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SRG Housing Finance Ltd.

BSE: 534680 Sector: Financials
NSE: N.A. ISIN Code: INE559N01010
BSE 00:00 | 02 Aug 176.00 -7.15
(-3.90%)
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189.55

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189.55

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NSE 05:30 | 01 Jan SRG Housing Finance Ltd
OPEN 189.55
PREVIOUS CLOSE 183.15
VOLUME 806
52-Week high 240.00
52-Week low 101.20
P/E 12.15
Mkt Cap.(Rs cr) 229
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 189.55
CLOSE 183.15
VOLUME 806
52-Week high 240.00
52-Week low 101.20
P/E 12.15
Mkt Cap.(Rs cr) 229
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

SRG Housing Finance Ltd. (SRGHOUSING) - Auditors Report

Company auditors report

To

The Members

SRG Housing Finance Limited

REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS

OPINION

We have audited the accompanying Financial Statements of SRG Housing Finance Limited("the Company") which comprise the Balance Sheet as at March 31 2020 theStatement of Profit and Loss Cash Flow Statement and Statement of Change in Equity forthe year then ended and the notes to the standalone financial statements including asummary of the significant accounting policies and other explanatory information.

In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid financial statements give the information required by theCompanies Act 2013 (the Act) in the manner so required and give a true and fair view inconformity with the accounting principles generally accepted in India

a) In the case of the Balance Sheet of the state of affairs of the Company as at 31stMarch 2020.

b) In the case of the Statement of Profit and Loss of the profit for the year ended onthat date; and

c) In the case of the Cash Flow Statement of the cash flows for the year ended on thatdate. d) In the case of Statement of Change in Equity change in equity for the yearended on that date.

Basis for Opinion

We conducted our audit of the financial statements in accordance with the Standards onAuditing specified under section 143(10) of the Act (SAs). Our responsibilities underthose Standards are further described in the Auditor's Responsibility for the Audit of theFinancial Statements section of our report. We are independent of the Company inaccordance with the Code of Ethics issued by the Institute of Chartered Accountants ofIndia (ICAI) together with the ethical requirements that are relevant to our audit of thefinancial statements under the provisions of the Act and the Rules made thereunder and wehave fulfilled our other ethical responsibilities in accordance with these requirementsand the ICAI's Code of Ethics. We believe that the audit evidence obtained by us issufficient and appropriate to provide a basis for our audit opinion on the financialstatements.

Emphasis of Matter

We draw your attention to Note no. 35 to the Financial Statement which describes to theextent to which the COVID-19 pandemic will impact the Company's results will depend onfuture developments which are highly uncertain. Further pursuant to the Reserve Bank ofIndia (‘RBI') Covid-19 Regulatory Package the Company has offered a moratorium onthe payment of instalments to eligible borrowers As a result ageing of the accounts whichhave opted for moratorium has been determined with reference to days past due status asof February 29 2020. 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 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 matter mentioned below to be the key audit matters to becommunicated in our report.

Key Audit Matter Auditor's response
Expected credit loss allowances:
Ind-AS accounting framework was implemented on April 1st 2018. Accordingly Ind-AS 109 is a new and complex standard that requires the Company to recognise Expected Credit Loss (ECL) on financial instruments. This is a significant departure from the earlier rule based provisioning. Expected credit loss allowances relating to loans and advances are determined on a portfolio basis with the use of impairment models. These models are based on historical loss experience and use a number of key assumptions including probability of default loss given default (including propensity for possession and forced sale discounts for mortgages) and valuation of recoveries. Our work therefore focused on the appropriateness of modeling methodologies adopted and the significant judgments required. We understood and assessed the appropriateness of the impairment models developed and used by the management at the entity level. This included assessing and challenging the appropriateness of key modeling judgments (e.g. the transfer criteria used to determine significant increase in credit risk). We tested the formula applied within the calculation files the completeness and accuracy of key data inputs sourced from underlying systems that are applied in the calculation. We also tested the reconciliation of loans and advances between underlying source systems and the expected credit loss models. Our opinion is not modified in respect of this matter.
Amortisation of Processing Fee and Commission:
In accordance with Ind-AS 109 interest income on loans is recognized in the statement of profit or loss using the effective interest method. The calculation includes all fees paid or received between parties to the contract that are an integral part of the effective interest rate transaction costs and all other premiums or discounts accordingly processing fees collected is an integral part of the effective interest rate calculation. The effective interest method is a method of calculating the amortised cost of a financial asset or a financial liability and of allocating the interest income or interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial asset or when appropriate a shorter period to the net carrying amount of the financial asset or financial liability. Hence the processing fees income and commission exp now is being recognized over the life of the loan. We evaluated management's process and tested key controls around the determination of amortization of processing fees and commission including controls relating to:
• Identification of agent sourced loans
• Estimating the transaction cost relating to sourcing of loans.
We found these key controls were designed implemented and operated effectively and therefore determined that we could place reliance on these key controls for the purposes of our audit. We have verified the workings which contain the processing fees collected and commission paid against each loan sanctioned during the current year as well as previous year. We tested the formula applied within the Calculation files. We tested the completeness and accuracy of key data inputs sourced from underlying systems that are applied in the calculation. We matched the processing fees and commission in the workings with the underlying source systems including General Ledger. We have also tested whether loans which have been pre-closed the related balance processing fees received and commission paid have been recognized fully as income. Our opinion is not modified in respect of this matter.

