TCFC Finance Limited
Report on the Indian Accounting Standards ("Ind AS") Financial StatementsOpinion
We have audited the accompanying Ind AS financial statements of TCFC Finance Limited("the Company") which comprise the Balance Sheet as at 31st March2020 the Statement of Profit and Loss (including Other Comprehensive Income) theStatement of Changes in Equity and the Statement of Cash Flows for the year ended on thatdate and a summary of the significant accounting policies and otherexplanatory information (hereinafter referred to as "Ind AS financialstatements").
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid Ind AS financial statements give the information required bythe Companies Act2013 ("the Act") in the manner so required and give a true andfair view in conformity with the Indian Accounting Standards prescribed under section 133of the Act read with the Companies (Indian Accounting Standards) Rules 2015 as amended("Ind AS") and other accounting principles generally accepted in India of thestate of affairs of the Company as at 31st March 2020 the Profit and totalcomprehensive income changes in equity and its cash flow for the year ended on that date.
Basis for Opinion
We conducted our audit of the Ind AS financial statements in accordance with theStandards on Auditing (SAs') specified under section 143(10) of the Act. Ourresponsibilities under those Standards are further described in the Auditor'sResponsibilities for the Audit of the Ind AS Financial Statements section of our report.We are independent of the Company in accordance with the Code of Ethics issued by theInstitute of Chartered Accountants of India (ICAI') together with the ethicalrequirements that are relevant to our audit of the Ind AS financial statements underprovisions of the Act and the Rules made thereunder and we have fulfilled our otherethical responsibilities in accordance with these requirements and the ICAI's Code ofEthics. We believe that the audit evidence we have obtained is sufficient and appropriateto provide a basis for our opinion on the Ind AS financial statements.
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. Wehave determined the matters described below to be the key audit matters to be communicatedin our report.
Transition to Indian Accounting Standards ("Ind AS")
|The Company has adopted Ind AS notified under section 133 of the Companies Act 2013 ("the Act") read with the ||We have performed the following audit procedures in order to obtain sufficient audit evidence: |
|Companies (Indian Accounting Standards) Rules 2015 from April 01 2019. Ind AS are new and complex accounting standards which require considerable judgment and interpretation in its implementation. Further Ind ||Assessed the Company's process to identify the impact of adoption and transition to the new accounting standards. Evaluated the design of internal controls and tested |
|AS 101 ("First-time Adoption of Indian Accounting Standards") allows two categories of exceptions to the first-time adopters which mainly includes prohibition to retrospective application of certain requirements of Ind AS and exemption from some requirements of Ind AS. We consider this transition and the required disclosure to be a key audit matter because new accounting policies have been developed by the ||the operating effectiveness of key internal controls around the process of preparation of the Financial Statements; Reviewed the exemptions availed by the Company from certain requirements under Ind AS; Obtained an understanding of the governance over the determination of key judgments; |
|Company to comply with these standards and judgment. Note 2-3 "Significant Accounting Policies" Note 36 First-time adoption of Ind AS Note 34 "Fair value measurement" and Note 35 "Risk management" to the Ind AS Financial ||Evaluated and tested the key assumptions and judgments adopted by management; Assessed the disclosures made against the relevant Ind AS; and |
|Statements provide detailed information on the significant policies critical judgment and estimation along with details of exemptions applied from certain requirements under Ind AS based on which these Financial Statements are prepared. ||Determined the appropriateness of the methodologies and models used along with the responsibility of the outputs. |
Valuation of Investments
|The Company's investment portfolio consists of Equity Instruments and Government Securities. Total investment portfolio of the Company represents 10.55 per cent of the Company's total assets (net of provision). ||Our audit procedures for this area included: We assessed appropriateness of the pricing methodologies with reference to Company's accounting and valuation policy; |
|Investments are stated at cost less provision for diminution other than temporary in the value of these investments. In respect of the portfolio of quoted investments we do not consider these investments to be at a high risk of significant to be subject to a significant level of judgement because they comprise liquid quoted investments. However due to their materiality in the context of the financial statements as a whole they are considered to be one of the areas which had significant overall audit strategy. The portfolio of unquoted investments is 1.97 per cent of the Company's Total Assets. Valuation of unquoted investments involves judgement depending on the observability of the inputs into the valuation and further judgement in determining the appropriate valuation methodology where external pricing sources are either not readily available or are unreliable. Refer Note no. 2-3 of the "Significant Accounting Policies". ||We have assessed the process and tested the operating effectiveness of the key controls including the Company's review and approval of the estimates and assumptions used for the valuation including key authorization and data input controls; For quoted investments recalculated the valuations of investments with independent pricing sources; For unquoted investments we critically evaluated the valuation assessment and resulting conclusions in order to determine appropriateness of the valuations recorded with reference to the Company's valuation guidelines. |
