To the Members of UFO Moviez India Limited
Report on the Audit of the Standalone Financial Statements
We have audited the standalone financial statements of UFO Moviez India Limited("the Company") which comprise the Balance Sheet as at 31 March 2019 theStatement of Profit and Loss (including other comprehensive income) Statement of Changesin Equity and Statement of Cash Flows for the year then ended and notes to the standalonefinancial statements including a summary of significant accounting policies and otherexplanatory information (hereinafter referred to as "the standalone financialstatements").
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone financial statements give the information requiredby the Companies Act 2013 ("the Act") in the manner so required and give a trueand fair view in conformity with the accounting principles generally accepted in India ofthe state of affairs of the Company as at 31 March 2019 and of its profit (includingother comprehensive income) changes in equity and its cash flows for the year ended onthat date.
Basis for Opinion
We conducted our audit in accordance with the Standards on Auditing ("SAs")specified under Section 143(10) of the Act. Our responsibilities under those SAs arefurther described in the Auditor's Responsibilities for the Audit of the StandaloneFinancial 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 together with the ethical requirements that are relevant to our audit of thestandalone financial statements under the provisions of the Act and the Rules thereunderand we have fulfilled our other ethical responsibilities in accordance with theserequirements and the Code of Ethics. We believe that the audit evidence we have obtainedis sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters ("KAM") are those matters that in our professionaljudgment were of most significance in our audit of the standalone financial statements ofthe current period. These matters were addressed in the context of our audit of thestandalone financial statements as a whole and in forming our opinion thereon and we donot provide a separate opinion on these matters.
Key Audit Matters
|Key audit matters ||How our audit addressed the key audit matter |
|Revenue recognition - Advertisement revenue || |
|Company has recognised advertisement revenue of र 21372.00 lacs for the year ended 31 March 2019 (Refer Notes 21 and 2(h) to the standalone financial statements) being 50 % of total revenue. ||In relation to recognition of revenue from advertisements we have: |
| || Considered the appropriateness of management's revenue recognition policy in light of the requirements of Ind AS 115; |
|We identified advertisement revenue as a KAM considering - || |
| There may be an inherent risk regarding the existence and accuracy of revenue given that the advertisements are availed through various direct customers including a number of small players individual advertisement agents and large advertisement agencies; || Assessed the reasonableness of the timing and amount of revenue recognised during the year; |
| || Assessed the design implementation and operating effectiveness of management's key internal controls over revenue recognition; |
| || assessed with assistance from our internal IT specialists the design implementation and operating effectiveness of management's key internal IT controls over the completeness and accuracy of the scheduling billing and accounting system; |
| || tested the completeness and accuracy of financial information contained within the advertisement module and billing systems which included system generated reports recording of revenue and accrual of revenue at period end; |
| || Detailed testing on a sample of sales transactions from origination through to the general ledger to ensure that revenue recognised was complete and was recorded in the appropriate period and at the correct value; |
| The Company has an automated proprietary IT system for scheduling advertisements invoicing and accounting for related revenues. Revenue recognition is based on automated playback logs retrieval and advertisement playout rates incorporated in the IT system. Further various modules such as for processing of advertisement content and scheduling of advertisements are linked to the financial module. The accuracy and completeness of Company's revenue is thus largely dependent on the Company's IT system and may be susceptible to management override of controls. || On selected samples we |
| || confirmed our understanding of the process by which revenue is determined by the relevant billing system |
| || verified underlying records such as sales contracts release orders invoices logs for advertisements displayed |
| || performed procedures on release orders over / under unutilised and obtained rationale from management for the same |
| || performed procedures to confirm the existence of the customers |
|Key audit matters || performed margin analysis on overall advertisement revenue. How our audit addressed the key audit matter |
|Impairment of investment in and loans to subsidiaries || |
|The Company has investments in and loans to its subsidiaries ||Our audit procedures included amongst others the following: |
