To the Members of
Xchanging Solutions Limited
Report on the Audit of the Standalone Financial Statements
We have audited the accompanying standalone financial statements of XchangingSolutions Limited ("the Company") which comprise the Balance Sheet as atMarch 31 2020 and the Statement of Profit and Loss (including Other ComprehensiveIncome) the Statement of Cash Flows and the Statement of Changes in Equity for the yearthen ended and a summary of significant accounting policies and other explanatoryinformation.
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 Indian Accounting Standards prescribed under Section133 of the Act read with the Companies (Indian Accounting Standards) Rules 2015 asamended ("Ind AS") and other accounting principles generally accepted in Indiaof the state of affairs of the Company as at March 31 2020 and its profit totalcomprehensive income its cash flows and the changes in equity for the year ended on thatdate.
Basis for Opinion
We conducted our audit of the standalone financial statements in accordance with theStandards on Auditing specified under Section 143(10) of the Act (SAs). Ourresponsibilities under those Standards are further described in the Auditor'sResponsibility for the Audit of the Standalone 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 ethical requirementsthat are relevant to our audit of the standalone financial statements under the provisionsof the Act and the Rules made thereunder and we have fulfilled our other ethicalresponsibilities in accordance with these requirements and the ICAI's Code of Ethics. Webelieve that the audit evidence obtained by us is sufficient and appropriate to provide abasis for our audit opinion on the standalone financial statements.
Emphasis of Matter
We draw attention to Note 3.1 (v) of the standalone financial statements whichdescribes the management assessment of the impact of the outbreak of Covid-19 on revenuetrade receivables including unbilled receivables and investments. The management believesthat no adjustment is required in the financial statement as it does not impact thecurrent financial year. However in view of highly uncertain economic environment and itslikely effect on future service revenue due to Covid-19 a definitive assessment of theimpact on the subsequent periods is dependent upon circumstances as they evolve. Ouropinion 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 standalone financial statements of the current period.These matters were addressed in the context of our audit of the standalone financialstatements as a whole and in forming our opinion thereon and we do not provide aseparate opinion on these matters. We have determined the matters described below to bethe key audit matters to be communicated in our report.
|Key Audit Matter ||Auditor's Response |
|1. Assessment of impairment on investment in subsidiary ||Principal Audit Procedures |
|As described in Note 7 of the Standalone Financial statements the carrying amount of investment in US subsidiary recorded is Rs. 11224 lakhs. The Company recognized impairment loss of Rs. 6045 lakhs as at March 31 2020. ||We performed the following procedures: |
|The Company identifies whether an impairment indication occurs every year and performs impairment test over investment in subsidiary and compares the carrying amount with the greater of the calculated value-in-use and fair value used to determine whether it is impaired. In estimating the value-in-use management's judgment is involved in determining the key assumptions such as sales growth rate discount rate and terminal growth rate that have a significant impact on the estimated value-in-use. || Evaluated the design of internal controls relating to development of key assumptions used in value in use model and tested operating effectiveness of these controls. |
|Considering significant degree of judgment in estimating value-in-use and likelihood of management bias we identified assessment of impairment on investment in subsidiary as a key audit matter. || gaining an understanding of and assessing the impairment testing process implemented by Management. |
| || verifying the appropriateness of the model used to calculate value in use as per discounted cash flow method. |
| || analysing the consistency of cash flow forecasts with Management's latest estimates presented to the Board of Directors as part of the budget process. |
| || comparing the cash flow forecasts for financial years 2021 to 2025 with the business plans used for prior year impairment testing. |
| || assessing the methods used to calculate the discount rate applied to the estimated cash flows expected as well as the terminal growth rate used to project the latest. We also involved our internal valuation specialist in evaluating management's assessment. |
| || prior year expected cash flows to infinity; comparing these rates with market data and external sources and recalculating the rates based on our own data sources. |
| || assessing sensitivity testing of value in use to a change in the main assumptions used by Management. |
|2. Evaluation of uncertain tax positions ||Principal Audit Procedures |
|The Company has material uncertain tax positions including matters under dispute which involves significant judgment due to existence of multiple uncertain tax positions leading to disputes / litigations and there are interpretation of various rules and law. It also involves consideration of on-going disputes and disclosures of related contingencies to determine the possible outcome of these disputes. || Evaluated the design of internal controls relating to the uncertain tax positions and tested the operative effectiveness of these controls. |
|Refer Notes 3.1 (ii) and 20 to the Standalone financial statements. || Obtained details of completed tax assessments and demands for the year ended March 31 2020 from the management. |
| || We involved our internal experts to challenge the management's underlying assumptions in estimating the tax provision and the possible outcome of the disputes. |
| || Our internal experts also considered the legal precedence and other rulings in evaluating management's position on these uncertain tax positions. Additionally we considered the effect of new information in respect of uncertain tax positions as at April 1 2019 to evaluate whether any change was required to management's position on these uncertainties. |
Information Other than the 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 the Boards'Report including Annexures to Board's Report Management Discussion and Analysis Reportand Corporate Governance Report including annexures thereon but does not include thestandalone financial statements and our auditor's report thereon.