INFORMATION OTHER THAN THE FINANCIAL STATEMENTS AND AUDITOR'S REPORT THEREON

The Company's management and Board of Directors are responsible for the preparation ofthe other information. The other information comprises the information included in theManagement Discussion and Analysis Board's report including the Annexures to Board'sReport Corporate Governance and Shareholder's Information but does not include thefinancial statements and our auditor's report thereon.

Our opinion on the financial statements does not cover the other information and we donot express any form of assurance conclusion thereon.

In connection with our audit of the financial statements our responsibility is to readthe other information and in doing so consider whether the other information ismaterially inconsistent with the financial statements or our knowledge obtained during thecourse 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'S RESPONSIBILITY FOR THE FINANCIAL STATEMENTS

The Company's management and Board of Directors are responsible for the matters statedin Section 134(5) of the Companies Act 2013 ("the Act") with respect to thepreparation of the Financial Statements that give a true and fair view of the financialposition financial performance and cash flows of the Company in accordance with theaccounting principles generally accepted in India including the Indian AccountingStandards specified under Section 133 of the Act read with Rule 7 of The Companies(Accounts) Rules 2014. This responsibility also includes maintenance of adequateaccounting records in accordance with the provisions of the Act for safeguarding theassets of the Company and for preventing and detecting the frauds and otherirregularities; 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.

In preparing the financial statements management and Board of Directors areresponsible for assessing the Company's ability to continue as a going concerndisclosing as applicable matters related to going concern and using the going concernbasis of accounting unless management either intends to liquidate the Company or to ceaseoperations or has no realistic alternative but to do so.

The Board of Directors is also responsible for overseeing the Company's financialreporting process.

AUDITOR'S RESPONSIBILITY

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 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 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 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 financial control relevant to the audit inorder to design audit procedures that are appropriate in the circumstances. Under section143(3)(i) of the Act 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 reasonablenessof accounting estimates and related disclosures made by the 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.

• Materiality is the magnitude of misstatements in the financial statements thatindividually 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 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 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")as issued by Central Government of India in terms of Sub Section (11) of Section 143 ofthe Act we hereby give in the "Annexure A" a statement on the mattersspecified in paragraphs 3 and 4 of the Order 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 accounts 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 and the Cash Flow Statementdealt with by this Report are in agreement with the books of accounts;

d. In our opinion the aforesaid financial statements comply with the Indian AccountingStandards referred to in Section 133 of the Act;

e. On the basis of written representations received from the Directors and taken onrecord by the Board of Directors none of the Directors is disqualified as on March 312020 from being appointed as a Director in terms of 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". Our report expresses an unmodifiedopinion on the adequacy and operating effectiveness of the Company's internal financialcontrols over financial reporting.

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 Company does not have any pending litigations which would impact its financialposition;

ii. The Company did not have any long-term contracts including derivatives contractsfor which there were any material foreseeable losses;

iii. There were no amounts required to be transferred to the Investor Education andProtection Fund by the Company.

h. 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 the remuneration paid to the Managing Director of the Company is inaccordance with the provisions of Section 197 along with Schedule V of Companies Act 2013and the remuneration limit is in accordance with the first proviso of Section 197(1) andSchedule V of Companies Act 2013.

For PKJ & Co.
Chartered Accountants
FRN: 124115W
Rishabh Jain
Partner
Place: Udaipur Membership No. 176309
Date: 26.06.2020 UDIN:- 20176309AAAABH4329

ANNEXURE-A TO THE INDEPENDENT AUDITORS' REPORT

(Referred to in para 1 under "Report on other Legal and RegulatoryRequirement" of our report of even date)

1. According to the information and explanations given to us in respect of the fixedassets:

(a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.

(b) Fixed assets have been physically verified by the management during the year and nodiscrepancies between the book records and the physical inventory have been noticed. Inour opinion the frequency of verification is reasonable.

(c) we report that the title deed of the immovable property is held in the name of theCompany as at the balance sheet date. Immovable property of land whose title deed has beenpledged as security for non-convertible debentures is held in the name of the Company.

2. The Company does not have any inventory and hence reporting under clause (ii) ofparagraph 3 of the Order is not applicable.

3. According to the information and explanations given to us the Company has notgranted any loans secured or unsecured to Companies Firms Limited Liability Partnershipsor other parties covered in the register maintained under Section 189 of The CompaniesAct 2013 and therefore clause (iii) of paragraph 3 of the Order is not applicable.

4. The Company has not advanced any loan or given any guarantee or provided orsecurities to the parties covered under section 185 of the Act. The Company has compliedwith the provisions of section 186 of the Act in respect of investments made or loans orguarantee or security provided to the parties covered under section 186.