|- the carrying amount of Company's investment in subsidiaries is र 11039.36 lacs and the Company has advanced loans amounting to र 1287.97 (refer Notes 4 and 5 to the standalone financial statements). Management has carried out an impairment assessment based on the business plan using the discounted free cash flow model. || Evaluating the Company's process for identifying indicators of impairment of its investment in subsidiaries and / or recoverability of loans by assessing management's review of the financial performance of each subsidiary; |
| || assessed the recoverable amount based on the valuation. |
|We identified this as a KAM considering: ||This included assessment of historical accuracy of management's assumptions and forecasts and review of documentation supporting key judgements; |
| there is a risk that the investments in and loans to certain subsidiaries may not be recovered. || |
|The annual impairment testing involves complexity and significant judgment in evaluating underlying assumptions for estimating recoverable amount. The Discounted Forecasted Cash Flows ("DCF") model is based on key assumptions such as probability of securing and executing future advertisement contracts estimating growth rates and terminal value as well as using an appropriate weighted - average cost of capital (discount rate). || reconciled input data to approved budgets and tested mathematical accuracy; |
| || performed sensitivity analysis around the key assumptions to ascertain the extent to which adverse changes both individually or in aggregate could impact the analysis; |
| || Discussed management's strategic and operational plans for the foreseeable future. |
Our opinion on the standalone financial statements does not cover the other informationand we do not express any form of assurance conclusion thereon.
In connection with our audit of the standalone financial statements our responsibilityis to read the other information and in doing so consider whether the other informationis materially inconsistent with the standalone financial statements or our knowledgeobtained in the audit or otherwise appears to be materially misstated. If based on thework we have performed we conclude that there is a material misstatement of this otherinformation we are required to report that fact. We have nothing to report in thisregard.
Management's Responsibility for the Standalone Financial Statements
The Company's management and Board of Directors are responsible for the matters statedin Section 134(5) of the Act with respect to the preparation of these standalone financialstatements that give a true and fair view of the state of affairs profit/loss (includingother comprehensive income) changes in equity and cash flows of the Company in accordancewith the accounting principles generally accepted in India including the IndianAccounting Standards ("Ind AS") specified under Section 133 of the Act. Thisresponsibility also includes maintenance of adequate accounting records in accordance withthe provisions of the Act for safeguarding of the assets of the Company and for preventingand detecting frauds and other irregularities; selection and application of appropriateaccounting policies; making judgments and estimates that are reasonable and prudent; anddesign implementation and maintenance of adequate internal financial controls that wereoperating effectively for ensuring the accuracy and completeness of the accountingrecords relevant to the preparation and presentation of the standalone financialstatements that give a true and fair view and are free from material misstatement whetherdue to fraud or error.
In preparing the standalone financial statements management 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.
Board of Directors is also responsible for overseeing the Company's financial reportingprocess.
Auditor's Responsibilities for the Audit of the Standalone Financial Statements
Our objectives are to obtain reasonable assurance about whether the standalonefinancial statements as a whole are free from material misstatement whether due to fraudor error and to issue an auditor's report that includes our opinion. Reasonable assuranceis a high level of assurance but is not a guarantee that an audit conducted in accordancewith SAs will always detect a material misstatement when it exists. Misstatements canarise from fraud or error and are considered material if individually or in theaggregate they could reasonably be expected to influence the economic decisions of userstaken on the basis of these standalone financial statements.
As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the standalonefinancial 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 Company hasadequate internal financial controls with reference to standalone financial statements inplace 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 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 standalone financial statements or if such disclosures are inadequate to modify ouropinion. Our conclusions are based on the audit evidence obtained up to the date of ourauditor's report. However future events or conditions may cause the Company to cease tocontinue as a going concern.
Evaluate the overall presentation structure and content of the standalonefinancial statements including the disclosures and whether the standalone financialstatements represent the underlying transactions and events in a manner that achieves fairpresentation.
We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have compliedwith relevant ethical requirements regarding independence and to communicate with themall relationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safeguards.