Our opinion on the standalone financial statements does not cover the otherinformation and we do not express any form of assurance conclusion thereon.
In connection with our audit of the standalone financial statements ourresponsibility is to read the other information and in doing so consider whether theother information is materially inconsistent with the standalone financial statements orour knowledge obtained during the course of our audit or otherwise appears to bematerially 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 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 standalone financial statementsthat give a true and fair view of the financial position financial performance includingother comprehensive income cash flows and changes in equity of the Company in accordancewith the Ind AS and other accounting principles generally accepted in India. Thisresponsibility also includes maintenance of adequate accounting records in accordance withthe provisions of the Act for safeguarding 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 financialstatement 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 is responsible forassessing the Company's ability to continue as a going concern disclosing as applicablematters related to going concern and using the going concern basis of accounting unlessmanagement either intends to liquidate the Company or to cease operations or has norealistic alternative but to do so.
Those Board of Directors are also responsible for overseeing the Company's financialreporting process.
Auditor's Responsibility 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 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 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.
Materiality is the magnitude of misstatements in the standalone financial statementsthat individually or in aggregate makes it probable that the economic decisions of areasonably knowledgeable user of the standalone financial statements may be influenced. Weconsider quantitative materiality and qualitative factors in (i) planning the scope of ouraudit work and in evaluating the results of our work; and (ii) to evaluate the effect ofany identified misstatements in the standalone 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 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.
Report on Other Legal and Regulatory Requirements
1. 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 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 Cash Flows and Statement of Changes in Equity dealt with by thisReport are in agreement with the books of account.
d) In our opinion the aforesaid standalone financial statements comply with the Ind ASspecified under Section 133 of the Act.
e) On the basis of the written representations received from the directors as on March31 2020 taken on record by the Board of Directors none of the directors is disqualifiedas on March 31 2020 from being appointed as a director in terms of Section 164(2) of theAct.
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 A".. Our report expresses an unmodified opinion onthe adequacy and operating effectiveness of the Company's internal financial controls overfinancial reporting.
g) 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 opinionand to the best of our information and according to the explanations given to us theremuneration paid by the Company to its directors during the year is in accordance withthe provisions of Section 197 of the Act.
h) 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 as amended inour opinion and to the best of our information and according to the explanations given tous:
i. The Company has disclosed the impact of pending litigations on its financialposition in its standalone financial statements;
ii. The Company did not have any material foreseeable losses on long-term contractsincluding derivative contracts.
iii. There were no amounts which were required to be transferred to the InvestorEducation and Protection Fund by the Company.
2. As required by the Companies (Auditor's Report) Order 2016 ("the Order")issued by the Central Government in terms of Section 143(11) of the Act we give in"Annexure B" a statement on the matters specified in paragraphs 3 and 4 of theOrder.
ANNEXURE "A" TO THE INDEPENDENT AUDITOR'S REPORT
(Referred to in paragraph 1(f) under Report on Other Legal and RegulatoryRequirements' Section of our report of even date)
Report on the Internal Financial Controls Over Financial Reporting under Clause (i) ofSub-Section 3 of Section 143 of the Companies Act 2013 ("the Act")
We have audited the internal financial controls over financial reporting of XchangingSolutions Limited ("the Company") as of March 31 2020 in conjunction withour audit of the standalone Ind AS 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.
Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting of the Company based on our audit. We conducted ouraudit in accordance with the Guidance Note on Audit of Internal Financial Controls OverFinancial Reporting (the "Guidance Note") issued by the Institute of CharteredAccountants of India and the Standards on Auditing prescribed under Section 143(10) of theCompanies Act 2013 to the extent applicable to an audit of internal financial controls.Those Standards and the Guidance Note require that we comply with ethical requirements andplan and 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 judgement including the assessment of the risks ofmaterial misstatement of the financial statements whether due to fraud or error.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the 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 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 authorisations of management and directors of the company; and
(3) provide reasonable assurance regarding prevention or timely detection ofunauthorised 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.
