To the Members of Shalby Limited
REPORT ON THE AUDIT OF THE STANDALONE FINANCIAL STATEMENTS
We have audited the accompanying standalone financial statements of Shalby Limited("the Company") which comprise the Balance Sheet as at March 31 2020 thestatement of Profit and Loss (including other comprehensive income) the statement ofchanges in equity and the statement of cash flows for the year ended on that date and asummary of the significant accounting policies and other explanatory information(hereinafter referred to as "standalone financial statements").
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 trueand fair view in conformity with the Indian Accounting Standards prescribed under section133 of the Act read with the Companies (Indian Accounting Standards) Rules 2015 asamended ("Ind AS") and other accounting principles generally accepted in Indiaof the state of affairs of the Company as at March 31 2020 the profit and totalcomprehensive income changes in equity and its cash flows for the year ended on thatdate.
Basis for Opinion
We conducted our audit of the standalone financial statements in accordance with theStandards on Auditing specified under section 143(10) of the Act. Our responsibilitiesunder those Standards are further described in the Auditor's Responsibilities for theAudit of the Standalone Financial Statements section of our report. We are independent ofthe Company in accordance with the Code of Ethics issued by the Institute of CharteredAccountants of India (ICAI) together with the independence requirements that are relevantto our audit of the standalone financial statements under the provisions of the Act andthe Rules made thereunder and we have fulfilled our other ethical responsibilities inaccordance with these requirements and the ICAI's Code of Ethics. We believe that theaudit evidence we have obtained is sufficient and appropriate to provide a basis for ouraudit opinion on the standalone financial statements.
Emphasis of Matter
We draw attention to Note no. 51 to the financial statement to assess therecoverability of certain assets the management has considered internal and externalinformation upto the date of this report in respect of the current and estimated futureglobal including Indian economic indicators consequent to the global health pandemic. Theactual impact of the pandemic may be different from that considered in assessing therecoverability of these assets.
Our opinion is not modified in respect of this matter.
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. We have determined the matters described below to bethe key audit matters to be communicated in our report.
|Sr Key Audit Matter ||Auditor's Response |
|1 Reasonableness of Carrying amount of Investment in 100% subsidiary company classified as "Held for Sale" || |
|Investment in equity shares of 100% owned subsidiary company "Vrundavan Shalby Hospitals Ltd" has been classified as held for sale. The carrying value of investment in equity instruments of such subsidiary company as at March 31 2020 amounts to Rs.131.92 million. Based on the property valuation report from an independent civil engineer the management expects to realize the consideration higher than the carrying amount of investment. Management expects the process of sale to be completed within 12 months from March 31 2020. ||We have performed following audit procedure in relation to managements evaluation of the asset held for sale: |
|Refer Notes 18 to the Standalone Financial Statements. || Evaluating the independent professional valuer's competence capabilities and objectivity; |
| || Assessing the valuation methodology used by the independent professional valuer to estimate the fair value of investment classified as held for sale. |
| || Assessing bases and assumptions w.r.t proximity of civic amenities surface communication area of land & building Circle rates year of construction of building quality of interior depreciated value recent sale deals in nearby area etc. |
| ||Based on the audit procedures performed we found that assumptions made by the management in relation to the valuation are supported by the available evidence. |
|2 Evaluation of uncertain tax positions || |
|The Company has material uncertain tax positions including matters under dispute which involves significant judgment to determine the possible outcome of these disputes. Refer Notes 36 to the Standalone Financial Statements. ||We evaluated the related accounting policy for provisioning for tax exposures and found it to be appropriate. We have obtained details of completed tax assessments and demands upto the year ended March 31 2020 from management. We evaluated auditee's response / opinion taken from various tax experts by auditee to challenge the possible outcome of the disputes. We also considered legal precedence and other rulings in evaluating management's position on these uncertain tax positions. Additionally we considered the effect of new information in respect of uncertain tax positions as at March 31 2020 to evaluate whether any change was required to management's position on these uncertainties. From the evidence obtained and in the context of the financial statements taken as a whole we consider the provisions in relation to uncertain tax positions as at March 31 2020 to be appropriate. |
|3 Migration of ERP System || |
|During the year company has migrated its ERP system from Careworks to SRIT in majority of the units which is mainly used for Patient billing & Inventory management. The implementation of a new system has an inherent risk of loss of integrity of key data being migrated and the breakdown in operation or monitoring of IT dependent controls within critical business processes such as purchasing. selling and recording of transaction which could lead to financial errors or misstatements and inaccurate financial reporting. The Company's financial accounting and reporting systems are heavily dependent on the new system and there is a risk that automated accounting procedures and related IT dependent manual controls are not designed and operating effectively. ||We have reviewed the information systems migration process and Information Technology General Procedures Controls (ITGC) with the assistance of IT audit specialists our procedures included: |
| ||Testing general IT controls around system access change management and computer operations within specific applications pertinent to the financial statements by assessing appropriate policies are in place and adhered to by inspecting supporting evidence. Also assessed the operation of controls over changes or transactions being recorded in the systems and testing manual compensating controls such as reconciliations between systems and other information sources through re-performance or inspection. |
| ||We reviewed the management's planning and processes around systems migration in order ascertain how controls in existing information systems are mapped into new information systems. We also independently tested completeness validity and accuracy of transaction and master data migrated to new information system. Where general IT controls and compensating manual controls were inadequate or ineffective we performed additional substantive testing such as using extended sample sizes and performing data analysis routines over impacted accounts to test the integrity of the transactional level data that is flowing into the Company's financial statements. Our procedures did not identify any material exceptions. |
INFORMATION OTHER THAN THE STANDALONE FINANCIAL STATEMENTS AND AUDITOR'S REPORT THEREON
The Company's Board of Directors is responsible for the preparation of the otherinformation. The other information comprises the information included in the ManagementDiscussion and Analysis Board's Report including Annexures to Board's Report CorporateGovernance and Shareholder's Information but does not include the standalone financialstatements 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 during the course of our audit or otherwise appears to be materially misstated.
