To the Members of Satin Creditcare Network Limited
REPORT ON THE AUDIT OF THE STANDALONE FINANCIAL
1) We have audited the accompanying Standalone Financial Statements of SatinCreditcare Network Limited ('the Company') which comprise the Balance Sheet as at 31March 2020 the Statement of Profit and Loss (including Other Comprehensive Income) theCash Flow Statement and the Statement of Changes in Equity for the year then ended and asummary of the significant accounting policies and other explanatory information.
2) In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid Standalone Financial Statements give the information requiredby the Companies Act 2013 ('Act') in the manner so required and give a true and fair viewin conformity with the accounting principles generally accepted in India including IndianAccounting Standards ('Ind AS') specified under section 133 of the Act of the state ofaffairs of the Company as at 31 March 2020 and its profit (including other comprehensiveincome) its cash flows and 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 Financial Statements section of our report. We are independent of theCompany in accordance with the Code of Ethics issued by the Institute of CharteredAccountants of India ('ICAI') together with the ethical requirements that are relevant toour audit of the financial statements under the provisions of the Act and the rulesthereunder and we have fulfilled our other ethical responsibilities in accordance withthese requirements and the Code of Ethics. We believe that the audit evidence we haveobtained is sufficient and appropriate to provide a basis for our opinion.
Emphasis of Matter
4) We draw attention to Note 53 to the accompanying standalone financial statementwhich describes significant uncertainties due to the outbreak of SARS- CoV-2 (COVID-19pandemic) virus. The impact of the COVID-19 pandemic on the operations of the Company andits financial position as at 31 March 2020 including the measurement of expected creditlosses on the financial loan assets are significantly dependent on uncertain futureeconomic conditions. Our opinion is not modified in respect of this matter.
Key Audit Matters
5) 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.
6) We have determined the matters described below to be the key audit matters to becommunicated in our report.
|Key audit matter ||How our audit addressed the key audit matter |
|Expected Credit Losses on loans || |
|[Refer Note 3(j) for the accounting policy and Note 42 for the related disclosures] || |
|As at 31 March 2020 the Company has financial assets (loans) amounting to Rs. 470939.10 lakhs including loans which are carried at fair value through other comprehensive income amounting to Rs. 420819.04 lakhs. As per Ind AS 109- Financial Instruments the Company is required to recognize allowance for expected credit losses on financial assets. The expected credit loss is calculated using the percentage of probability of default (PD) loss given default (LGD) and exposure at default (EAD) for each of the stages of loan portfolio. ||Our audit focused on assessing the appropriateness of management's judgment and estimates used in the impairment analysis through the following procedures but were not limited to the following procedures: |
|Expected credit loss cannot be measured precisely but can only be estimated through use of statistics. The calculation of expected credit losses is complex and requires exercise of judgement around both the timing of recognition of impairment provisions and estimation of the amount of provisions required in relation to loss events. ||(a) performed a walk through of the impairment loss allowance process and assessed the design effectiveness of controls; |
|Considering the significance of the above matter to the standalone financial statements and since the matter required our significant attention to test the calculation of expected credit losses we have identified this as a key audit matter for current year audit. ||(b) obtained an understanding of the model adopted by the Company including key inputs and assumptions for calculation of expected credit losses including the impact of COVID 19 on the assumptions and how management calculated the expected credit losses and the appropriateness data on which the calculation is based; |
|We also draw attention to Note 53 of the accompanying standalone financial statements regarding uncertainties involved on the due to outbreak of COVID-19 pandemic with respect to the measurement of expected credit loss on such loan assets which are significantly dependent on uncertain future developments. ||(c) obtained the policy on moratorium of loans approved by the Board of Directors pursuant to the regulatory announcement made by the RBI; |
| ||(d) tested the design and operating effectiveness of the key controls over completeness and accuracy of the key inputs and assumptions considered for calculation recording and monitoring of the impairment loss recognized; |
| ||(e) tested the accuracy of inputs through substantive procedures and assessed the reasonableness of the assumptions used; |
| ||(f) developed a point estimate by making reference to the expected credit losses recognized by entities that carry comparable financial assets; and (g) tested the arithmetical calculation of the expected credit losses; |
| ||(h) assessed the appropriateness and adequacy of the related presentation and disclosures in the accompanying financial statements in accordance with the applicable accounting standards; and |
| ||(i) obtained written representations from management and those charged with governance whether they believe significant assumptions used in calculation of expected credit losses are reasonable. |
Information other than the Financial Statements and Auditor's Report thereon
7) The Company's Board of Directors is responsible for the other information. The otherinformation comprises the information included in the Annual Report but does not includethe Standalone Financial Statements and our auditor's report thereon.
Our opinion on the Standalone Financial Statements does not cover the other informationand we do 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 and in doing so consider whether the other informationis materially inconsistent with the Standalone Financial Statements or our knowledgeobtained in the audit or otherwise appears to be materially misstated. If based on thework we have performed we conclude that there is a material misstatement of this otherinformation we are required to report that fact. We have nothing to report in thisregard.
