To The Members
M/S. REAL TOUCH FINANCE LIMITED (FORMERLY ASSOCIATED CEREALS LIMITED)
Report on Financial Statements Opinion
We have audited the accompanying financial statement of REAL TOUCH FINANCE LIMITED(FORMERLY ASSOCIATED CEREALS LIMITED) which comprises the Balance sheet as at 31stMarch 2020 The Statement of Profit and Loss (Including other Comprehensive Income)theStatement of Changes in Equity and the Statement of Cash Flow for the year then ended anda summary of Significant accounting policies and other explanatory' information.
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 andfair view in conformity with the accounting principles generally accepted in India of thestate of affairs of the Company as at 31 March 2020 and profit and other comprehensiveincome changes in equity and its cash flows for the year ended on that date.
Basis for Opinion
We have conducted our audit in accordance with the Standards on Auditing specifiedunder section 143(10) of the Companies Act 2013. Our responsibilities under thosestandards are further described in the Auditor's Responsibilities tor the Audit ofFinancial Statements section of our report. We are independent of the Company inaccordance with the Code of Ethics issued by Institute of Chartered Accountants of lndiatogether with ethical requirements that are relevant to our audit of financial statementunder the provisions of Companies Act 2013 and rules these under and we have fulfilledour other ethical responsibilities in accordance with these requirements and code ofethics. We believe that the audit evidence we have obtained is sufficient and appropriateto provide a basis for our opinion.
' Key Audit Matters
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 standalone financialstatements as a whole and in forming our opinion thereon and we do not provide aseparate opinion on these matters.
1) Classification and measurement of financial assets - Business model assessment
Ind AS 109 Financial Instruments contains three principal measurement categories forfinancial assets i.e.:
Fair Value through Other Comprehensive Income (FVOCI'); and
Fair Value through Profit and Loss (FVTPL').
A financial asset is classified into a measurement category at inception and isreclassified only in rare circumstances. The assessment as to how an asset should beclassified is made on the basis of both the Group's business model for managing thefinancial asset and the contractual cash flow characteristics of the financial asset.
The term business model' refers to the way in which the Group manages itsfinancial assets in order to generate cash flows. That is the Group's business modeldetermines whether cash flows will result from collecting contractual cash-flows seliingthe financial assets or both.
Amortised cost classification and measurement category is met if the financial asset isheld within a business model whose objective is to hold financial assets in order tocollect contractual cash flows.
FVOC1 classification and measurement category is met if the financial asset is held ina business model in which assets are managed both in order to collect contractual cashflows and for sale. Such financial assets are subsequently measured at fair value withchanges in fair value recognized in other comprehensive income.
FVTPL classification and measurement category is met if the financial asset does notmeet the criteria for classification and measurement at amortised cost or at FVOCI. Suchfinancial assets are subsequently measured at fair value with changes in fair valuerecognized in profit or loss.
Key audit procedures included:
Design / controls
Assessing the design implementation and operating effectiveness of key internalcontrols over management's intent of purchasing a financial asset and the approvalmechanism for such stated intent and classification of such financial assets on the basisof management's intent (business model).
For financial assets classified at amortised cost we tested controls over theclassification of such assets and subsequent measurement of assets at amortised cost.Further we tested key internal controls over monitoring of such financial assets to checkwhether there have been any subsequent sales of financial assets classified at amortisedcost.
For financial assets classified at FVOCI we tested controls over theclassification of such assets and subsequent measurement of assets at fair value.
2) Recognition and measurement of impairment of loans and advances involve significantmanagement judgement
With the applicability of Ind AS 109 credit loss assessment is now based on expectedcredit loss (ECL') model. The Group's impairment allowance is derived from estimatesincluding the historical default and loss ratios. Management exercises judgement indetermining the quantum of loss based on a range of factors.
The most significant areas are:
Segmentation of loan book
Loan staging criteria
Calculation of probability of default / Loss given default
Consideration of probability weighted scenarios and forward lookingmacro-economic factors.
Key audit procedures included:
Design / controls
Assessing the design and implementation of key internal financial controls overloan impairment process used to calculate the impairment charge.
We used our modelling specialist to test the model methodology andreasonableness of assumptions used.
Testing of management review controls over measurement of impairment allowancesand disclosures in the consolidated financial statements.
We focused on appropriate application of accounting principles validatingcompleteness and accuracy of the data and reasonableness of assumptions used in the model.
Appropriateness of management's judgments was also independently reconsidered inrespect of calculation methodologies segmentation economic factors the period ofhistorical loss rates used loss emergence periods and the valuation of recovery assetsand collateral.
Responsibility of Management and Those Charged with Governance for the FinancialStatements
The Company's Board of Directors is responsible for the matters stated in Section134(5) of the Companies Act 2013 ("the Act") with respect to the preparationand presentation of these financial statements that give a true and fair view of the stateof affairs profit and other comprehensive income changes in equity and cash flows of theCompany in accordance with the accounting principles generally accepted in Indiaincluding the Indian Accounting Standards (Ind AS') specified under section 133 ofthe Act. This responsibility also includes maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding of the assets of the Companyand for preventing and detecting frauds and other irregularities; selection andapplication of appropriate accounting policies; making judgments and estimates that arereasonable and prudent; and design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the accuracy andcompleteness of the accounting records relevant to the preparation and presentation ofthe standalone financial statements that give a true and fair view and are free frommaterial misstatement whether due to fraud or error.