5. As per the Ministry of Corporate Affairs notification dated March 31 2014 theprovisions of Sections 73 to 76 or any other relevant provisions of The Companies Act2013 and The Companies (Acceptance of Deposits) Rules 2014 as amended with regard tothe deposits accepted are not applicable to the Company. According to information andexplanations given to us the Company has not accepted any deposits during the year.

6. According to the information and explanations given to us the Central Governmenthas not prescribed maintenance of cost records under Sub-Section (1) of Section 148 of theAct in respect of the activities carried on by the Company.

7. According to the information and explanations given to us:

a) The Company is regular in depositing undisputed statutory dues including ProvidentFund Employees State Insurance Income Tax Cess Goods and Service Tax and any otherstatutory dues as applicable with the appropriate authorities.

b) There are no undisputed statutory dues payable in respect of Provident FundEmployees' State Insurance Income-tax Service Tax Value Added Tax Cess GST and othermaterial statutory dues in arrears as at March 31 2020 for a period of more than sixmonths from the date they became payable.

c) There were no dues of Income Tax Sales Tax Wealth Tax Service Tax Value AddedTax GST as at March 31 2020 which has not been deposited on account of dispute.

8. In our opinion and according to the information and explanations given to us theCompany has not defaulted in the repayment of loans or borrowings to FinancialInstitutions Banks and dues to Debenture Holders. The Company has not taken loans orborrowings from Government.

9. The Company has not raised moneys by way of Initial Public offer or Further Publicoffer (including debt instruments) during the year.

The Company has raised funds by way of raising Term loans and during the year and thesame were applied by the Company for the purpose for which they were raised.

10. According to the information and explanations given to us no fraud by the Companyand no fraud on the Company by its officers or employees has been noticed or reportedduring the year.

11. According to the information and explanations given to us the Company has paid /provided managerial remuneration in accordance with the requisite approvals mandated bythe provisions of Section 197 read with Schedule V to The Companies Act 2013.

12. The Company is not a Nidhi Company; hence reporting under clause (xii) of paragraph3 of the Order is not applicable to the Company.

13. According to the information and explanations given to us the Company is incompliance with Section 177 and 188 of The Companies Act 2013 wherever applicable forall transactions with the related parties and the details of related party transactionshave been disclosed in the notes on Financial Statements as required by the x applicableIndian Accounting Standards.

14. According to the information and explanations given to us the Company has not madeany preferential allotment or private placement of shares or fully or partly convertibledebentures during the year. Therefore provision of clause (xiv) of paragraph 3 of theOrder is not applicable to the Company.

15. According to the information and explanations given to us the Company has notentered into any non-cash transactions with Directors or persons connected with him underprovisions of Section 192 of The Companies Act 2013. Therefore provision of clause (xv)of paragraph 3 of the Order is not applicable to the Company.

16. According to the information and explanations given to us the Company is notrequired to be registered under Section 45-lA of The Reserve Bank of India Act 1934.

For PKJ & Co.
Chartered Accountants
FRN: 124115W
Rishabh Jain
Partner
Place: Udaipur Membership No. 176309
Date: 26.06.2020 UDIN:- 20176309AAAABH4329

ANNEXURE-B TO THE INDEPENDENT AUDITOR'S REPORT

(Referred to in para 2(f) under "Report on other Legal and RegulatoryRequirement" of our report of even date) Report on the Internal Financial Controlsunder Clause (i) of Sub-Section 3 of Section 143 of the Companies Act 2013 ("theAct")

We have audited the Internal Financial Controls over financial reporting of SRG HousingFinance Limited ("the Company") as of March 31 2020 in conjunction with ouraudit of the Financial Statements of the Company for the year ended on that date.

MANAGEMENT'S RESPONSIBILITY FOR INTERNAL FINANCIAL CONTROLS

The 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 Reporting (the‘'Guidance Note") issued by The Institute of Chartered Accountants of India(ICAI). 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 Act.

AUDITOR'S RESPONSIBILITY

Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting based on our audit. We conducted our audit in accordancewith the Guidance Note and the Standards on Auditing issued by the ICAI and prescribedunder Section 143(10) of the Act 2013 to the extent applicable to an audit of internalfinancial controls both issued by The Institute of Chartered Accountants of India. ThoseStandards and the Guidance Note require that we comply with ethical requirements and planand perform the audit to obtain reasonable assurance about whether adequate internalfinancial controls over financial reporting was established and maintained and if suchcontrols operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls over financial reporting includedobtaining an understanding of internal financial controls over financial reportingassessing 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 judgment 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 Company's internal financial controls systemover financial reporting.

MEANING OF INTERNAL FINANCIAL CONTROLS OVER FINANCIAL REPORTING

A Company's internal financial control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. A Company's internal financial control over financialreporting includes those policies and procedures that (1) pertain to the maintenance ofrecords that in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the Company; (2) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of Financial Statements inaccordance with generally accepted accounting principles and that receipts andexpenditures 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 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.

OPINION

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 PKJ & Co.
Chartered Accountants
FRN: 124115W
Rishabh Jain
Partner
Place: Udaipur Membership No. 176309
Date: 26.06.2020 UDIN:- 20176309AAAABH4329