To the Members of SORIL Infra Resources Limited
Report on the Audit of the Consolidated Financial Statements
We have audited the accompanying Consolidated Financial Statements of SORIL InfraResources Limited(hereinafter referred to as the "Holding Company ") and itssubsidiaries (Holding Company and its subsidiaries together referred to as "theGroup) which comprise the Consolidated balance sheet as at 31 March 2020 theConsolidated Statement of Profit and Loss (including Other Comprehensive Income) theConsolidated Statement of Changes in Equity and Consolidated Statement of Cash Flows forthe year then ended and notes to the Consolidated Financial Statements including asummary of significant accounting policies and other explanatory information (hereinafterreferred to as "the Consolidated Financial Statements").
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid Consolidated Financial Statements give the information requiredby the Companies Act 2013 ('The Act') in the manner so required and give a true and fairview in conformity with the accounting principles generally accepted in India includingIndian Accounting Standards ('Ind AS') specified under section 133 of the Act of theConsolidated state of affairs of the Group as at 31 March 2020 its Consolidated profitand Consolidated total comprehensive income it's Consolidated changes in equity and itsConsolidated cash flows for the year ended on that date.
Basis for Opinion
We conducted our audit in accordance with the Standards on Auditing (SAs) specifiedunder section 143(10) of the Companies Act 2013. Our responsibilities under thoseStandards are further described in the Auditor's Responsibilities for the Audit of theConsolidated Financial Statements section of our report. We are independent of the Groupin accordance with the Code of Ethics issued by the Institute of Chartered Accountants ofIndia together with the ethical requirements that are relevant to our audit of theConsolidated 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
We draw attention to Note 43(iv) of the Consolidated Financial Statement whichdescribes the uncertainties due to the outbreak of 'Covid-2019' pandemic and management'sevaluation of the same on the consolidated financial results of the Group as at theBalance Sheet date. In view of these uncertainties the impact on the Group's results issignificantly dependent on future developments.
The above matter has also been reported as emphasis of matter in audit report issued byus on the standalone financial statements of the one subsidiary company for the year ended31 March 2020.
Our opinion is not modified in respect of this matter.
Key Audit Matters
Key Audit Matters are those matters that in our professional judgement were of mostsignificance in our audit of the Consolidated Financial Statements of the current year.These matters were addressed in the context of our audit of the Consolidated FinancialStatements as a whole and in forming our opinion thereon and we do not provide aseparate opinion on these matters.
|Key audit matter ||How the matter was addressed in our audit |
|Information technology || |
| || |
|IT systems and controls ||Our audit procedures to assess the IT system access management included the following: |
| ||General IT controls/user access management |
|The Group's financial accounting and reporting processes are highly dependent on the automated controls in information systems such that there exists a risk that gaps in the IT control environment could result in the financial accounting and reporting records being materially misstated. || We tested a sample of key controls operating over the information technology in relation to financial accounting and reporting systems including system access and system change management program development and computer operations. |
|We have focused on user access management change management segregation of duties system reconciliation controls over key financial accounting and reporting systems. || We tested the design and operating effectiveness of key controls over user access management which includes granting access right new user creation removal of user rights and preventative controls designed to enforce segregation of duties. |
|Key audit matter ||How the matter was addressed in our audit |
| || For a selected group of key controls over financial and reporting systems we independently performed procedures to determine that these controls remained unchanged during the year or were changed following the standard change management process. |
| || Evaluating the design implementation and operating effectiveness of the significant accounts-related IT automated controls which are relevant to the accuracy of system calculation and the consistency of data transmission. |
| || Other areas that were independently assessed included password policies system interface controls controls over changes to applications and databases and those business users developers and production support did not have access to change applications the operating system or databases in the production environment. |
| || |
|Key audit matter ||How our audit addressed the key audit matter |
| || |
|Property Plant and Equipment ||Our Procedures in relation to the property plant and equipment but not limited to the following: |
|The Group's policies on the property plant and equipment are set out in note 3.5 to the Consolidated Financial Statements. || Assessed the appropriateness of the Group's accounting policy by comparing with applicable Ind AS. |
| || |
| || We obtained an understanding of the management process for identification of possible impairment indicators and process performed by the management for impairment testing. |
|The Group carries property plant and equipment with net written down value of Rs 175.70 crores as at 31 March 2020 with the majority of value attributed to plant & machinery as disclosed in note- 4A of the Consolidated Financial Statements. || Enquired of the management and understood the internal controls related to completeness of the list of property plant and equipment alongwith the process followed. |
| || Performed test of details: |
|However due to their materiality in the contest of the Group's Financial Statements as a whole and significant degree of the judgement and subjectivity involved in the estimates and key assumptions used this is considered to be the area to be of most significance to the audit and accordingly has been considered as key audit matter for the current year audit. ||a. For all significant additions made during the year underlying supporting documents were verified to ensure that the transaction has been accurately recorded in the Consolidated Financial Statements; |
