To the Members of Sainik Finance & Industries Limited
Report on the Audit of the Financial Statements
We have audited the accompanying Ind AS financial statements of Sainik Finance &Industries Limited comprising of the Balance Sheet as at 31 March 2020 the Statement ofProfit and Loss including other comprehensive income the Cash Flow Statement and theStatement of Changes in Equity for the year then ended and notes to the Ind AS financialstatements including a summary of significant accounting policies and other explanatoryinformation (hereinafter referred to as the Ind AS financial statements').
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid Ind AS financial statements give the information required bythe Companies Act 2013 as amended (the Act') in the manner so required and give atrue and fair view in conformity with the accounting principles generally accepted inIndia of the state of affairs of the Company as at 31 March 2020 their profit includingother comprehensive income their cash flows and the statement of changes in equity forthe year ended on that date.
Basis for Opinion
We conducted our audit of the Ind AS financial statements in accordance with theStandards on Auditing (SAs) as specified under section 143(10) of the Act. Ourresponsibilities under those Standards are further described in the Auditor'sresponsibilities for the audit of the Ind AS Financial Statements' section of our report.We are independent of the Company in accordance with the Code of Ethics' issued bythe Institute of Chartered Accountants of India together with the ethical requirementsthat are relevant to our audit of the financial statements under the provisions of the Actand the Rules thereunder and we have fulfilled our other ethical responsibilities inaccordance with these requirements and the Code of Ethics. We believe that the auditevidence we have obtained is sufficient and appropriate to provide a basis for our auditopinion on the Ind AS financial statements.
Key Audit Matters
Key Audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the financial statements of the current period. These matterswere addressed in the context of our audit of the financial statements as a whole and informing our opinion thereon and we do not provide a separate opinion on these matters.
We have determined the matters described below to be the key audit matters to becommunicated in our report. We have fulfilled the responsibilities described in theAuditor's responsibilities for the audit of the Ind AS financial statements section of ourreport including in relation to these matters. Accordingly our audit included theperformance of procedures designed to respond to our assessment of the risks of materialmisstatement of the Ind AS financial statements. The results of audit procedures performedby us including those procedures performed to address the matters below provide thebasis for our audit opinion on the accompanying Ind AS financial statements.
|Sl. Key Audit matter ||Auditors' Response |
|1. Transition to Ind AS accounting framework || |
|The Company has adopted Ind AS from 1 April 2019 with an effective date of 1 April 2018 for such transition. For periods up to and including the year ended 31 March 2019 the Company had prepared and presented its financial statements in accordance with the erstwhile generally accepted accounting principles in India (Indian GAAP). || Read the Ind AS impact assessment performed by the Management and the resultant changes made to the accounting policies considering the requirements of the new framework. |
|To give effect of the transition to Ind AS these financial statements for the year ended 31 March 2020 together with the comparative financial information for the previous year ended 31 March 2019 and the transition date Balance Sheet as at 1 April 2018 have been prepared under Ind AS. || Evaluated the exemptions and exceptions allowed by Ind AS and applied by the Management in applying the first-time adoption principles of Ind AS 101 in respect of fair valuation of assets and liabilities existing as at transition date. |
|The transition has involved significant change in the Company's policies and processes for financial reporting including generation of supportable information and applying estimates to inter alia determine impact of Ind AS on accounting and disclosure requirements prescribed under the extant Reserve Bank of India (RBI) directions. In view of the complexity involved Ind AS transition and the preparation of financial statements subsequent to the transition date have been areas of key focus in our audit. || Tested the accounting adjustments posted as at the transition date and in respect of the previous year to convert the financial information reported under erstwhile Indian GAAP to Ind AS. |
| || Tested the disclosures prescribed under Ind AS. |
|2 Impairment on financial assets (expected credit losses). || |
|Ind AS 109 requires the Company to recognise impairment loss allowance towards its financial assets (designated at amortised cost and fair value through other comprehensive income) using the expected credit loss (ECL) approach. ||We read and assessed the Company's accounting policies for impairment of financial assets and their compliance with Ind AS 109. |
|Such ECL allowance is required to be measured considering the guiding principles of Ind AS 109 including: || |
| unbiased probability weighted outcome under various scenarios; || We tested the criteria for staging of loans based on their past-due status to check compliance with requirement of Ind AS 109. Tested a sample of performing (stage 1) loans to assess whether any loss indicators were present requiring them to be classified under stage 2 or 3 and vice versa. |
| time value of money; || We evaluated the reasonableness of the Management estimates by understanding the process of ECL |