In preparing the standalone financial statements management and the Board of Directorsarc responsible 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 the Company's financialreporting process.
Auditor's Responsibility for the Audit of Financial Statement
Our objectives are to obtain reasonable assurance about whether the standalonefinancial statements as a whole are free from material misstatement whether due to fraudor error and to issue an auditor's report that includes our opinion. Reasonable assuranceis a high level of assurance but is not a guarantee that an audit conducted in accordancewith SAs will always detect a material misstatement when it exists. Misstatements canarise from fraud or error and are considered material if individually or in theaggregate they could reasonably be expected to influence the economic decisions of userstaken on the basis of these standalone financial statements.
As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional skepticism throughout the audit. Wc also:
identity' and assess the risks of material misstatement of the standalonefinancial statements whether due to fraud or error design and perform audit proceduresresponsive to those risks and obtain audit evidence that is sufficient and appropriate toprovide a basis for our opinion. The risk of not detecting a material misstatementresulting from fraud is higher than for one resulting from error as fraud may involvecollusion forgery intentional omissions misrepresentations or the override of internalcontrol.
obtain an understanding of internal control relevant to the audit in order todesign audit procedures that are appropriate in the circumstances. Under section 143 (3)(i) of the Act we are also responsible for expressing our opinion on whether the Companyhas adequate internal financial controls with reference to the standalone financialstatements in place 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 standalone financial statements or if such disclosures are inadequate to modify ouropinion. Our conclusions are based on the audit evidence obtained up to the date of ourauditor's report. However future events or conditions may cause the Company to cease tocontinue as a going concern.
evaluate the overall presentation structure and content of the standalonefinancial statements including the disclosures and whether the standalone financialstatements represent the underlying transactions and events in a manner that achieves fairpresentation.
We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have compliedwith relevant ethical requirements regarding independence and to communicate with themall relationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safeguards.
From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the standalone financial statementsof the current period and are therefore the key audit matters. we describe these mattersin our auditor's report unless law or regulation precludes public disclosure about thematter or 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
1. As required by the Companies (Auditor's Report) Order 2016 ("the Order")issued by the Central Government of India in terms of sub-section (11) of section 143 ofthe Act we give in Annexure "A" a statement on matters specified in pharagarph3 and 4 of order to the extent applicable.
2. As required by Section 143 (3) of the Act we report that:
(a) We have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purposes of our audit.
(b) In our opinion proper books of account as required by law have been kept by theCompany so far as it appears from our examination of those books;
(c) The Balance Sheet and the Statement of Profit and Loss dealt with by this Reportare in agreement with the books of account;
(d) In our opinion the aforesaid financial statements comply with the IndianAccounting Standards specified under Section 133 of the Act read with Rule 7 of theCompanies (Accounts) Rules 2014;
(e) On the basis of the written representations received from the directors as on 31March 2020 and taken on record by the Board of Directors Mr. Binod Chand Kankaria isdisqualified as on 31 March 2020 and the same has been removed from the Board in terms ofSection 164 (2) of the Act;
(g) With respect to report on the adequacy of the Internal Financial Control overfinancial reporting of the Company and the operating effectiveness of such controls referto our report in "Annexure B".
(h) with respect to the other matters to be included in the Auditor's Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand to the best of our information and according to the explanations given to us:
i. The Company does not have any pending litigations on its financial position in itsfinancial statements.
ii. The Company does not have any material foreseeable losses.
iii. The Company does not require to transfer any amount to the Investor Education andProtection Fund.
Annexure A to the Independent Auditors' Report
(Referred to in paragraph 2 under Report on Other Legal and RegulatoryRequirements' section of our report to the members of Rea! Touch Finance Limited of evendate)
I. The Company does not have any Fixed Assets. Thus paragraph 3(i) of the Order is notapplicable.
II. The Company does not have any inventory and hence reporting under clause (ii) ofthe Order is not applicable.
III. According to the information and explanation given to us the companies hasgranted loan and advances to parties covered in the register maintained under section 189of the companies Act. 2013.
(a)The Borrowers have been regular in payment of the Interest as stipulated. The termsof arrangements do not stipulate any repayment schedule and the loans are repayable ondemand.
IV. In our opinion and according to the information and explanations given to us thecompany being a Non Banking Finance Company the provisions of Sections 185 and 186 of thecompanies Act 2013 are not applicable to it.
V. The Company has not accepted any deposits from the public.
VI. The Central Government has not prescribed the maintenance of cost records undersection 148(1) of the Act for any of the services rendered by the Company.
