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Sundaram Finance Holdings Ltd.

BSE: 535060 Sector: Financials
NSE: SUNDARMHLD ISIN Code: INE202Z01029
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Sundaram Finance Holdings Ltd. (SUNDARMHLD) - Auditors Report

Company auditors report

Report on the Audit of the Standalone Financial Statements To the Members of SundaramFinance Holdings Limited

Opinion

We have audited the accompanying standalone financial statements of Sundaram FinanceHoldings Limited ("the Company") which comprise the Balance Sheet as at 31stMarch 2019 the Statement of Profit and Loss (including Other Comprehensive Income)Statement of Changes in Equity and Statement of Cash Flows for the year then ended andnotes to the financial statements including a summary of significant accounting policiesand other explanatory information. In our opinion and to the best of our information andaccording to the explanations given to us the aforesaid standalone financial statementsgive the information required by the Companies Act 2013 ("the Act") in themanner so required and give a true and fair view in conformity with Indian AccountingStandards prescribed under Section 133 of the Act (Ind AS) and other accounting principlesgenerally accepted in India of the state of affairs of the Company as at March 31 2019and profit and total comprehensive income changes in equity and its cash flows for theyear 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 Act. Our responsibilities under those standards are furtherdescribed in the Auditor's Responsibilities for the Audit of the financial statementssection of our report. We are independent of the Company in accordance with Code of Ethicsissued by the Institute of Chartered Accountants of India (ICAI) together with the ethicalrequirements that are relevant to our audit of the financial statements under theprovisions of the Act and the Rules thereunder and we have fulfilled our ethicalresponsibilities in accordance with these requirements and the ICAI's Code of Ethics. Webelieve that the audit evidence we have obtained is sufficient and appropriate to providea basis for our opinion on the standalone financial statements.

Key Audit Matters

Key audit matters are those matters that in our professional judgment are of mostsignificance in our audit of the financial statements of the current period. These matterswere addressed in the context of our audit of the financial statements as a whole and informing our opinion thereon and we do not provide a separate opinion on these matters.

We have determined the matters described below to be the key audit matter to becommunicated in our report.

Key Audit Matter Our audit procedures with regards to key audit matter
Valuation of Unquoted investments fair valued through OCI
Refer Note 2.2 "Fair value measurement" and Note 2.4 "Financial Assets" for relevant accounting policies and significant accounting estimates used by the Company. (i) Reviewed the Accounting Policies used by the Company for accounting and disclosing Investments for compliance with the accounting framework.
The investment portfolio is valued at र 184738.90 lakhs which represents almost 100% of the total assets where unquoted equity investments fair valued through OCI amounts to र 37471 lakhs ("Investment") covering about 20% of investment value as at 31st March 2019. As the above investment are not traded in the active market fair value of these investments involved significant management judgement and estimate and were based on the valuation methodology recommended by a valuation expert in the Group. (ii) Evaluating the valuation methodology recommended by the valuation expert in the Group.
(iii) Verified the correctness of market inputs used and mathematical accuracy of the valuation analysis.
For determination of Fair Value the market approach has been considered according to which the earnings and book value based market multiples of listed peer companies in the same sector as that of the investments have been used to determine the fair value of unquoted equity investments after adjusting for illiquidity discount. (iv) Assessed the adequacy of internal controls evaluated the design and tested the operating effectiveness of such controls for initial recognition subsequent measurement and disclosure of investments as on the reporting date as per applicable regulations.
This valuation is a Level 3 type of valuation in accordance of Ind AS 113 (v) Our team was supported by our in-house valuation specialist especially in determining whether such valuation methodology is consistent with the market practice.
Fair Value Measurement where one or more significant inputs to the fair value measurement is unobservable. Accordingly the valuation of unquoted investment was considered to be a Key Audit Matter due to significant judgments associated with determining the fair value of investment. (vi) We also assessed whether the disclosures in relation to investments are compliant with the relevant Indian accounting requirements and appropriately present the sensitivities in the valuations based on alternative outcome.

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 ManagementDiscussion and Analysis; Board's Report including Annexure and Corporate Governance Reportbut does not include the 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 ouraudit of the financial statements our responsibility is to read the other informationand in doing so consider whether the other information is materially inconsistent withthe financial statements or our knowledge obtained during the course of our audit orotherwise appears to be materially misstated. If based on the work we have performed weconclude that there is a material misstatement of this other information; we are requiredto report that fact. We have nothing to report in this regard.

Managements 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 financial statements that givea true and fair view of the financial position financial performance total comprehensiveincome changes in equity and cash flows of the Company in accordance with the Ind AS andother accounting principles generally accepted in India. Their responsibility alsoincludes maintenance of adequate accounting records in accordance with the provisions ofthe Act for safeguarding of the assets of the Company and for preventing and detectingfrauds and other irregularities; selection and application of appropriate accountingpolicies; making judgments and estimates that are reasonable and prudent; and designimplementation 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 financial statement that givea true and fair view and are free from material misstatement whether due to fraud orerror.