| impact arising from forward looking macro-economic factors estimation and tested the controls around data extraction and validation. and; || |
| availability of reasonable and supportable information without undue costs. || Tested the ECL model including assumptions and underlying computation. |
|Applying these principles involves significant estimation in various aspects such as: || Assessed the floor/minimum rates of provisioning applied for loan products with inadequate historical defaults. |
| grouping of borrowers based on homogeneity by using appropriate statistical techniques; || Audited disclosures included in the Ind AS financial statements in respect of expected credit losses. |
| staging of loans and estimation of behavioral life; || |
| determining macro-economic factors impacting credit quality of receivables; || |
| estimation of losses for loan products with no/minimal historical defaults. || |
|Considering the significance of such allowance to the overall financial statements and the degree of estimation involved in computation of expected credit losses this area is considered as a key audit matter. || |
Information other than the Financial Statements and Auditors' Report thereon
The Company's Board of Directors is responsible for the preparation of otherinformation which comprises the Director's Report including annexures to Director'sReport Management Discussion and Analysis Report and Report on Corporate Governance butdoes not include the financial statements and our auditor's report thereon.
Our opinion on the financial statements does not cover the other information andaccordingly we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements our responsibility isto read the other information and in doing so consider whether the other information ismaterially inconsistent with financial statements or our knowledge obtained during thecourse of audit or otherwise appears to be materially misstated.
Based on the work we have performed if we conclude that there is a materialmisstatement of this other information; we are required to report the fact. We havenothing to report in this regard.
Responsibility of Management for Financial Statements
The Company's Board of Directors is responsible for the preparation and presentation ofthese Ind AS financial statements in terms of the requirements of the Act that give a trueand fair view of the financial position financial performance including othercomprehensive income cash flows and statement of changes in equity in accordance with theaccounting principles generally accepted in India including the Indian AccountingStandards (Ind AS) specified under section 133 of the Act. The respective Board ofDirectors of the Companies are responsible for maintenance of adequate accounting recordsin accordance with the provisions of the Act for safeguarding of the assets and forpreventing and detecting frauds and other irregularities; selection and application ofappropriate accounting policies; making judgments and estimates that are reasonable andprudent; and the design implementation and maintenance of adequate internal financialcontrols that were operating effectively for ensuring the accuracy and completeness ofthe accounting records relevant to the preparation and presentation of the Ind ASfinancial statements that give a true and fair view and are free from materialmisstatement whether due to fraud or error which have been used for the purpose ofpreparation of the Ind AS financial statements by the Directors of the Company asaforesaid.
In preparing the Ind AS financial statements the respective Board of Directors of thecompanies are responsible for assessing the ability of the Company to continue as a goingconcern disclosing as applicable matters related to going concern and using the goingconcern basis of accounting unless Management either intends to liquidate the Company orto cease operations or has no realistic alternative but to do so.
Those respective Board of Directors of the Companies are also responsible foroverseeing the financial reporting process of the Company.
Auditor's Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the Ind AS 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 assurance but is not a guarantee that an audit conducted in accordance with SAswill always detect a material misstatement when it exists. Misstatements can arise fromfraud or error and are considered material if individually or in the aggregate theycould reasonably be expected to influence the economic decisions of users taken on thebasis of these Ind AS financial statements.
As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the Ind AS 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 misrepresentation 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 Companies Act 2013 we are also responsible for expressing our opinion on whetherthe company has adequate internal financial controls system in place and the operatingeffectiveness 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 Ind AS 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 Ind AS financialstatements including the disclosures and whether the financial statements represent theunderlying transactions and events in a manner that achieves fair presentation.
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 charge with governance we determine thosematters that were of most significance in the audit of Ind AS financial statements of thecurrent period and are therefore the key audit matters. We describe these matters in ourauditor's report unless law or regulation precludes public disclosure about the matter orwhen in extremely rare circumstances in our report because the adverse consequences ofdoing so would reasonably be expected to outweigh the public benefits of suchcommunication.