If based on the work we have performed we conclude that there is a materialmisstatement of this other information we are required to report that fact. We havenothing to report in this regard.
MANAGEMENT RESPONSIBILITY FOR THE STANDALONE FINANCIAL STATEMENTS
The Company's Board of Directors is responsible for the matters stated in section134(5) of the Act with respect to the preparation of these standalone financial statementsthat give a true and fair view of the financial position financial performance totalcomprehensive income changes in equity and cash flows of the Company in accordance withthe Ind AS and other accounting principles generally accepted in India. Thisresponsibility also includes maintenance of adequate accounting records in accordance withthe provisions of the Act for safeguarding the assets of the Company and for preventingand detecting frauds and other irregularities; selection and application of appropriateaccounting policies; making judgments and estimates that are reasonable and prudent; anddesign implementation 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 standalone financialstatements that give a true and fair view and are free from material misstatement whetherdue to fraud or error.
In preparing the standalone financial statements management is 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 unlessmanagement either intends to liquidate the Company or to cease operations or has norealistic alternative but to do so.
The Board of Directors are also responsible for overseeing the Company's financialreporting process.
AUDITOR'S RESPONSIBILITIES FOR THE AUDIT OF THE STANDALONE FINANCIAL STATEMENTS
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. We also:
Identify and assess the risks of material misstatement of the standalone 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 to designaudit procedures that are appropriate in the circumstances. Under section 143(3)(i) of theCompanies Act 2013 we are also responsible for expressing our opinion on whether thecompany has adequate internal financial controls system in place and the operatingeffectiveness of such controls.
Evaluate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basis ofaccounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the Company'sability to continue as a going concern. If we conclude that a material uncertainty existswe are required to draw attention in our auditor's report to the related disclosures inthe financial statements or if such disclosures are inadequate to modify our opinion.Our conclusions are based on the audit evidence obtained up to the date of our auditor'sreport. However future events or conditions may cause the Company to cease to continue asa going concern.
Evaluate the overall presentation structure and content of the standalone financialstatements including the disclosures and whether the standalone financial statementsrepresent the underlying transactions and events in a manner that achieves fairpresentation.
Materiality is the magnitude of misstatements in the standalone financial statementsthat individually or in aggregate makes it probable that the economic decisions of areasonably knowledgeable user of the financial statements may be influenced. We considerquantitative materiality and qualitative factors in (i) planning the scope of our auditwork and in evaluating the results of our work; and (ii) to evaluate the effect of anyidentified misstatements in the financial statements.
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 in terms of Section 143(11) of the Act we give in"Annexure A" a statement on the matters specified in paragraphs 3 & 4 of theOrder to the extent applicable.
2. As required by Section 143(3) of the Act based on our audit 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 the Statement of Profit and Loss (including Other ComprehensiveIncome) the Statement of Cash Flows and Statement of Changes in Equity dealt with by thisReport are in agreement with the books of account.
(d) In our opinion the aforesaid standalone financial statements comply with theIndian Accounting Standards prescribed under Section 133 of the Act read with Rule 7 ofthe Companies (Accounts) Rules 2014.
(e) On the basis of the written representations received from the directors as on March31 2020 taken on record by the Board of Directors none of the directors is disqualifiedas on March 31 2020 from being appointed as a director in terms of Section 164 (2) of theAct.