|The Company's inventory consists of Shares and mutual fund. Total Inventory of the Company represents 81.79 per cent of the Company's total assets. Inventory's are made and valued in accordance with ||Our audit procedures for this area included: We assessed appropriateness of the pricing methodologies with reference to Company's valuation policy. |
|Policy of the Company and relevant Ind AS at cost or market value whichever is lower on FIFO basis. Refer ||We have verified the inventory of shares by DEMAT statements and the account statements in respect of Mutual Funds. |
|Note no. 2-3 of "Significant Accounting Policies". ||In Quoted Inventories recalculated the valuation with independent pricing sources. |
Emphasis of Matter
We draw attention to note 38 of the financial statements of the company whereinfinancial impact of COVID-19 on the operations of the Company has been disclosed. Furtherthe extent to which the COVID-19 pandemic will impact the Company's financial performanceis dependent on future developments which are highly uncertain. Our opinion is notmodified in this matter.
Due to COVID-19 pandemic and the lockdown and other restrictions imposed by theGovernment and local administration the audit processes were carried out based on theremote access to the extent available/feasible and necessary records made available by themanagement through digital medium.
The Company's Board of Directors is responsible for preparation of the otherinformation. Other information comprises the information included in the ManagementDiscussion and Analysis of the Board's Report including Annexures thereto to CorporateGovernance and Shareholder's Information but does not include the Ind AS financialstatements and our auditor's report thereon. Our opinion on the Ind AS financialstatements does not cover the other information and we will not express any form ofassurance conclusion thereon.
In connection with our audit of the Ind AS financial statements our responsibility isto read the other information identified above when it becomes available and in doing soconsider whether the other information is materially inconsistent with the Ind ASfinancial statements or our knowledge obtained during the course of our audit or otherwiseappears to be materially misstated.
Management's Responsibility for the Ind AS Financial Statements
The Company's Board of Directors is responsible for the matters stated in Section134(5) of the Companies Act 2013 ("the Act") with respect to preparation ofthese Ind AS Financial Statements that give a true and fair view of the financialposition financial performance total comprehensive income changes in equity and cashflows of the Company Accounting Standards (Ind AS) prescribed under section 133 of the Actread with the Companies (Indian Accounting Standards) Rules 2015 as amended and otheraccounting principles generally accepted in India.
This responsibility also includes maintenance of adequate accounting records inaccordance with provisions of the Act for safeguarding assets of the Company and forpreventing and detecting frauds and other irregularities; selection and application ofappropriate accounting policies; making judgments and estimates that are reasonable andprudent; and design implementation and maintenance of adequate internal financialcontrols that were operating effectively for ensuring accuracy and completeness of theaccounting records relevant to preparation and presentation of the Ind AS FinancialStatements that give a true and fair view and are free from material misstatement whetherdue to fraud or error.
In preparing the Ind AS financial statements management is responsible for assessingthe Company's ability to continue as a going concern disclosing as applicable mattersrelated to going concern and using the going concern basis of accounting unless managementeither intends to liquidate the Company or to cease operations or has no realisticalternative but to do so. The Board of Directors is also responsible for overseeing theCompany's financial reporting process.
Auditor's Responsibilities for Audit of the Ind AS 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: i Identify and assessrisks of material misstatement of the financial statements whether due to fraud or errordesign and perform audit procedures responsive to those risks and obtain audit evidencethat is sufficient and appropriate to provide a basis for our opinion. The risk of notdetecting a material misstatement resulting from fraud is higher than for one resultingfrom error as fraud may involve collusion forgery intentional omissionsmisrepresentations or the override of internal control. ii. Obtain an understanding ofinternal control relevant to in accordancewith theIndian the audit in order to designaudit procedures that are appropriate in the circumstances. Under section 143(3)(i) of theAct 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. iii. Evaluate appropriateness of accounting policies used and thereasonableness of accounting estimates and related disclosures made by management. iv.Conclude on appropriateness of management's use of the going concern basis of accountingand based on the audit evidence obtained whether a material uncertainty exists relatedto events or conditions that may cast significant doubt on the Company's ability tocontinue as a going concern. If we conclude that a material uncertainty exists we arerequired to draw attention in our auditor's report to the related disclosures in thefinancial statements or if such disclosures are inadequate to modify our opinion. Ourconclusions 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. v. Evaluate the overall presentation structure and content of thefinancial statements including the disclosures and whether the financial statementsrepresent the underlying transactions and events in a manner that achieves fairpresentation.