Report on other legal and regulatory requirements
As required by Section 143 (3) of the Act 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 purposes of our audit of the aforesaidInd AS 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 Balance Sheet the Statement of Profit and Loss including the Statement of OtherComprehensive Income the Cash Flow Statement and Statement of Changes in Equity dealtwith by this Report are in agreement with the books of account maintained for the purposeof preparation of the Ind AS financial statements;
d) In our opinion the aforesaid Ind AS financial statements comply with the Ind ASspecified under Section 133 of the Act.
e) On the basis of the written representations received from the directors as on 31stMarch 2020 taken on record by the Board of Directors none of the directors isdisqualified as on 31st March 2020 from being appointed as a director in termsof Section 164 (2) of the Act.
f) With respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate Report in "Annexure (B)".
g) With respect to the other matters to be included in the Auditors' Report inaccordance with the requirements of section 197(16) of the Act as amended
In our opinion and to the best of our information and accordingly to the explanationsgiven to us no remuneration has been paid by the company to its directors during theyear.
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. There is no pending litigation which would have its impact on Ind AS financialstatement of the Company.
ii. The Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses.
iii. There are no amounts required to be transferred to the Investor Education andProtection Fund by the Company.
For Nagar Goel & Chawla
ICAI Firm Registration No. : 009933N
Membership No. : 515984
Place: New Delhi
Date: 25th June 2020
ANNEXURE (A) TO THE INDEPENDENT AUDITOR'S REPORT OF EVEN DATE ON THE FINANCIALSTATEMENTS OF SAINIK FINANCE & INDUSTRIES LIMITED
The Annexure referred to in Independent Auditors' Report to the members of the Companyon the financial statements for the year ended 31 March 2020 we report that:
(i) (a) According to the information and explanations given to us the Company hasmaintained proper records showing full particulars including quantitative details andsituation of fixed assets (property plant and equipment).
(b) According to the information and explanations given to us the Company has aregular programme of physical verification of its property plant and equipment by whichall fixed assets (property plant and equipment) are verified at periodic intervals. Inour opinion the period of verification is reasonable having regard to the size of theCompany and the nature of its assets. No material discrepancies were noticed duringphysical verification of fixed assets (property plant and equipment).
(c) According to the information and explanations given to us and on the basis of ourexamination of the records of the Company the title deeds of immovable properties areheld in the name of the Company.
(ii) According to the information and explanations given to us the management hasconducted physically verification in respect of finished goods at reasonable intervals. Nomaterial discrepancies were noticed during physical verification of inventories ascompared to book records.
(iii) In our opinion and according to the information and explanations provided to usthe Company has granted loans to a Company covered in the register maintained undersection 189 of the Companies Act 2013 (the Act').
(a) In our opinion the rate of interest and other terms and conditions on which theloans had been granted to the parties listed in the register maintained under section 189of the Act were not prima facie prejudicial to the interest of the Company.
(b) The terms of arrangement do not stipulate any repayment schedule and the loans arerepayable on demand with interest.
(c) Since the term of arrangement do not stipulate any repayment schedule and the loansare repayable on demand no question of overdue amounts will arise in respect of the loansgranted to the parties listed in the register maintained under section 189 of the Act.
(iv) In our opinion and according to the information and explanations provided to usthe Company did not make any investment as per provisions of section 186(1) of the Act.Further the Company is exempted from compliance of section 185 and 186 (exceptsub-section "1" of Section 186) of the Act.
(v) According to the information and explanations provided to us the Company has notaccepted any deposits from the public. Accordingly the directives issued by Reserve Bankof India and the provisions of section 73 to 76 or any other relevant provisions of theAct and rules framed thereunder in this regard are not applicable.
(vi) According to the information and explanations provided to us the CentralGovernment has not specified for maintenance of cost records under section 148(1) of theCompanies Act 2013 in respect of the activities carried on by the Company. Hence theprovisions of paragraph 3(vi) of the Order is not applicable to the Company.
(vii) In respect of statutory dues;
(a) According to the information and explanations given to us and on the basis of ourexamination of the records of the Company the Company is regular in depositing withappropriate authorities undisputed statutory dues including provident fund investoreducation and protection fund employees' state insurance income-tax sales tax servicetax custom duty excise duty value added tax goods and service tax and other materialstatutory dues as applicable.