| ||b. Obtaining management reconciliation of property plant and equipment and agreeing to general ledger. Further all the significant reconciling items were tested; |
| ||c. Analysing management's plan for the assets in the future and the associated consideration of Ind AS 16; |
| ||d. Reviewing the management impairment consideration documentation relating to the carrying value to property plant and equipment; and |
| ||e. Reviewing the appropriateness of the related disclosure within the Consolidated Financial Statements. |
|Key audit matter ||How our audit addressed the key audit matter |
|De-recognition of financial asset || |
|The Group's policies on de-recognition of financial assets are set out in note 3.1(IV) to the Consolidated Financial Statements. ||Our Procedures in relation to the de-recognition of financial asset but not limited to the following: |
| || |
|During the year the Group has assigned loans amounting to Rs 41.51 crores for managing its funding requirements and recorded a net income of Rs 3.11 crores. As per Ind AS 109 de-recognition of loans transferred by the Group through assignment is based on the 'risk and reward' model and a 'control' model. If de-recognition criteria are met the financial assets transferred are de-recognized and difference between carrying value and consideration including the present value of interest payments that it would not give up (excess interest spread receivable) is recorded as income in the statement of profit and loss. || Assessed the terms of assignment agreements on a sample basis to evaluate whether the de-recognition criteria have been met. |
| || Assessed the significant estimates and judgments including the discount rate and expected remaining life of the portfolio transferred used by the Group for computation of excess interest spread receivable and servicing asset. |
| || Tested the arithmetical accuracy of computation of the excess interest spread receivable and servicing asset. |
| || |
|The Group also records a servicing asset at their fair value for the right retained for servicing the financial asset for the service contract. || Assessed the disclosures included in the Ind AS financial statements with respect to de-recognition in accordance with the requirements of Ind AS 109 and Ind AS 107. |
|The assessment of de-recognition criteria being met involves significant judgements and furthermore the measurement of the related EIS receivable income and servicing asset requires significant estimates to be made with respect to the discount rate expected portfolio life prepayment and foreclosures. Given the complexity and the volume of such transactions it is considered a key audit matter. || |
Information Other than the Consolidated Financial Statements and Auditor's Reportthereon
The Holding Company's Board of Directors is responsible for the other information. Theother information does not include the Consolidated Financial Statements and our auditor'sreport thereon.
Our opinion on the Consolidated Financial Statements does not cover the otherinformation and we do not express any form of assurance conclusion thereon.
In connection with our audit of the Consolidated Financial Statements ourresponsibility is to read the other information and in doing so consider whether theother information is materially inconsistent with the Consolidated Financial Statements orour knowledge obtained in the audit or otherwise appears to be materially misstated.
If based on the work we have performed on the other information obtained prior to thedate of this auditor's report we conclude that there is a material misstatement of thisother information we are required to report that fact. Reporting under this section isnot applicable as no other information is obtained at the date of this auditor's report.
Management's Responsibility for the Consolidated Financial Statements
The Holding Company's Board of Directors is responsible for the matters stated insection 134(5) of the Act with respect to the preparation of these Consolidated FinancialStatements that give a true and fair view of the Consolidated financial positionConsolidated financial performance Consolidated total comprehensive income Consolidatedchanges in equity and Consolidated cash flows of the Group in accordance with theaccounting principles generally accepted in India including the Ind AS specified undersection 133 of the Act. This responsibility also includes maintenance of adequateaccounting records in accordance with the provisions of the Act for safeguarding of theassets of the Group and for preventing and detecting frauds and other irregularities;selection and application of appropriate accounting policies; making judgments andestimates that are reasonable and prudent; and design implementation and maintenance ofadequate internal financial controls that were operating effectively for ensuring theaccuracy and completeness of the accounting records relevant to the preparation andpresentation of the Consolidated Financial Statements that give a true and fair view andare free from material misstatement whether due to fraud or error which have been usedfor the purpose of preparation of Consolidated Financial Statements by the Directors ofthe Holding Company as aforesaid.
In preparing the Consolidated Financial Statements the respective Board of Directorsof the companies included in the Group are responsible for assessing the ability of theGroup to continue as a going concern disclosing as applicable matters related to goingconcern and using the going concern basis of accounting unless management either intendsto liquidate the Group or to cease operations or has no realistic alternative but to doso.
The respective Board of Directors of the companies are also responsible for overseeingfinancial reporting process of the Group.
Auditor's Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the ConsolidatedFinancial 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 Consolidated 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 ConsolidatedFinancial 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 HoldingCompany has adequate internal financial controls system with reference to ConsolidatedFinancial Statements 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 ability ofthe Group to continue as a going concern. If we conclude that a material uncertaintyexists we are required to draw attention in our auditor's report to the relateddisclosures in the Consolidated Financial Statements or if such disclosures areinadequate to modify our opinion. Our conclusions are based on the audit evidenceobtained up to the date of our auditor's report. However future events or conditions maycause the Group to cease to continue as a going concern.