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 31 2020 based on the criteria forinternal financial control over financial reporting established by the Company consideringthe essential components of internal control stated in the Guidance Note on Audit ofInternal Financial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India.
ANNEXURE "B" TO THE INDEPENDENT AUDITORS' REPORT
(Referred to in paragraph 2 under Report on Other Legal and RegulatoryRequirements' Section of our report of even date)
(i) In respect of property plant and equipment :
(a) The Company has maintained proper records showing full particulars includingquantitative details and situation of property plant and equipment.
(b) The Company has a program of verification of property plant and equipment to coverall the items in a phased manner over a period of 3 years which in our opinion isreasonable having regard to the size of the Company and the nature of its assets.
Pursuant to the program all property plant and equipment were physically verified bythe Management during the year. According to the information and explanations given to usno material discrepancies were noticed on such verification.
(c) The Company does not have any immovable properties of freehold land and building.In respect of immovable properties of building that have been taken on lease and disclosedas property plant and equipment in the standalone financial statements the leaseagreements are in the name of the Company.
(ii) The Company does not have any inventory and hence reporting under clause 3 (ii) ofthe Order is not applicable.
(iii) In our opinion and according to the information and explanations given to us theCompany has not granted any loans secured or unsecured to companies firms LimitedLiability Partnerships or other parties covered in the register maintained under Section189 of the Companies Act 2013.
(iv) The Company has not granted any loans made investments or provided guarantees andhence reporting under clause 3 (iv) of the Order is not applicable.
(v) The Company has not accepted deposits during the year and does not have anyunclaimed deposits as at March 31 2020 and therefore the provisions of the clause 3 (v)of the Order is not applicable.
(vi) The maintenance of cost records has not been specified by the Central Governmentunder Section 148(1) of the Companies Act 2013 for the business activities carried out bythe Company. Thus reporting under clause 3 (vi) of the Order is not applicable. (vii)According to the information and explanations given to us in respect of statutory dues:(a) The Company has been generally regular in depositing undisputed statutory duesincluding Provident Fund Employees' State Insurance Income-tax Goods and Services Taxcess and other material statutory dues applicable to it with the appropriate authorities.
(b) There were no undisputed amounts payable in respect of Provident Fund Employees'State Insurance Income-tax Goods and Services Tax cess and other material statutorydues in arrears as at March 31 2020 for a period of more than six months from the datethey became payable.
(c) Details of dues of Income Tax which have not been deposited as on March 31 2020 onaccount of disputes are given below:
|Nature of Statute ||Nature of dues ||Forum where dispute is pending ||Period to which amount relates ||Amount (Rs. In lakhs) |
|Income tax Act 1961 ||Income Tax ||Income Tax Appellate Tribunal ||Financial year 2009-10 ||6 |
| || || ||Financial year 2012-13 ||46(*) |
| || || ||Financial year 2013-14 ||493 (**) |
| || || ||Financial year 2014-15 ||606 |
(*) Net of Rs. 39 lakhs paid under protest (**) Net of Rs. 123 lakhs paid under protest
(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 has not issued any debentures.
(ix) The Company has not raised moneys by way of initial public offer or further publicoffer (including debt instruments) or term loans and hence reporting under clause 3 (ix)of the Order is not applicable.
(x) To the best of our knowledge and according to the information and explanationsgiven to us no fraud by the Company or no material fraud on the Company by its officersor employees has been noticed or reported during the year.
(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 CompaniesAct 2013.
(xii) The Company is not a Nidhi Company and hence reporting under clause 3 (xii) ofthe Order is not applicable.
(xiii) In our opinion and according to the information and explanations given to us theCompany is in compliance with Section 177 and 188 of the Companies Act 2013 whereapplicable for all transactions with the related parties and the details of related partytransactions have been disclosed in the standalone financial statements as required by theapplicable accounting standards. (xiv) During the year the Company has not made anypreferential allotment or private placement of shares or fully or partly convertibledebentures and hence reporting under clause 3 (xiv) of the Order is not applicable.
(xv) In our opinion and according to the information and explanations given to usduring the year the Company has not entered into any non-cash transactions with itsdirectors or persons connected to its directors and hence provisions of Section 192 of theCompanies Act 2013 are not applicable.
(xvi) The Company is not required to be registered under Section 45-IA of the ReserveBank of India Act 1934.
| ||For DELOITTE HASKINS & SELLS LLP |
| ||Chartered Accountants |
| ||(Firm's Registration No. 117366W/W-100018) |
| ||Bhavani Balasubramanian |
| ||(Partner) |
| ||(Membership No. 22156) |
| ||UDIN: 20022156AAAAAM1467 |
|Chennai May 22 2020 || |