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 had no realisticalternative but to do so. The Board of Directors is also responsible for overseeing theCompany's financial reporting process.

Auditor's Responsibilities for the Audit of the Financial Statements

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

financial statements whether due to fraud or error design and perform auditprocedures responsive to those risks and obtain audit evidence that is sufficient andappropriate to provide a basis for our opinion. The risk of not detecting a materialmisstatement resulting from fraud is higher than for one resulting from error as fraudmay involve collusion forgery intentional omissions misrepresentations or the overrideof 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) ofthe Act we are also responsible for expressing our opinion on whether the Company hasadequate internal financial controls system in place and the operating effectiveness ofsuch 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 financial statementsincluding the disclosures and whether the financial statements represent the underlyingtransactions and events in a manner that achieves fair presentation. We communicate withthose charged with governance regarding among other matters the planned scope and timingof the audit and significant audit findings including any significant deficiencies ininternal control that we identify during our audit. We also provide those charged withgovernance with a statement that we have complied with relevant ethical requirementsregarding independence and to communicate with them all relationships and other mattersthat may reasonably be thought to bear on our independence and where applicable relatedsafeguards. 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

1. As required by the Companies (Auditor's Report) Order 2016 ("the Order")issued by the Central Government of India in terms of Sub section(11) of Section 143 ofthe Companies Act 2013 we 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 we report that: i) We have sought andobtained all the information and explanations which to the best of our knowledge andbelief were necessary for the purpose of our audit; ii) In our opinion proper books ofaccount as required by law have been kept by the Company so far as appears from ourexamination of those books.

iii) The Balance Sheet the Statement of Profit and Loss Account (including OtherComprehensive Income) Statement of Changes in Equity and the Statement of Cash Flow dealtwith in this report are in agreement with the books of account. iv) In our opinion thefinancial statements comply with the Ind AS specified under section 133 of the Act. v) Onthe basis of the written representations received from the directors as on 1stApril 2019taken on records by the Board of Directors none of the directors is disqualified frombeing appointed as a director under sub-section (2) of section 164 of the Act. vi) Withrespect to the adequacy of the internal financial controls over financial reporting of theCompany and the operating effectiveness of such controls refer to our Separate report inANNEXURE "B". Our report expresses an unmodified opinion on the adequacy andoperating effectiveness of the Company's internal financial controls over financialreporting. vii) With respect to the other matters to be included in the Auditor's Reportin accordance with the requirements of section 197(16) of the Act as amended: In ouropinion and to the best of our information and according to the explanations given to usthe remuneration paid by the Company to its directors during the year is in accordancewith provisions of Section 197 of the Act. viii) With respect to other matters to beincluded in the auditor's report in accordance with Rule 11 of the Companies (Audit andAuditors) Rule 2014 in our opinion and to the best of our information and according tothe explanations gives to us i. The Company does not have any pending litigations whichwould impact its financial position; ii. The Company did not have any long term contractsincluding derivative contracts for which there were any material foreseeable losses; iii.There has been no delay in transferring amounts required to be transferred to theInvestor Education and Protection Fund by the Company.

For R.G.N. Price & Co.

Chartered Accountants

Firm Registration No: 002785S

K. Venkatakrishnan

Place : Chennai

Partner

Date: 17th May 2019

Membership No. : 208591

Annexure – "A" referred to in paragraph 1 under ‘Report on OtherLegal and Regulatory Requirements' section of our audit report of even date to the membersof Sundaram Finance Holdings Limited ("the Company") on the financial statementsof the Company for the year ended 31st March 2019