Evaluate the overall presentation structure and content of the ConsolidatedFinancial Statements including the disclosures and whether the Consolidated FinancialStatements represent the underlying transactions and events in a manner that achieves fairpresentation.
We communicate with those charged with governance of the Holding Company and such otherentities included in the Consolidated Financial statements of which we are the independentauditors regarding among other matters the planned scope and timing of the audit andsignificant audit findings including any significant deficiencies in internal controlthat 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 Consolidated FinancialStatements of the current year and are therefore the key audit matters. We describe thesematters in our auditor's report unless law or regulation precludes public disclosure aboutthe matter or when in extremely rare circumstances we determine that a matter should notbe communicated in our report because the adverse consequences of doing so wouldreasonably be expected to outweigh the public interest benefits of such communication.
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 aforesaidConsolidated Financial Statements.
(b) In our opinion proper books of account as required by law have been kept by theGroup so far as it appears from our examination of those books.
(c) The Consolidated Financial Statements dealt with by this report are in agreementwith the books of account.
(d) In our opinion the aforesaid Consolidated Financial Statements comply with Ind ASspecified under Section 133 of the Act.
(e) On the basis of the written representations received from the directors of theHolding Company as on 31 March 2020 taken on record by the Board of Directors of theHolding Company none of the directors is disqualified as on 31 March 2020 from beingappointed as a director in terms of Section 164(2) of the Act.
(f) With respect to the adequacy of the internal financial controls with reference toConsolidated Financial Statements of the Group and the operating effectiveness of suchcontrols refer to our separate Report in 'Annexure A'.
(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 in our opinionand to the best of our information and according to the explanations given to us:
i. The Group has disclosed the impact of pending litigations on its financial positionin its Consolidated Financial Statements as at 31 March 2020- Refer Note 34 to theConsolidated Financial Statements.
ii. The Group 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 Holding Company and its subsidiaries during the yearended 31 March 2020.
(h) With respect to the matter to be included in the Auditor's Report in accordancewith 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 the Holding Company and its subsidiaries did not pay any remuneration to itsDirectors during the year.
For Agarwal Prakash & Co.
Firm's Registration No.: 005975N
Membership No. 097848
Date: 11 July 2020
Annexure A to the Independent Auditor's Report
With reference to the Annexure A referred to in the Independent Auditor's Report to themembers of the SORIL Infra Resources Limited on the Consolidated Financial Statements forthe year ended 31 March 2020.
Independent Auditor's Report on the internal financial controls with reference tofinancial statements under Clause (i) of Sub-section 3 of Section 143 of the CompaniesAct 2013 ('the Act')
In conjunction with our audit of the consolidated financial statements of SORIL InfraResources Limited ('the Holding Company') and its subsidiaries (the Holding Company andits subsidiaries together referred to as 'the Group') as at and for the year ended 31March 2020 we have audited the internal financial controls with reference to financialstatements of the Holding Company and its subsidiary companies which are companiescovered under the Act as at that date.
Responsibilities of Management and Those Charged with Governance for Internal FinancialControls
The respective Board of Directors of the Holding Company and its subsidiary companieswhich are companies covered under the Act are responsible for establishing andmaintaining internal financial controls based on the internal control over financialreporting criteria established by the respective 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
Our responsibility is to express an opinion on the internal financial controls withreference to financial statements of the Holding Company and its subsidiary companies asaforesaid based on our audit. We conducted our audit in accordance with the Standards onAuditing issued by the ICAI prescribed under Section 143(10) of the Act to the extentapplicable to an audit of internal financial controls with reference to financialstatements and the Guidance Note issued by the ICAI. Those Standards and the GuidanceNote require that we comply with ethical requirements and plan and perform the audit toobtain reasonable assurance about whether adequate internal financial controls withreference to financial statements were established and maintained and if such controlsoperated 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 includes obtaining an understanding of such internal financial controlsassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditor's judgement including the assessment of the risks ofmaterial 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 Holding Company and its subsidiary companiesinternal financial controls with reference to Consolidated Financial Statements.
Meaning of Internal Financial Controls with Reference to Financial Statements
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 withauthorisations of management and directors of the company; and (3) provide reasonableassurance regarding prevention or timely detection of unauthorised 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
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.
In our opinion and based on the consideration of the reports of the other auditors oninternal financial controls with reference to financial statements of the subsidiarycompanies the Holding Company and its subsidiary companies which are companies coveredunder the Act have in all material respects adequate internal financial controls withreference to financial statements and such controls were operating effectively as at 31March 2020 based on the internal control over financial reporting criteria established bythe respective Company considering the essential components of internal control stated inthe Guidance Note issued by the ICAI.
For Agarwal Prakash & Co.
Firm's Registration No.: 005975N
Membership No. 097848
Date: 11 July 2020