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 alsoprovide those charged with governance with a statement that we have complied with relevantethical requirements regarding independence and to communicate with them allrelationships 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")issued by the Central Government of India in terms of sub-section (11) of section143 ofthe Act we give in Annexure "A" hereto a statement on the matters specified inparagraph 3 of the Order to the extent applicable.
2. As required by section143(3) of the Act 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 purpose of our audit;
b) In our opinion proper books of account as required by law have been kept by theCompany so far as appears from our examination of those books;
c) The Balance Sheet Statement of Profit (including other comprehensive income) theCash Flow Statement and Statement of Changes in Equity dealt with by this Report are inagreement with the books of account;
d) In our opinion the aforesaid Ind AS financial statements comply with the accountingstandards specified under section 133 of the Act read with Rule 7 of the Companies(Accounts) Rules 2014;
e) On the basis of written representations received from the directors as on 31stMarch 2020 taken on record by the Board of Directors none of the directors isdisqualified as on 31 st March 2020 from being appointed as a director interms of section 164 (2) of the Act; f) With respect to adequacy of the internal financialcontrols over financial reporting of the Company and operating effectiveness of suchcontrols refer to our separate report in "Annexure B"; and
g) With respect to other matters 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 thebest of our information and according to the explanations given to us the remunerationpaid by the company to its directors during the year is in accordance with the provisionsof section 197 of the Act.
h) With respect to other matters to be included in the Auditor's Report in accordancewith Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinion and to thebest of our information and according to the explanations given to us:
i. The Company has disclosed the impact of pending litigations on its financialposition in its Ind AS financial statements -Refer Note no. 29 of Ind As FinancialStatements
. ii. The Company does not have any long-term contracts including derivative contracts;as such the question of commenting on any material foreseeable losses thereon does notarise. and Loss
iii. There were no amounts which were required to be transferred to the InvestorEducation and Protection Fund by the Company.
For GMJ & Co
Firm No. 103429W
(CA Atul Jain) Partner M. No. 037097
Annexure "A" to the Independent Auditor's Report
(i) (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of its fixed assets;
(b) Some of the fixed assets have been physically verified by the management during theyear and no material discrepancies were noticed on such verification;
(c) The title deed is held in the name of the Company as at the balance sheet date;
(ii) The inventory has been verified by the management at reasonable intervals duringthe year on the basis of statements received from custodians and depositary participantsand no material discrepancies were noticed on physical verification as compared to thebook records;
(iii) The Company has not granted loans secured or unsecured to any firms companiesor other parties covered in the register maintained under Section 189 of the Company'sAct2013 (the Act) and hence provisions of clauses (iii) (a) (b) and(c) of paragraph 3 ofthe Company (Auditors Report) Order 2016 (the Order) are not applicable to the Company;
(iv) According to the information and explanations given to us the provisions ofSection 185 of the Act are not applicable to the Company and the Company has complied withthe provision of Section 186 of the Act in respect of subscription of shares to bodycorporates;
(v) The Company has not accepted any deposits from the public within the meaning ofSections 73 to 76 of the Act and the rules framed thereunder;
(vi) The Central Government of India has not prescribed maintenance of cost recordsunder subsection (1) of Section 148 of the Act for any of the activities of the Company;
(vii) According to records of the Company examined by us and the information andexplanations given to us:
(a) The Company is generally regular in depositing undisputed statutory dues includingprovident fund employees' state insurance income-tax goods and service tax duty ofcustoms duty of excise value added tax cess and other statutory dues with appropriateauthorities. There were no undisputed amounts payable for a period of more than six monthsfrom the date they became payable;
(b) According to information and explanations given to us there are no material duesof duty of customs and goods & service tax which have not been deposited as at March31 2020 on account of any dispute;
(viii) The Company has not taken any loan from any financial Institution bank orgovernment and has not issued any debentures;
(ix) The Company has not raised money by way of initial public offer or further publicoffer and term loans therefore clause
(ix) of para 3 of the Order is not applicable;
(x) Based on the audit procedures performed and according to the information andexplanations given to us we report that no fraud on or by the Company has been noticed orreported during the year;
(xi) Managerial remuneration has been paid and provided in accordance with therequisite approvals mandated by the provisions of section 197 read with Schedule V of theAct;
(xii) As the Company does not fall into the category of a Nidhi company clause
(xii) of para 3 of the Order is not applicable to the Company;
(xiii) According to the information and explanations given to us all transactions withrelated parties are in compliance with Sections 177 and 188 of the Act wherever applicableand details have been disclosed in the Ind AS Financial Statements as required byapplicable accounting standards;
(xiv) The Company has not made any preferential allotment or private placement ofshares or fully or partly convertible debentures during the year under review;
(xv) According to the information and explanations given to us the Company has notentered into any non-cash transactions with directors or persons connected with them underprovisions of section 192 of Act; and
(xvi) The Company is required to be registered under section 45-IA of the Reserve Bankof India Act 1934 and is registered vide the Registration no. 13.00984 taken in the year1998.
