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Allsec Technologies Ltd.

BSE: 532633 Sector: IT
NSE: ALLSEC ISIN Code: INE835G01018
BSE 00:00 | 24 Apr 2020 Allsec Technologies Ltd
NSE 05:30 | 01 Jan 1970 Allsec Technologies Ltd

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OPEN 139.40
PREVIOUS CLOSE 132.80
VOLUME 2
52-Week high 340.00
52-Week low 109.15
P/E 11.68
Mkt Cap.(Rs cr) 212
Buy Price 139.40
Buy Qty 750.00
Sell Price 125.95
Sell Qty 20.00
OPEN 139.40
CLOSE 132.80
VOLUME 2
52-Week high 340.00
52-Week low 109.15
P/E 11.68
Mkt Cap.(Rs cr) 212
Buy Price 139.40
Buy Qty 750.00
Sell Price 125.95
Sell Qty 20.00

Allsec Technologies Ltd. (ALLSEC) - Auditors Report


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Company auditors report

To the Members of Allsec Technologies Limited

Report on the Standalone Financial Statements

Opinion

1. We have audited the accompanying standalone financial statements of AllsecTechnologies Limited (‘the Company') which comprise the Balance Sheet as at 31 March2019 the Statement of Profit and Loss (including Other Comprehensive Income) theStatement of cash flows and the Statement of Changes in Equity for the year then endedand a summary of the significant accounting policies and other explanatory information.

2. 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 (‘Act') in the manner so required and give a true and fairview in conformity with the accounting principles generally accepted in India includingIndian Accounting Standards (‘Ind AS') specified under section 133 of the Act of thestate of affairs (financial position) of the Company as at 31 March 2019 and its profit(financial performance including other comprehensive income) its cash flows and thechanges in equity for the year ended on that date.

Basis for Opinion

3. We conducted our audit in accordance with the Standards on Auditing specified undersection 143(10) of the Act. Our responsibilities under those standards are furtherdescribed in the Auditor's Responsibilities for the Audit of the Standalone FinancialStatements section of our report. We are independent of the Company in accordance with theCode of Ethics issued by the Institute of Chartered Accountants of India (‘ICAI')together with the ethical requirements that are relevant to our audit of the standalonefinancial statements under the provisions of the Act and the rules thereunder and we havefulfilled our other ethical responsibilities in accordance with these requirements and theCode of Ethics. We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our opinion.

Key Audit Matters

4. 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.