From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the standalone financial statementsof the current period and are therefore the key audit matters. We describe these mattersin our auditor's report unless law or regulation precludes public disclosure about thematter or when in extremely rare circumstances we determine that a matter should not becommunicated in our report because the adverse consequences of doing so would reasonablybe expected to outweigh the public interest benefits of such communication.
The comparative financial statement of the Company for the year ended 31 March 2018prepared in accordance with Ind AS and included in these standalone financial statementshave been audited by the predecessor auditor who expressed an unmodified opinion as perthe report dated 29 May 2018. Additionally the financial statement for the year ended 31March 2018 have been adjusted to give effect to the Scheme of amalgamation ('the Scheme')of the Company's wholly owned subsidiaries including its step down subsidiaries namely VN Films Private Limited ("VNFPL") Edridge Limited ("EL") UFOInternational Limited ("UIL") and Southern Digital Screenz India Private Limited("SDS") (together referred to as the "merging companies") with theCompany which adjustments have been audited by us. Our conclusion is not modified inrespect of the above matters.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditors' Report) Order 2016 ("the Order")issued by the Central Government of India in terms of Section 143(11) of the Act we givein "Annexure A" a statement on the matters specified in paragraphs 3 and 4 ofthe Order to the extent applicable.
(A) As required by Section 143(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 purposes of our audit.
(b) In our opinion proper books of account as required by law have been kept by theCompany so far as it appears from our examination of those books.
(c) The Balance Sheet the Statement of Profit and Loss (including other comprehensiveincome) the Statement of Changes in Equity and the Statement of Cash Flows dealt with bythis report are in agreement with the books of account.
(d) In our opinion the aforesaid standalone financial statements comply with the IndAS specified under Section 133 of the Act.
(e) On the basis of the written representations received from the Directors as on 31March 2019 taken on record by the Board of Directors none of the directors isdisqualified as on 31 March 2019 from being appointed as a director in terms of Section164(2) of the Act.
(f) With respect to the adequacy of the internal financial controls with reference tofinancial statements of the Company and the operating effectiveness of such controlsrefer to our separate Report in "Annexure B".
(B) 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 has disclosed the impact of pending litigations as at 31 March 2019 onits financial position in its standalone financial statements - Refer Note 34 to thestandalone financial statements;
ii. The Company did not have any long term contracts including derivative contractsfor which there were any material foreseeable losses.
iii. There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company.
iv. The disclosures in the standalone financial statements regarding holdings as wellas dealings in specified bank notes during the period from 8 November 2016 to 30 December2016 have not been made in these standalone financial statements since they do not pertainto the financial year ended 31 March 2019.
(C) With respect to the matter to be included in the Auditors' Report under Section197(16) of the Act:
In our opinion and according to the information and explanations given to us theremuneration paid by the Company to its directors during the current year is in accordancewith the provisions of Section 197 of the Act. The remuneration paid to any director isnot in excess of the limits laid down under Section 197 of the Act. The Ministry ofCorporate Affairs has not prescribed other details under Section 197(16) which arerequired to be commented upon by us.
| ||For B S R & Co. LLP |
| ||Chartered Accountants |
| ||Firm's Registration No: 101248W/W-100022 |
| || |
| ||Rajesh Mehra |
|Place : Mumbai ||Partner |
|Date : 21 May 2019 ||Membership No: 103145 |
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 Company on the standalone financial statements for the year ended 31 March2019 we report the following:
(i) (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.
(b) The Company has a regular programme of physical verification of its fixed assetsby which all fixed assets are verified in a phased manner over a period of two years. Inour opinion this periodicity of physical verification is reasonable having regard to thesize of the Company and the nature of its assets. Pursuant to the programme certain fixedassets were physically verified during the year and no discrepancies were noticed on suchverification.
(c) According to the information and explanations given to us the Company does nothave any immovable property. Thus paragraph 3(i)(c) of the Order is not applicable to theCompany.
(ii) The inventory has been physically verified by the management during the year. Inour opinion the frequency of such verification is reasonable. The Company has maintainedproper records of inventory. There were no discrepancies noticed on verification betweenthe physical stock and the book records.