For GMJ & Co
Firm No. 103429W
(CA Atul Jain) Partner M. No. 037097
Annexure "B" to Auditor's Report
Report on Internal Financial Controls under Clause (i) of
Sub-section 3 of Section 143 of the Act
We have audited the internal financial controls over financial reporting of TCFCFinance Limited ("the Company") as of 31st March 2020 in conjunctionwith our audit of the Ind AS Financial Statements of the Company for the year ended onthat 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 includedesign implementation and maintenance of adequate internal financial controls that wereoperating effectively for ensuring orderly and efficient conduct of its businessincluding adherence to Company's policies safeguarding of its assets prevention anddetection of frauds and errors accuracy and completeness of accounting records andtimely preparation of reliable financial information as required under the Act.
Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting based our audit. We conducted our audit in accordancewith the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting(the "Guidance Note") issued by the Institute of Chartered Accountants of Indiaand the Standards on Auditing prescribed under section 143(10) of the Act to the extentapplicable to an audit of internal financial controls. 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 overfinancial reporting was established and maintained and if such control operatedeffectively in all material respects. Our audit involved performing procedures to obtainaudit evidence about adequacy of the internal financial controls system over financialreporting and their operating effectiveness. Our audit of internal financial controls overfinancial reporting included obtaining an understanding of internal financial controlsover financial reporting assessing the risk that a material weakness exists and testingand evaluating the design and operating effectiveness of internal control based on theassessed risk. The procedures selected depend on the auditors' judgment includingassessment of the risks of material misstatement of the IndAS Financial Statementswhether due to fraud or error. We believe that the audit evidence we have obtained issufficient and appropriate to provide a basis for our audit opinion on the Company'sinternal financial controls system over 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 reliability of financial reporting andpreparation of Ind AS Financial Statements for external purposes in accordance withgenerally accepted accounting principles. A company's internal financial control overfinancial reporting includes those policies and procedures that
(1) pertain to maintenance of records that in reasonable detail accurately and fairlyreflect the transactions and dispositions of assets of the company;
(2)provide reasonable assurance that transactions are recorded as necessary to permitpreparation of Ind AS Financial Statements in accordance with generally acceptedaccounting principles and that receipts and expenditures of the company are being madeonly in accordance 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 Ind AS Financial Statements.
Inherent Limitations of Internal Financial Controls Over Financial Reporting
Because of inherent limitations of internal financial controls over financialreporting including possibility of collusion or improper management override of controlsmaterial misstatements due to error or fraud may occur and not be detected. Alsoprojections onof any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that internal financial control overfinancial reporting may become inadequate because of changes in conditions or that thedegree of compliance with the policies or procedures may deteriorate.
In our opinion and to the best of our information and according to the explanationsgiven to us the Company has in all material respects an adequate internal financialcontrols system over financial reporting and such internal financial controls overfinancial reporting were operating effectively as at 31st March 2020 based onthe internal control over financial reporting criteria established by the Companyconsidering essential components of internal control stated in the Guidance Note on Auditof Internal Financial Controls Over Financial Reporting issued by the Institute ofChartered Accountants of India.
For GMJ & Co.
Firm No. 103429W
(CA Atul Jain) Partner M. No. 037097