthe books of account and records examined by us in the normal course of audit and to thebest of our knowledge and belief we report that:

(i) (a) (A) The Company has maintained proper records showing full particularsincluding quantitative details and situation of property plant and equipment and right ofuse assets.

(B) The Company has maintained proper records showing full particulars of intangibleassets.

(b) The Company has a regular program of physical verification of its property plantand equipment right of use assets under which the assets are physically verified in aphased manner over a period of three years which in our opinion is reasonable havingregard to the size of the Company and the nature of its assets. In accordance with thisprogram certain property plant and equipment right of use assets were verified duringthe year and no material discrepancies were noticed on such verification.

(c) The title deeds of all the immovable properties held by the Company (other thanproperties where the Company is the lessee and the lease agreements are duly executed infavour of the lessee) are held in the name of the Company.

(d) The Company has not revalued its Property Plant and Equipment and Right of Useassets or intangible assets during the year.

(e) No proceedings have been initiated or are pending against the Company for holdingany benami property under the Benami Transactions (Prohibition) Act 1988 (45 of 1988) andrules made thereunder. Accordingly reporting under clause 3(i)(e) of the Order is notapplicable to the Company.

(ii) (a) The Company does not hold any inventory. Accordingly reporting under clause3(ii) of the Order is not applicable to the Company.

(b) The Company has not been sanctioned working capital limits by banks or financialinstitutions on the basis of security of current assets during any point of time of theyear. Accordingly reporting under clause 3(ii)(b) of the Order is not applicable to theCompany.

(iii) (a) The Company has provided loans or advances in the nature of loans guaranteeto two companies and one other Party. The details of the same are given below:

Particulars Guarantees Rs. million Loans Rs. million
Aggregate amount provided during the year 420.67
- Subsidiary 3522.00
- Others
Balance outstanding as at balance sheet date 770.78 420.67
- Subsidiary - 3522.00
- Others

(b) The investments made guarantees provided security given and terms and conditionsof the grant of all loans and advances in the nature of loans and guarantees provided arenot prima facie prejudicial to the Company's interest.

Annexure A (Contd)

(c) In respect of loans and advances in the nature of loans granted by the Company theschedule of repayment of principal and payment of interest has been stipulated and therepayments/receipts of principal and interest are regular.

(d) There is no overdue amount in respect of loans or advances in the nature of loansgranted to such companies firms LLPs or other parties.

(e) The Company has granted loans or advances in the nature of loans which had fallendue during the year and was/were repaid on or before the due date. Further no fresh loanswere granted to any party to settle the overdue loans/advances in nature of loan.

(f) The Company has not granted any loans or advances in the nature of loans which arerepayable on demand or without specifying any terms or period of repayment.

(iv) In our opinion and according to the information and explanations given to us theCompany has complied with the provisions of sections 185 and 186 of the Act in respect ofloans investments guarantees and security as applicable.

(v) The Company has not accepted any deposits or there is no amount which has beenconsidered as deemed deposit within the meaning of sections 73 to 76 of the Act and theCompanies (Acceptance of Deposits) Rules 2014 (as amended). Accordingly reporting underclause 3(v) of the Order is not applicable to the Company.

(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/businessactivity. Accordingly reporting under clause 3(vi) of the Order is not applicable.

vii) (a) In our opinion and according to the information and explanations given to usundisputed statutory dues including goods and services tax provident fund employees'state insurance income-tax sales-tax service tax duty of customs duty of excisevalue added tax cess and other material statutory dues as applicable have generallybeen regularly deposited with the appropriate authorities by the Company though therehave been slight delays in a few cases. Further no undisputed amounts payable in respectthereof were outstanding at the year-end for a period of more than six months from thedate they became payable.

(b) According to the information and explanations given to us there are no statutorydues referred in sub-clause (a) which have not been deposited with the appropriateauthorities on account of any dispute except for the following:

Name of the statute Nature of dues Gross Amount (Rs. Million) Amount paid under Protest (^Million) Period to which the amount relates Forum where dispute is pending
The Income Tax Act 1961 Income tax 12.52