(f) With respect to the adequacy of the internal financial controls with reference tothe financial statements of the Company and the operating effectiveness of such controlsrefer to our separate Report in "Annexure B". Our report expresses anunmodified opinion on the adequacy and operating effectiveness of the company's internalfinancial controls over financial reporting.
(g) With respect to the other matters to be included in the Auditor's 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 according 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. TheCompany has disclosed the impact of pending litigations on its financial position in itsstandalone financial statements.
II. The Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses. III. There were no amounts which wererequired to be transferred to the investor's education and protection fund by the company.
Annexure A' to the Independent Auditor's Report
(Referred to in Paragraph 2 under "Report on Other Legal and RegulatoryRequirements" section of our Report to the members of Shalby Limited of even date)
(i) Fixed Assets
a. The Company has maintained proper records showing full particulars includingquantative details and situation of fixed assets.
b. The Company has a program of verification to cover all the items of fixed assets ina phased manner which in our opinion is reasonable having regard to the size of theCompany and the nature of its assets. Pursuant to the program certain fixed assets werephysically verified by the management during the year. According to the information andexplanations given to us no material discrepancies were noticed on such verification.
c. According to the information and explanations given to us and on the basis of ourexamination of the records of the company provided to us the title deeds of immovableproperties are held in the name of the Company except freehold land and leasehold landaggregate net block amounting to Rs. 305.81 million acquired pursuant to the schemes ofamalgamation in the nature of merger which is pending for registration in the name of thecompany. Further as per information and explanations given to us all the existing buildingof the company are either constructed on freehold / leasehold land or acquired pursuant toscheme of amalgamation in the nature of merger.
According to information and explanations given to us the management of the companyhas conducted physical verification of Inventory at regular intervals at all the unitsduring the year as well as at the year end and no material discrepancies were noticed onsuch physical verification during the year.
(iii) Loans given
In our opinion and according to the information and explanation given to us during thecourse of audit the Company has not granted any Secured or unsecured loan to companiesfirms Limited Liability Partnerships or other parties covered in the register maintainedunder Section 189 of the Companies Act 2013. Hence reporting under clause 3 (iii) of theorder is not applicable to the company.
(iv) Compliance of Sec. 185 & 186
In our opinion and according to the information and explanations given to us theCompany has complied with the provisions of section 185 and 186 of the Act in respect tothe loans investments guarantees and secirities.
(v) Public Deposit
The Company has not accepted deposits during the year and does not have any unclaimeddeposits as at March 31 2020 and therefore the provisions of the clause 3 (v) of theOrder are not applicable to the Company.
(vi) Cost Records
We have broadly reviewed the cost records maintained by the Company pursuant to rulesmade by the Central Government. We are of the opinion that prima facie the prescribedaccounts and records have been maintained and being made. We have not however made adetailed examination of these records with a view to determine whether they are accurateor complete.
(vii) Statutory Dues a. The Company has generally been regular in depositingundisputed statutory dues including Provident Fund Employees' State Insurance IncomeTax Goods and Service Tax Customs Duty Cess and other material statutory duesapplicable to it with the appropriate authorities.
b. There were no undisputed amounts payable in respect of Provident Fund Employees'State Insurance Income Tax Goods and Service Tax Customs Duty Cess and other materialstatutory dues in arrears as at March 31 2020 for a period of more than six months fromthe date they became payable.
c. According to the information and explanations given to us the company has nodisputed outstanding statutory dues as at March 31 2020 other than stated below:
|Name of the Statue ||Nature of the Dues ||Amount Unpaid Rs. in million ||Period to which it relates ||Forum where dispute is pending |
|Sales Tax ||Demand Notice issued by ||50.49 ||F.Y. 2009-10 || |
| ||Sales Tax Department ||61.80 ||F.Y. 2010-11 || |
| || ||73.27 ||F.Y. 2011-12 ||Assistant Commissioner of Sales Tax |
| || ||89.80 ||F.Y. 2012-13 || |
| || ||98.86 ||F.Y. 2013-14 || |
|Income Tax ||Demand Notice issued by ||95.32 ||A.Y. 2013-14 ||Income Tax Appellate Tribunal Commissioner of Income Tax |
| ||Tax Department ||27.43 ||A.Y. 2014-15 || |
| || ||41.42 ||A.Y. 2015-16 || |
(viii) According to the information and explanations given to us and on the basisof our examination of the books of account the Company has not defaulted in the repaymentof loans and borrowings to the financial institutions and banks during the year.
(ix) In our opinion and according to the information and explanations given to usmoney raised by way of term loans have been applied by the Company during the year for thepurposes of which they are raised. The company has not raised monies by way of initialpublic offer or further public offer (including debt instruments).