Responsibilities of Management and Those Charged with
Governance for the Standalone Financial Statements
8) The accompanying Standalone Financial Statements have been approved by the Company'sBoard of Directors. The Company's Board of Directors is responsible for the matters statedin section 134(5) of the Act with respect to the preparation of these Standalone FinancialStatements that give a true and fair view of the financial position financial performanceincluding other comprehensive income changes in equity and cash flows of the Company inaccordance with the accounting principles generally accepted in India including the IndAS specified under section 133 of the Act. This responsibility also includes maintenanceof adequate accounting records in accordance with the provisions of the Act forsafeguarding of the assets of the Company and for preventing and detecting frauds andother irregularities; selection and application of appropriate accounting policies; makingjudgments and estimates that are reasonable and prudent; and design implementation andmaintenance of adequate internal financial controls that were operating effectively forensuring the accuracy and completeness of the accounting records relevant to thepreparation and presentation of the financial statements that give a true and fair viewand are free from material misstatement whether due to fraud or error.
9) In preparing the financial statements management is responsible for assessing theCompany's ability to continue as a going concern disclosing as applicable mattersrelated to going concern and using the going concern basis of accounting unless managementeither intends to liquidate the Company or to cease operations or has no realisticalternative but to do so.
10) Those Board of Directors is also responsible for overseeing the Company's financialreporting process.
Auditor's Responsibilities for the Audit of the Financial Statements
11) 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.
12) As part of an audit in accordance with Standards on Auditing we exerciseprofessional judgment and maintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the 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 with reference to financial statements in place andthe 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;
13) 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.
14) 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.
15) 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
16) 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.
17) As required by the Companies (Auditor's Report) Order 2016 ('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.
18) 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 March2020 from being appointed as a director in terms of section 164(2) of the Act;
f) we have also audited the internal financial controls with reference to financialstatements of the Company as on 31 March 2020 in conjunction with our audit of theStandalone Financial Statements of the Company for the year ended on that date and ourreport dated 15 June 2020 as per Annexure B expressed unmodified 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 50 to the Standalone Financial Statements hasdisclosed the impact of pending litigations on its financial position as at 31 March 2020;
ii) the Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses as at 31 March 2020;
iii) there were no amounts which were required to be transferred to the InvestorEducation and Protection Fund by the Company during the year ended 31 March 2020; and
iv) the disclosure requirements relating to holdings as well as dealings in specifiedbank notes were applicable for the period from 8 November 2016 to 30 December 2016 whichare not relevant to these Standalone Financial Statements. Hence reporting under thisclause is not applicable.
For Walker Chandiok & Co LLP
Firm's Registration No.: 001076N/N500013
Membership No.: 095256
Date: 15 June 2020
Annexure A to the Independent Auditor's Report of even date to the members of SatinCreditcare Network Limited on the standalone financial statements for the year ended 31March 2020
Based on the audit procedures performed for the purpose of reporting a true and fairview on the financial statements of the Company and taking into consideration theinformation and explanations given to us and the books of account and other recordsexamined by us in the normal course of audit and to the best of our knowledge and beliefwe report that:
(i) (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of property plant and equipment.
(b) The Company has a regular program of physical verification of its property plantand equipment under which fixed assets are verified in a phased manner over a period of 3years which in our opinion is reasonable having regard to the size of the Company andthe nature of its assets. In accordance with this program certain fixed assets wereverified during the year and no material discrepancies were noticed on such verification.
(c) The title deeds of all the immovable properties (which are included under the head'Property plant and equipment') are held in the name of the Company except for thefollowing property which was transferred as a result of amalgamation of companies asstated in the Note 13 to the Standalone Financial Statements wherein the tittle deeds arein the name of the erstwhile Company:
| || || || || ||(Amount in Rs. lakhs) |
|Nature of property ||Total number of cases ||Whether leasehold / freehold ||Gross block as on 31 March 2020 ||Net block as on 31 March 2020 ||Remarks |
|Building ||1 ||Freehold ||292.00 ||156.67 ||The said property is in the name of Satin Intellicomm Limited an erstwhile Company that merged with the Company. |
(ii) The Company does not have any inventory. Accordingly the provisions of Clause3(ii) of the Order are not applicable.
(iii) The Company has granted secured and unsecured loans to companies covered in theregister maintained under Section 189 of the Act; and with respect to the same:
a) in our opinion the terms and conditions of grant of such loans are not primafacie prejudicial to the Company's interest;
b) the schedule of repayment of principal and payment of interest has been stipulatedand in our opinion repayments/ receipts of the principal amount and the interest areregular; and
c) there is no overdue amount in respect of loans granted to such companies.
(iv) In our opinion the Company has complied with the provisions of Sections 185 and186 of the Act in respect of loans investments guarantees and security.
(v) In our opinion the Company has not accepted any deposits within the meaning ofSections 73 to 76 of the Act and the Companies (Acceptance of Deposits) Rules 2014 (asamended). Accordingly the provisions of Clause 3(v) of the Order are not applicable.
(vi) The Central Government has not specified maintenance of cost records undersub-section (1) of Section 148 of the Act in respect of Company's services. Accordinglythe provisions of Clause 3(vi) of the Order are not applicable.