-

2008-09 Honourable High Court
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 11.68 2012-13 Honourable High Court
Name of the statute Nature of dues Gross Amount (Rs. Million) Amount paid under Protest (^Million) Period to which the amount relates Forum where dispute is pending
The Income Tax Act 1961 Income tax 21.84 25.20 2013-14 Honourable High Court
The Income Tax Act 1961 Income tax 6.73 - 2013-14 Assessing officer (AO)
The Income Tax Act 1961 Income tax 32.83 32.83 2014-15 Honourable High Court
The Income Tax Act 1961 Income tax 9.31 9.31 2014-15 Assessing officer (AO)
The Income Tax Act 1961 Income tax 7.02 1.5 2015-16 Honourable High Court
The Income Tax Act 1961 Income tax 19.42 - 2015-16 Assessing officer (AO)
The Income Tax Act 1961 Income tax 277.22 - 2017-18 Commissioner (Appeals)
The Income Tax Act 1961 Income tax 379.74 - 2018-19 Commissioner (Appeals)
Maharashtra Value added Tax Act 2002 Sales Tax 6.6 6.6 2005-06 200607 2007-08 2008-09 and 2014-15 Customs Excise and Service Tax Appellate Tribunal
Maharashtra Value added Tax Act 2002 Sales Tax 6.8 6.8 2010-11 201314 and 2016-17 Joint Commissioner (Appeals) - VAT
The Customs Act 1962 Export incentive 296.55 296.55 2015-16 201617 and 2017-18 Directorate of Revenue Intelligence
The Finance Act 1994 Service tax 173.78 165.58 2014-15 Central Excise and Service Tax Appellate Tribunal

(viii) According to the information and explanations given to us no transactions weresurrendered or disclosed as income during the year in the tax assessments under the IncomeTax Act 1961 (43 of 1961) which have not been recorded in the books of accounts.

(ix) (a) According to the information and explanations given to us the Company has notdefaulted in

repayment of its loans or borrowings or in the payment of interest thereon to anylender.

(b) According to the information and explanations given to us including representationreceived from the management of the Company and on the basis of our audit procedures wereport that the Company has not been declared a willful defaulter by any bank or financialinstitution or other lender.

(c) In our opinion and according to the information and explanations given to us moneyraised by way of term loans were applied for the purposes for which these were obtained.

(d) In our opinion and according to the information and explanations given to us andon an overall examination of the financial statements of the Company funds raised by theCompany on short term basis have not been utilised for long term purposes.

(e) According to the information and explanations given to us and on an overallexamination of the financial statements of the Company the Company has not taken anyfunds from any entity or person on account of or to meet the obligations of itssubsidiaries.

(f) According to the information and explanations given to us the Company has notraised any loans during the year on the pledge of securities held in its subsidiaries.

(x) (a) The Company has not raised any money by way of initial public offer or furtherpublic offer (including

debt instruments) during the year. Accordingly reporting under clause 3(x)(a) of theOrder is not applicable to the Company.

(b) According to the information and explanations given to us the Company has not madeany preferential allotment or private placement of shares or (fully partially oroptionally) convertible debentures during the year. Accordingly reporting under clause3(x)(b) of the Order is not applicable to the Company.

(xi) (a) To the best of our knowledge and according to the information and explanationsgiven to us no fraud

by the Company or on the Company has been noticed or reported during the period coveredby our audit.

(b) No report under section 143(12) of the Act has been filed with the CentralGovernment for the period covered by our audit.

(c) According to the information and explanations given to us including therepresentation made to us by the management of the Company there are no whistle-blowercomplaints received by the Company during the year.

(xii) The Company is not a Nidhi Company and the Nidhi Rules 2014 are not applicableto it. Accordingly reporting under clause 3(xii) of the Order is not applicable to theCompany.

(xiii) In our opinion and according to the information and explanations given to usall transactions entered into by the Company with the related parties are in compliancewith sections 177 and 188 of the Act where applicable. Further the details of suchrelated party transactions have been disclosed in the standalone financial statements asrequired under Related Party Disclosures specified in Companies (Indian AccountingStandards) Rules 2015 as prescribed under section 133 of the Act.

(xiv) (a) In our opinion and according to the information and explanations given to usthe Company has an internal audit system as required under section 138 of the Act which iscommensurate with the size and nature of its business.

(b) We have considered the reports issued by the Internal Auditors of the Company tilldate for the period under audit.

(xv) According to the information and explanation given to us the Company has notentered into any noncash transactions with its directors or persons connected with themand accordingly provisions of section 192 of the Act are not applicable to the Company.

(xvi) The Company is not required to be registered under section 45-IA of the ReserveBank of India Act 1934. Accordingly reporting under clause 3(xvi) of the Order is notapplicable to the Company.

(xvii) The Company has not incurred any cash loss in the current as well as theimmediately preceding financial year.