V.. (a) According to the information and explanations given to us and on the basis ofour examination of the records of the Company amounts deducted/accrued in the books ofaccount in respect of undisputed statutory dues including provident fund income taxsales tax wealth tax service tax duty of customs value added tax cess and othermaterial statutory dues have been regularly deposited during the year by the Company withthe appropriate authorities. As explained to us the Company did not have any dues onaccount of employees' state insurance and duty of excise.
According to the information and explanations given to us. no undisputed amountspayable in respect of provident fund income tax sales tax wealth tax service tax dutyof customs value added tax cess and other material statutory dues were in arrears as at31 March 2020 for a period of more than six months from the date they became payable.
(b) According to the information and explanations given to us there are no materialdues of wealth tax duty of customs and cess which have not been deposited with theappropriate authorities on account of any dispute.
(c) According to the information and explanations given to us there is no amount whichwas required to be transferred to the investor education and protection fund in accordancewith the relevant provisions of the Companies Act 2013 and rules there under.
VIII. The company does not have any loans and borrowings from any financialinstitution banks government or debenture holders during the year Accordinglyparagraph 3(viii) of the Order is not applicable.
IX. The company did not raise money by way of initial public offer or further publicoffer(including debt instruments) and term loans during the year Accordingly paragraph3(ix) of the Order is not applicable
X. According to the information and explanations given to us. no material fraud on orby the company by its officers or employees has been noticed or reported during the courseof our audit.
XI. According to the information and explanations given to us and based on ourexamination of the records of the company. the Company has paid for managerialremuneration in accordance with the provisions of Section 197 read with Schedule
XII. In our opinion and according to the information and explanations given to us theCompany is not a nidhi company. Accordingly paragraph 3(xii) of the Order is notapplicable.
XIII. According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not entered into anytransactions with the related parties in compliance with Sections 177 and 188 of the Actso the clause is not applicable for the Company.
XIV. According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not made any preferentialallotment or private placement of shares or fully or partly convertible debentures duringthe year.
XV. According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not entered into non cashtransactions with Directors or persons connected with him. Accordingly paragraph 3(xv) ofthe Order is not applicable.
XVI. The Company is registered under Section 45-IA of the Reserve Bank of lndia Act1934 Via Certificate of Registration
No. No.B.05.03146 dated 05/07/1999.
Annexure-B to the Auditor's Report
(Referred to in paragraph 1(1) under Report on Other Legal and RegulatoryRequirements' section of our report to the members of Real Touch Finance Limited of evendate)
Report on the Internal Financial Controls Over Financial Reporting under Clause (i) ofthe sub section 3 of Section 143 of the Companies Act 2013(the Act')
We have audited the internal financial controls over the financial reporting of RealTouch Finance Limited ("the Company'') as on 31 March 2020 in conjunction with ouraudit of the financial statements of the Company for the year ended on that date.
Management's Responsibility for Internal Financial Controls
The Board of Directors of the Company 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 Guidance Note on Audit of Internal Financial Controls over FinancialReporting issued by the Institute of Chartered Accountants of India (TCAl').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 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 Companies Act2013.
Our responsibility is to express an opinion on the Company's internal financialreporting based on our audit. We conducted our audit in accordance with the Guidance Noteon Audit of Internal Financial Controls over Financial Reporting(the "GuidanceNote") and the Standards on Auditing .issued by 1CA1 and deemed to be prescribedunder section 143( 10) of the Companies Act.2013to the extent applicable to an audit ofInternal Financial Controls and both issued by the Institute of Chartered Accountants ofIndia. Those standards and Guidance Note require that we comply with the ethicalrequirement s and plan and platform the audit to obtain reasonable assurance about whetheradequate internal financial controls over financial reporting was established andmaintained and if such controls over financial reporting was established and maintainedand if such controls operated effectively in all material aspects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls system over financial reportingand their operating effectiveness .Our audit 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 financial statements whether due to fraud or error.
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 systemover financial reporting.
Meaning of Internal Financial Controls over Financial Reporting
A company's internal financial control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. A company's internal financial control over financialreporting includes those policies and procedures that (1) pertain to the maintenance ofcost records that in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the company; (2) provide reasonable assurance andtransactions arc recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles and the receipt and expendituresof the company are being made only in accordance with authorizations of management anddirectors of the company; and (3) provide reasonable assurance regarding prevention ortimely detection of unauthorized acquisition .use or disposition of the company's assetsthat could have a material effect on the financial statements.
Inherent Limitation of Internal Financial Controls Over Financial Reporting
Because of the inherent limitations of internal financial controls over financialreporting .including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not to be detected.Also projections of any evaluation of the internal financial controls over financialreporting may become inadequate because of changes in conditions or that the degree ofcompliance with the policies or procedures may deteriorate.
In our opinion the Company has in all material respects an adequate internalfinancial control system over financial reporting and such internal financial controlssystem over financial reporting were operating effectively as on 31 March 2020 based onthe internal control over financial reporting criteria established by the Companyconsidering the essential components of internal control stated in the Guidance Note onAudit of Internal Financial Controls Over Financial Reporting issued by the Institute ofChartered Accountants of India