(iii) The Company has granted unsecured loan to its wholly-owned subsidiary which isalso a party covered in the register maintained under Section 189 of the Act. The loan andinterest thereon are repayable on demand. Management informs us that Company has notdemanded repayment of any such loan or interest during the year and thus there is nodefault on the part of the party to whom the money has been lent. In our opinion andaccording to the information and explanations given to us the terms and conditions of thesaid loan are not prejudicial to the interest of the Company.
(iv) The Company has not granted any loans or provided any guarantees or security tothe parties covered under Section 185 of the Act. The Company has complied with theprovisions of Section 186 of the Act in respect of investments made or loans or guaranteeor security provided to the parties covered under Section 186.
(v) The Company has not accepted any deposits from the public within the meaning of thedirectives issued by the Reserve Bank of India provisions of Section 73 to 76 of the Actany other relevant provisions of the Act and the relevant rules framed thereunder.
(vi) The Central Government has not prescribed the maintenance of cost records underSection 148 of the Act for any of the services rendered by the Company.
(vii) (a) According to the information and explanations given to us and on the basis ofour examination of the records of the
Company amounts deducted / accrued in the books of account in respect of undisputedstatutory dues including Provident fund Employees' State Insurance Income-tax Goods andServices tax duty of Customs Value added tax Sales tax and other material statutorydues have been regularly deposited during the year by the Company with the appropriateauthorities. As explained to us Company did not have any dues on account of duty ofExcise and Cess.
According to the information and explanations given to us no undisputed amountspayable in respect of Provident fund Employees' State Insurance Income-tax Goods andServices tax duty of Customs and other material statutory dues were in arrears as at 31March 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 there are no dues ofIncome-tax Goods and Service tax duty of customs which have not been deposited onaccount of any dispute. The following dues of Service tax Value added tax and Sales taxhave not been deposited by the Company on account of disputes:
|Name of the statute ||Nature of dues* ||Amount (र )* ||Period (Financial year) ||Forum where the dispute is pending |
|Finance Act 1994 and Service Tax Rules 1994 ||Service tax ||1526.87 ||2007-08 to 2013-14 ||Honorable High Court of Mumbai |
|Finance Act 1994 and Service Tax Rules 1994 ||Service tax ||3637.32 ||2014-15 to 2017-18 ||Commissioner of Service Tax |
|Bihar Value Added Tax Act ||Value added tax ||6.00 ||2007-08 to 2008-09 ||Joint Commissioner of Sales Tax (Appeals) |
|West Bengal Value added tax ||Value added tax ||42.00 ||2007-08 ||Sales Tax Appellate Tribunal |
|Bihar Value Added Tax Act ||Value added tax ||5.00 ||2010-11 ||Joint Commissioner of Sales Tax (Appeals) |
|Tamilnadu Sales Tax ||Sales tax ||2.00 ||2014-15 to 2015-16 ||Joint Commissioner of Sales Tax (Appeals) |
|Gujarat Sales Tax ||Sales tax ||1.00 ||2013-14 ||Joint Commissioner of Sales Tax (Appeal) |
|Andhra Pradesh Sales Tax ||Sales tax ||5.00 ||2015-16 ||Joint Commissioner of Sales Tax (Appeal) |
|Kerala Sales Tax ||Sales tax ||28.00 ||2012-13 ||Joint Commissioner of Sales Tax (Appeal) |
* Excludes interest / penalty payable under relevant provisions of the respective Acts
* These amounts are net of amounts paid/deposited under protest र 10.00 lacs
(viii) In our opinion and according to the information and explanations given to usthe Company has not defaulted in the repayment of loans or borrowings to banks. TheCompany did not have any outstanding loans or borrowings from financial institutions orgovernment and there are no dues to debenture holders during the year.
(ix) The Company did not raise any money by way of initial public offer or furtherpublic offer (including debt instruments) during the year. In our opinion and according tothe information and explanations given to us the term loans taken by the Company havebeen applied for the purpose for which they were raised.