(xviii) There has been no resignation of the statutory auditors during the year.Accordingly reporting under clause 3(xviii) of the Order is not applicable to theCompany.

(xix) According to the information and explanations given to us and on the basis of thefinancial ratios ageing and expected dates of realisation of financial assets and paymentof financial liabilities other information accompanying the standalone financialstatements our knowledge of the plans of the Board of Directors and management we are ofthe opinion that no material uncertainty exists as on the date of the audit report thatCompany is capable of meeting its liabilities existing at the date of balance sheet as andwhen they fall due within a period of one year from the balance sheet date. We howeverstate that this is not an assurance as to the future viability of the company. We furtherstate that our reporting is based on the facts up to the date of the audit report and weneither give any guarantee nor any assurance that all liabilities falling due within aperiod of one year from the balance sheet date will get discharged by the company as andwhen they fall due.

(xx) According to the information and explanations given to us the Company does nothave any unspent amount in respect of any ongoing or other than ongoing project as at theexpiry of the financial year. Accordingly reporting under clause 3(xx) of the Order isnot applicable to the Company.

(xxi) The reporting under clause (xxi) is not applicable in respect of audit ofstandalone financial statements of the Company. Accordingly no comment has been includedin respect of said clause under this report.

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 2022

Independent Auditor’s Report on the internal financial controls with reference tofinancial statements under Clause (i) of Sub-section 3 of Section 143 of the CompaniesAct 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 2022 we haveaudited the internal financial controls with reference to financial statements of theCompany as at 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 internal financial controls with reference tofinancial statements criteria established by the Company considering the essentialcomponents of internal control stated in the Guidance Note on Audit ofInternal FinancialControls Over Financial Reporting issued by the Institute of Chartered Accounts of India.These responsibilities include the design implementation and maintenance of adequateinternal financial controls that were operating effectively for ensuring the orderly andefficient conduct of the Company's business including adherence to the Company'spolicies the safeguarding of its assets the prevention and detection of frauds anderrors the accuracy and completeness of the accounting records and the timelypreparation of reliable financial information as required under the act.

Auditor’s Responsibility for the Audit of the Internal Financial Controls withReference to Financial Statements

3. Our responsibility is to express an opinion on the Company's internal financialcontrols with reference to financial statements based on our audit. We conducted our auditin accordance with the Standards on Auditing issued by the Institute of CharteredAccountants of India ('ICAI') prescribed under Section 143(10) of the Act to the extentapplicable to an audit of internal financial controls with reference to financialstatements and the Guidance Note on Audit of Internal Financial Controls Over FinancialReporting ('the Guidance Note') issued by the ICAI. Those Standards and the Guidance Noterequire that we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether adequate internal financial controls with reference tofinancial statements were established and maintained and if such controls operatedeffectively in all material respects.

4. Our audit involves performing procedures to obtain audit evidence about the adequacyof the internal financial controls with reference to financial statements and theiroperating effectiveness. Our audit of internal financial controls with reference tofinancial statements includes obtaining an understanding of such internal financialcontrols 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 judgement including the assessment of therisks of material misstatement of the financial statements whether due to 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 internal financial controls withreference to financial statements.

Meaning of Internal Financial Controls with Reference to Financial Statements

6. A company's internal financial controls with reference to financial statements is aprocess designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles. A company's internal financial controlswith reference to financial statements include those policies and procedures that

(1) pertain to the maintenance of records that in reasonable detail accurately andfairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accountingprinciples and that receipts and expenditures of the company are being made only inaccordance with authorisations of management and directors of the company; and

(3) provide reasonable assurance regarding prevention or timely detection ofunauthorised acquisition use or disposition of the company's assets that could have amaterial effect on the financial statements.

Inherent Limitations of Internal Financial Controls with Reference to FinancialStatements

7. Because of the inherent limitations of internal financial controls with reference tofinancial statements 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 withreference to financial statements to future periods are subject to the risk that theinternal financial controls with reference to financial statements may become inadequatebecause of changes in conditions or that the degree of compliance with the policies orprocedures may deteriorate.

Opinion

8. In our opinion the Company has in all material respects adequate internalfinancial controls with reference to financial statements and such controls were operatingeffectively as at 31 March 2022 based on internal financial controls with reference tofinancial statements criteria established by the Company considering the essentialcomponents of internal control stated in the Guidance Note on Audit of Internal FinancialControls over Financial Reporting issued by the Institute of Chartered Accountants ofIndia.

.