Further there are no undisputed amounts payable outstanding as at 31 March 2020 for aperiod of more than six months from the date they become payable.
(b) According to the information and explanations given to us there are no materialstatutory dues which have not been deposited with the appropriate authorities on accountof any dispute.
(viii) In our opinion and according to the information and explanations given to usthe Company has not raised loan or borrowings from banks financial institutions andGovernment or debenture holders during the year under audit and therefore paragraph3(viii) of the Order is not applicable.
(ix) According to the information and explanations provided to us the company has notraised any moneys by way of initial public offer or further public offer (including debtinstruments) and not availed the facility of term loans during the year under audit andtherefore paragraph 3(ix) of the Order is not applicable.
(x) During the course of our examination of the books and records of the Companycarried out in accordance with the generally accepted auditing practices in India andaccording to the information and explanations given to us no fraud on or by the companyor any fraud by its officers or employees was noticed or reported during the year.
(xi) To the best of our knowledge and according to the information and explanationsgiven to us no managerial remuneration has been paid or provided during the year underaudit. Accordingly paragraph 3(xi) of the Order is not applicable on the Company.
(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 transactions with the related parties are incompliance with sections 177 and 188 of the Act where applicable and details of suchtransactions have been disclosed in the financial statements as required by the applicableaccounting standards.
(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 under audit.
(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) To the best of our knowledge and according to the information and explanationsgiven to us the company has registered under section 45-IA of the Reserve Bank of IndiaAct 1934.
For Nagar Goel & Chawla
ICAI Firm Registration No. : 009933N
Membership No. : 515984
Place: New Delhi
Date: 25 th June 2020
ANNEXURE- (B) TO THE INDEPENDENT AUDITOR'S REPORT OF EVEN DATE ON THE FINANCIALSTATEMENTS OF SAINIK FINANCE & INDUSTRIES LIMITED
Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section143 of the Companies Act 2013 ("the Act")
We have audited the internal financial controls over financial reporting of SainikFinance & Industries Limited ("the Company") as of March 31 2020 inconjunction with our audit of the financial statements of the Company for the year endedon that date.
Management's Responsibility for Internal Financial Controls
The Company's management is responsible for establishing and maintaining internalfinancial controls 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. These responsibilities includethe design implementation and maintenance of adequate internal financial controls thatwere operating effectively for ensuring the orderly and efficient conduct of its businessincluding adherence to company's policies the safeguarding of its assets the preventionand detection of frauds and errors the accuracy and completeness of the accountingrecords and the timely preparation of reliable financial information as required underthe Companies Act 2013.
Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting based on our audit with reference to these Ind ASfinancial statements. We conducted our audit in accordance with the Guidance Note on Auditof Internal Financial Controls Over Financial Reporting (the "Guidance Note")and the Standards on Auditing issued by ICAI and deemed to be prescribed under section143(10) of the Companies Act 2013 to the extent applicable to an audit of internalfinancial controls both applicable to an audit of Internal Financial Controls and bothissued by the Institute of Chartered Accountants of India. Those Standards and theGuidance Note require that we comply with ethical requirements and plan and perform theaudit to obtain reasonable assurance about whether adequate internal financial controlsover financial reporting was established and maintained and if such controls operatedeffectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system over financial reporting with reference to theseInd AS financial statements and their operating effectiveness. Our audit of internalfinancial controls over financial reporting included obtaining an understanding ofinternal financial controls over financial reporting assessing the risk that a materialweakness exists and testing and evaluating the design and operating effectiveness ofinternal control based on the assessed risk. The procedures selected depend on theauditor's judgement including the assessment of the risks of material misstatement of theInd AS 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 with reference to these Ind AS financial statements.
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 Ind AS financial statements for external purposes in accordance withgenerally accepted accounting principles. A company's internal financial control overfinancial reporting includes 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 authorizations of management and directors of the company; and
3. Provide reasonable assurance regarding prevention or timely detection ofunauthorized acquisition use or disposition of the company's assets that could have amaterial effect on the Ind AS financial statements.
Inherent Limitations 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 be detected.Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.
In our opinion the Company has in all material respects an adequate internalfinancial controls system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at March 31 2020 based on"the 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".
For Nagar Goel & Chawla
ICAI Firm Registration No. : 009933N
Membership No. : 515984
Place: New Delhi
Date: 25th June 2020.