(x) During the course of our examination of the books and records of the Companycarried out in accordance with the generally accepted auditing practices in India andaccording to the information and explanations given to us we have neither come across anyinstance of fraud by the Company or any instances of fraud on the Company by its officersor employees noticed or reported during the year nor have we been informed of any suchcase by the management.
(xi) In our opinion and according to the information and explanations given to us theCompany has paid/provided managerial remuneration in accordance with the requisiteapprovals mandated by the provisions of Section 197 read with Schedule V to the Act.
(xii) According to the information and explanations given to us in our opinion theCompany is not a Nidhi Company as prescribed under Section 406 of the Act.
(xiii) In our opinion and according to the information and explanations given to usall transactions with the related parties are in compliance with Sections 177 and 188 ofthe Act the details of such transactions have been disclosed in the standalone financialstatements as required under the Ind AS.
(xiv) According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not made any preferentialallotment or private placement of shares or fully or partly convertible debentures duringthe year. Accordingly paragraph 3(xiv) of the Order is not applicable to the Company.
(xv) According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not entered into non-cashtransactions with directors or persons connected with him. Accordingly paragraph 3(xv) ofthe Order is not applicable to the Company.
(xvi) According to the information and explanations given to us and based on ourexamination of the records of the Company the Company is not required to be registeredunder Section 45 IA of the Reserve Bank of India Act 1934. Accordingly paragraph 3 (xvi)of the Order is not applicable to the Company.
| ||For B S R & Co. LLP |
| ||Chartered Accountants |
| ||Firm's Registration No: 101248W/W-100022 |
| || |
|Place : Mumbai ||Rajesh Mehra |
|Date : 21 May 2019 ||Partner |
| ||Membership No: 103145 |
ANNEXURE B TO THE INDEPENDENT AUDITOR'S REPORT
Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section143 of the Companies Act 2013 ("the Act") Opinion
We have audited the internal financial controls with reference to financial statementsof UFO Moviez India Limited ("the Company") as of 31 March 2019 in conjunctionwith our audit of the standalone financial statements of the Company for the year ended onthat date.
In our opinion the Company has in all material respects adequate internal financialcontrols with reference to financial statements and such internal financial controls wereoperating effectively as at 31 March 2019 based on the internal financial controls withreference to financial statements criteria established by the Company considering theessential components of internal control stated in the Guidance Note on Audit of InternalFinancial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India (the "Guidance Note").
Management's Responsibility for Internal Financial Controls
The Company's management and the Board of Directors are responsible for establishingand maintaining internal financial controls based on the internal financial controls withreference to financial statements criteria established by the Company considering theessential components of internal control stated in the Guidance Note. Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of its business including adherence to Company's policies the safeguarding ofits assets the prevention and detection of frauds and errors the accuracy andcompleteness of the accounting records and the timely preparation of reliable financialinformation as required under the Companies Act 2013 (hereinafter referred to as"the Act").
Our responsibility is to express an opinion on the Company's internal financialcontrols with reference to financial statements based on our audit. We conducted our auditin accordance with the Guidance Note and the Standards on Auditing prescribed underSection 143(10) of the Act to the extent applicable to an audit of internal financialcontrols with reference to financial statements. Those Standards and the Guidance Noterequire that we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether adequate internal financial controls with reference tofinancial statements were established and maintained and whether such controls operatedeffectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls with reference to financial statements and their operatingeffectiveness. Our audit of internal financial controls with reference to financialstatements included obtaining an understanding of 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 judgment including the assessment of the risks ofmaterial misstatement of the standalone financial statements whether due to fraud orerror.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's internal financial controls withreference to financial statements.
Meaning of 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.
| ||For B S R & Co. LLP |
| ||Chartered Accountants |
| ||Firm's Registration No: 101248W/W-100022 |
|Place : Mumbai ||Rajesh Mehra |
|Date : 21 May 2019 ||Partner |
| ||Membership No: 103145 |