I a. The Company has maintained proper records for its property plant and equipment showing full particulars including quantitative details and situation of those assets.
b. The Company has conducted physical verification of property plant and equipment during the year and no material discrepancies were observed during such verification.
c. The Company has got certain immovable properties transferred from the transferor company vide composite scheme of arrangement approved by the Hon'ble National Company Law Tribunal vide its order dated 12th January 2018. Accordingly title deeds of all the properties have been transferred in the name of the Company except the title deed of one property which we were informed is in the process of getting transferred in the name of the Company.
II Considering the nature of business of the Company Clause 3(ii) of the Order relating to inventories is not applicable.
III According to information and explanations given to us the Company has not granted any loan secured or unsecured to companies firms or other parties covered in the Register maintained under Section 189 of the Act.
IV The Company has complied with the provisions of Sections 185 and 186 of the Act in respect of investments made during the year. According to information and explanations given to us the Company has not granted any loans or guarantees or securities during the year as envisaged under Section 185 and 186 of the Act.
V The Company has not accepted any deposits; Hence the provisions of Section 73 to 76 or any other relevant provisions of the Act and the rules framed thereunder are not applicable to the Company.
VI The Central Government has not prescribed maintenance of cost records under Section 148(1) of the Act.
VII a. According to the information and explanations given to us and records of the Company examined by us in our opinion the Company is regular in depositing the undisputed statutory dues including Provident Fund Employees' State Insurance Income Tax Goods and Services Tax Cess and any other statutory dues applicable to it with appropriate authorities.
There are no arrears of undisputed statutory dues outstanding as at 31st March 2019 for a period of more than six months from the date they became payable.
b. According to the information and explanations given to us and records of the Company examined by us in our opinion there are no dues of Income Tax Service Tax Goods and Services Tax or Cess pending on account of any dispute as at 31st March 2019.
VIII The Company has not obtained any loans or borrowings from financial institutions banks Government nor has issued any debentures during the year. Accordingly Clause 3(viii) of the Order is not applicable.
IX The Company has not raised any money by way of initial public offer or further public offer (including debt instruments) or term loans during the year.
X During the course of our examination of books and records of the Company carried out in accordance with the generally accepted auditing practices in India and according to the information and explanations given to us we have neither observed any instances of fraud by the Company or any fraud on the Company by its officers or employees nor have we been informed of such case by the Management during the year.
XI The managerial remuneration has been paid in accordance with the requisite approvals mandated by the provisions of Section 197 read with Schedule V to the Companies Act.
XII The Company is not a Nidhi Company and hence Clause 3(xii) of the Order is not applicable.
XIII In our opinion and according to information and explanations given to us all transactions with related parties are in compliance with Sections 177 and 188 of the Act and the details have been disclosed in the Standalone Financial Statements as required by the applicable Accounting Standards.
XIV The Company has not made any preferential allotment or private placement of shares or fully convertible or partly convertible debentures during the year under review.
XV According to the information and explanations given to us and based on our examination of records the Company has not entered into any non- cash transactions with the directors or persons connected with them contravening Section 192 of the Act.
XVI As informed to us the Company being an exempted Core Investment Company is not required to be registered under Section 45 – IA of the Reserve Bank of India Act1934.

 

For R.G.N. Price & Co.

Chartered Accountants

Firm Registration No: 002785S

K. Venkatakrishnan

Place : Chennai

Partner

Date: 17th May 2019

Membership No. : 208591

Annexure – "B" referred to in paragraph 2 Clause (vi) under ‘Reporton Other Legal and Regulatory Requirements' section of our audit report of even date tothe members of Sundaram Finance Holdings Limited ("the Company") on thefinancial statements of the Company for the year ended 31st March 2019

We have audited the internal financial controls over the financial reporting ofSundaram Finance Holdings Limited ("the Company") as on March 312019 inconjunction with our audit of the financial statements of the Company for the year endedon that date.

Management's Responsibility for Internal Financial Controls

The Company's Management is responsible for establishing and maintaining internalfinancial controls based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal Financial Controls over financial reportingissued by the Institute of Chartered Accountants of India. These responsibilities includethe design implementation and maintenance of adequate internal financial controls thatwere operating effectively for ensuring the orderly and efficient conduct of its businessincluding adherence to Company's policies the safeguarding of its assets the preventionand detection of frauds and errors the accuracy and completeness of the accountingrecords and the timely preparation of reliable financial information as required underthe Companies Act 2013.

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 accordance with the Guidance Note and the Standards onAuditing prescribed under sections 143(10) of the Act to the extent applicable to an auditof internal financial controls. The Guidance Note and those standards require that wecomply with ethical requirements and plan and perform the audit to obtain reasonableassurance about whether adequate internal financial controls over financial reporting wasestablished and maintained and if such controls operated effectively in all materialrespects.

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 whether material weakness exists and testing and evaluating the designand operating effectiveness of internal controls based on the assessed risk. Theprocedures selected depend on the auditor's judgment including the assessment of therisks of material 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 controls 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 of records that in reasonable detail accurately andfairly reflect the transactions and dispositions of the assets of the Company;

2. Provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accountingprinciples and that receipts and expenditures of the Company are being made only inaccordance with authorizations of management and directors of the Company; and

3. Provide reasonable assurance regarding prevention or timely detection ofunauthorized acquisition use or disposition of the Company's assets that could have amaterial effect on the 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 to the best of our information and according to the explanations givento us the Company has in all material respects an adequate internal financial controlssystem over financial reporting and such internal financial controls over financialreporting were operating effectively as at March 312019 based on the internal controlover financial reporting 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 ICAI.

For R.G.N. Price & Co.

Chartered Accountants

Firm Registration No: 002785S

K. Venkatakrishnan

Place : Chennai

Partner

Date: 17th May 2019

Membership No. : 208591