(x) To the best of our knowledge and acccording to the information and explanationsgiven to us no fraud by the Company or any fraud on the company by its officers oremployees has been noticed or reported during the year.
(xi) According to the information and explanations given to us the company has notpaid / provided for managerial remuneration during the year. Accordingly the provisionsof clause 3 (xi) of the order is not applicable to the company.
(xii) The company is not a Nidhi Company and hence reporting under clause 3 (xii)of the order is not applicable to the company.
(xiii) In our opinion and according to the information and explanations given tous the Company is in compliance with Section 177 and 188 of the Companies Act 2013 whereapplicable for all transactions with the related parties and the details of related partytransactions have been disclosed in the standalone financial statements as required by theapplicable accounting standards.
(xiv) During the year the company has not made any preferencial allotment orprivate placement of shares or fully or partly paid convertible debentures and hencereporting under clause 3 (xiv) of the order is not applicable to the company.
(xv) In our opinion and according to the information and explanations given to usduring the year the company has not entered into any non-cash transaction with directorsor persons connected to its directors and hence reporting under clause 3 (xv) of the orderis not applicable to the company.
(xvi) The company is not required to be registered under section 45-IA of theReserve Bank of India Act 1934.
Annexure B' to the Independent Auditor's Report of even date on the IND ASFinancial Statements of Shalby 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 with reference to Financial Statementsof Shalby Limited ("the Company") as of March 31 2020 in conjunction with ouraudit of the Ind AS financial statements of the Company for the year ended on thatdate.
MANAGEMENT'S RESPONSIBILITY FOR INTERNAL FINANCIALC ONTROLS
The Company's management is responsible for establishing and maintaining internalfinancial 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 issued by the Institute of Chartered Accountants ofIndia". These responsibilities include the design implementation and maintenance ofadequate internal financial controls that were operating effectively for ensuring theorderly and efficient conduct of its business including adherence to company's policiesthe safeguarding of its assets the prevention and detection of frauds and errors theaccuracy and completeness of the accounting records and the timely preparation ofreliable financial information as required under the Companies Act 2013.
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 Guidance Note on Audit of Internal Financial Controls OverFinancial Reporting (the "Guidance Note") and the Standards on Auditing issuedby ICAI and deemed to be prescribed under section 143(10) of the Companies Act 2013 tothe extent applicable to an audit of internal financial controls both applicable to anaudit of Internal Financial Controls and both issued by the Institute of CharteredAccountants of India. Those Standards and the Guidance Note require that we comply withethical requirements and plan and perform the audit to obtain reasonable assurance aboutwhether adequate internal financial controls over financial reporting was established andmaintained and if such controls operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls with reference to financial statements and their operatingeffectiveness. Our audit of internal financial controls with reference to financialstatements included obtaining an understanding of internal financial controls withreference to financial statements assessing the risk that a material weakness exists andtesting and evaluating the design and operating effectiveness of internal control based onthe assessed risk. The procedures selected depend on the auditor's judgement includingthe assessment of the risks of material misstatement of the financial statements whetherdue 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 withreference to financial statements.
MEANING OF INTERNALF INANCIALC ONTROLS WITH REFERENCE TO FINANCIALSTAT EMENTS
A company's internal financial control 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 control withreference to financial statements includes those policies and procedures that (1) pertainto the maintenance of records that in reasonable detail accurately and fairly reflectthe transactions and dispositions of the assets of the company; (2) provide reasonableassurance that transactions are recorded as necessary to permit preparation of financialstatements in accordance with generally accepted accounting principles and that receiptsand expenditures of the company are being made only in accordance with authorizations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorized acquisition use or disposition of thecompany's assets that could have a material effect on the financial statements.
INHERENT LIMITATIONS OF INTERNAL FINANCIAL CONTROLS WITH REFERENCE TO FINANCIALSTATEMENTS
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 overfinancial reporting to future periods are subject to the risk that the internal financialcontrol with reference to financial statements may become inadequate because of changes inconditions or that the degree of compliance with the policies or procedures maydeteriorate.
In our opinion the Company has in all material respects an adequate internalfinancial controls system with reference to financial statements and such internalfinancial controls with reference to financial statements were operating effectively as atMarch 31 2020 based on "the internal control with reference to financialstatements criteria established by the Company considering the essential components ofinternal control stated in the Guidance Note on Audit of Internal Financial Controls OverFinancial Reporting issued by the Institute of Chartered Accountants of India".
| ||For T R Chadha & Co LLP |
| ||Chartered Accountants |
| ||Firm's Reg. No-: 006711N / N500028 |
| ||Brijesh Thakkar |
| ||Partner |
|Place: Ahmedabad ||Mem No: 135556 |
|Date: June 15 2020 ||UDIN: 20135556AAAADK3987 |