(vii) a) The Company is regular in depositing undisputed statutory dues includingprovident fund employeesRs. state insurance income-tax sales-tax service tax duty ofcustoms duty of excise value added tax cess and other material statutory dues asapplicable to the appropriate authorities. Further no undisputed amounts payable inrespect thereof were outstanding at the year-end for a period of more than six months fromthe date they become payable.
b) The dues outstanding in respect of income-tax sales-tax service-tax duty ofcustoms duty of excise and value added tax on account of any dispute are as follows:
Statement of Disputed Dues
|Name of the statute ||Nature of dues ||Amount (Rs. in lakhs) ||Amount paid under protest (Rs. in lakhs) ||Period to which the amount relates ||Forum where dispute is pending ||Remarks |
|Income-tax Act 1961 ||Income-tax ||168.53 ||Nil ||Assessment year 2018-19 ||Deputy Commissioner of Income Tax CPC ||Intimation under section 143(1). The Company has filed rectification application. The Company got relief on similar demand for Assessment Year 2017-18. |
(viii) The Company has not defaulted in repayment of loans or borrowings to any bank orfinancial institution or debenture holders during the year. The Company did not have anyoutstanding loans or borrowings payable to government during the year.
(ix) In our opinion the Company has applied moneys raised by way of the term loans forthe purposes for which these were raised. The Company did not raise moneys by way ofinitial public offer/ further public offer (including debt instruments) during the year.
(x) No fraud by the Company or on the Company by its officers or employees has beennoticed or reported during the period covered by our audit except for few instances ofmisappropriation of cash collected from customers and other forms of embezzlement of cashby the employees involving amounts aggregating Rs. 127.77 lakhs. TheCompany has terminated the services of such employees and initiated legal action againstthem. The Company has recovered Rs. 34.64 lakhs from 46 employees.
(xi) Managerial remuneration has been paid and provided by the Company in accordancewith the requisite approvals mandated by the provisions of Section 197 of the Act readwith Schedule V to the Act.
(xii) In our opinion the Company is not a Nidhi Company. Accordinglyprovisions of Clause 3(xii) of the Order are not applicable.
(xiii) In our opinion all transactions with the related parties are in compliance withSections 177 and 188 of Act where applicable and the requisite details have beendisclosed in the financial statements etc. as required by the applicable Ind AS.
(xiv) During the year the Company has made preferential allotment of shares. Inrespect of the same in our opinion the Company has complied with the requirement ofSection 42 of the Act and the Rules framed thereunder. Further in our opinion theamounts so raised have been used for the purposes for which the funds were raised. Duringthe year the Company did not make preferential allotment/ private placement offully/partly convertible debentures.
(xv) In our opinion the Company has not entered into any non-cash transactions withthe directors or persons connected with them covered under Section 192 of the Act.
(xvi) The Company is required to be registered under Section 45-IA of the Reserve Bankof India Act 1934 and such registration has been obtained by the Company.
For Walker Chandiok & Co LLP
Firm's Registration No.: 001076N/N500013
Membership No.: 095256
Date: 15 June 2020
Annexure B to the Independent Auditor's of even date to the members of Satin CreditcareNetwork Limited on the Standalone financial statements for the year ended 31 March 2020
Independent Auditor's Report on the Internal Financial Controls with reference to theStandalone Financial Statements under Clause (i) of Sub-section 3 of Section 143 of theCompanies Act 2013 (the Act')
1) In conjunction with our audit of the Standalone Financial Statements of SatinCreditcare Network Limited ('the Company') as at and for the year ended 31 March 2020 wehave audited 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 the 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 (the Guidance Note') issued by the Institute ofChartered Accountants of India ('ICAI'). These responsibilities include the designimplementation and maintenance of adequate internal financial controls that were operatingeffectively for ensuring the orderly and efficient conduct of the Company's businessincluding adherence to the Company's policies the safeguarding of its assets theprevention and detection of frauds and errors the accuracy and completeness of theaccounting records and the timely preparation of reliable financial information asrequired 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 ICAI prescribed under Section143(10) of the Act to the extent applicable to an audit of internal financial controlswith reference to financial statements and the Guidance Note issued by the ICAI.
Those Standards and the Guidance Note require that we comply with ethical requirementsand plan and perform the audit to obtain reasonable assurance about whether adequateinternal financial controls with reference to financial statements were established andmaintained and if such controls operated effectively 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 and fairlyreflect the transactions and dispositions of the assets of the company; (2) providereasonable assurance that transactions are recorded as necessary to permit preparation offinancial statements in accordance with generally accepted accounting principles and thatreceipts and expenditures of the company are being made only in accordance withauthorizations of management and directors of the company; and (3) provide reasonableassurance regarding prevention or timely detection of unAuthorized acquisition use ordisposition of the company's assets that could have a material effect on the financialstatements.
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.
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 2020 based on the internal financial controls with referenceto financial statements criteria established by the Company considering the essentialcomponents of internal control stated in the Guidance Note issued by ICAI.
For Walker Chandiok & Co LLP
Firm's Registration No.: 001076N/N500013
Membership No.: 095256
Date: 15 June 2020