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

S.No. Key audit matter How our audit addressed the key audit matter
1 Implementation of Ind AS 115: Our audit procedures included but were not limited to the following:
The Company adopted Ind AS 115 - Revenue from Contracts with Customers with effect from 01 April 2018. The Company has opted to use the modified retrospective approach of implementation wherein the cumulative effect of initially applying Ind AS 115 is adjusted to the opening balance of other equity as at 01 April 2018. - Obtained an understanding of each stream of revenue as disclosed in Note 2.4 to the standalone financial statements and evaluated the design and operating effectiveness of the internal controls placed by the management on evaluating the impact on implementation of Ind AS 115 during the current year with respect to recognition and measurement of revenue.
The Company has revised its revenue recognition policy in accordance with Ind AS 115 as disclosed in Note 2.4 to the standalone financial statements which requires the management to apply judgement for identification of separate and distinct performance obligations in complex contracts involving multiple promises determining transaction price taking into account variable price considerations and assessment of satisfaction of obligations. - Assessed the appropriateness of practical expedients adopted by the management in implementing and transitioning to Ind AS 115
In process of evaluating the impact of revised revenue recognition policy management has analysed contracts related to HR-BPO segment for the terms relating to initial set-up and one time charges. The management based on judgment has assessed that the set-up and one-time activities are not highly interrelated with the monthly payroll services provided and accordingly are distinct services for the purpose of revenue recognition. Further in determining of transaction price terms of the contracts in relation to HR-BPO and Customer life-cycle management (CLM) segments were evaluated for variable consideration/performance based consideration rewards and penalties. Based on such evaluation revenue was assessed to be recognised at a point in time and not over the period of the contract. - Evaluated contracts with customers on a sample basis that were in effect as on 01 April 2018 to test management's assessment of the impact on account of change in revenue recognition policy on the date of implementation including performing the following procedures for the sample contracts selected:
• Discussed and obtained from the management their evaluation of identification of performance obligations and satisfaction thereof for such sample contracts. Evaluated such assessment for appropriateness in accordance with the accounting principles of Ind AS 115.
The impact on account of implementation of Ind • Tested the assumptions used by the Company for the expected contract period in case of open ended contracts.
AS 115 on the balance in retained earnings as at 01 April 2018 and on the profits for the year ended 31 March 2019 has been disclosed in Note 2.4 to the standalone financial statements. • Evaluated the terms in such contracts with customers pertaining to variable consideration rewards penalties etc. to assess whether the revenue recognition with respect to such terms is in accordance with the principles of Ind AS 115.
Considering the significance of the area large volume of revenue transactions and management judgment involved this matter was identified as a key audit matter for the current year audit. • Tested the arithmetical accuracy of the underlying calculations determining the impact of implementing the new accounting standard.
- On a sample basis evaluated theappropriateness of accounting treatment pertaining to revenue recognition for the new contracts with customers that were entered during the year ended 31 March 2019 to evaluate implementation of Ind AS 115 on an on-going basis.
Evaluated the disclosures made in the standalone financial statements with respect to the implementation of Ind AS 115 for appropriateness in accordance with the requirements of the Ind AS and Schedule III of the Companies Act 2013.
2 Recoverable amount of Investment in Subsidiaries: Our audit procedures included but were not limited to the following:
The Company carries an investment of INR 2521 lakhs made in its wholly owned subsidiaries Allsectech Inc. USA and Retreat Capital Management Inc. USA (together referred to as “US subsidiaries'). The US subsidiaries have incurred significant losses due to loss of a significant contract during the year and expense incurred towards class action suits by erstwhile contractors and demand raised by Texas Work Force Commission as detailed in Note 37 to the standalone financial statements. - Obtained a detailed understanding of the management's process of identification of impairment indicators for investments in subsidiaries and for valuation of such investments to determine the impairment provisions required to be made with respect to the carrying value of such investments.
- Evaluated the design and tested the operating effectives of the internal controls implemented by the management around the recognition and measurement of impairment of investments in subsidiaries.
The Company's accounting policy as detailed in Note 2.8 to the standalone financial statements sets out that the Company assesses at the end of each reporting period whether there is any indication that an asset may be impaired and if such indication exists the Company estimates the recoverable amount of the asset. - Evaluated the impairment indicators identified by the management as per the Company's accounting policy.
The Company has identified the losses incurred during the year ended 31 March 2019 by the US subsidiaries as an indicator of impairment. - Obtained management's estimation of recoverable value based on valuation performed by the management expert and tested the appropriateness of the valuation methodology and valuation assumptions including discount rate. Evaluated the cash flow projections used in the said valuation to business plans based on past performance of the subsidiaries. We also evaluated independence competency and objectivity of the management expert.
The recoverable amount is computed by the management using the assistance of an independent valuation expert based on the present value of the future cash flows (Discounted Cash Flow valuation method) expected to be derived from the respective subsidiaries as at 31 March 2019. - Inspected legal correspondence and notices received by the US subsidiaries with respect to the outstanding litigations and related legal opinion obtained from its legal advisors on the potential financial exposure relating to such outstanding litigations to determine whether the same have been appropriately considered by the management while determining the projected future cash outflows from such subsidiaries.
As detailed in note 37 the recoverable amount of AllsecTech Inc. was determined to be higher than the carrying value of relevant investments in the standalone financial statements whereas the recoverable amount of Retreat Capital Management Inc. was lower when compared with the carrying value of relevant investments in the standalone financial statements. Based on these factors the Company has provided for impairment on the value of investments in Retreat Capital Management Inc. as at 31 March 2019 for an amount of INR 1307 lakhs. - Tested arithmetical accuracy of the calculations performed as above.
Considering materiality of the amounts involved and the significant management judgment involved in measurement of recoverable amounts of the investments in subsidiaries recoverability of investment in subsidiaries was identified as a key audit matter for the current year audit. - Evaluated appropriateness of disclosures made in the standalone financial statements in accordance with disclosure requirements of Ind AS and Schedule III of the Companies Act 2013.

Information other than the Standalone Financial Statements and Auditor's Report thereon

6. The Company's Board of Directors is responsible for the other information. The otherinformation comprises the information included in the Annual Report but does not includethe standalone financial statements and our auditor's report thereon. The Annual Report isexpected to be made available to us after the date of this auditor's report.

Our opinion on the standalone financial statements does not cover the other informationand we will 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 identified above when it becomes available and in doingso consider whether the other information is materially inconsistent with the standalonefinancial statements or our knowledge obtained in the audit or otherwise appears to bematerially misstated.

When we read the Annual Report if we conclude that there is a material misstatementtherein we are required to communicate the matter to those charged with governance

Responsibilities of Management and Those Charged with Governance for the StandaloneFinancial Statements

7. 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 state of affairs (financial position) profit orloss (financial performance including other comprehensive income) changes in equity andcash flows of the Company in accordance with the accounting principles generally acceptedin India including the Ind AS specified under section 133 of the Act. This responsibilityalso includes maintenance of adequate accounting records in accordance with the provisionsof the 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 standalone financialstatements that give a true and fair view and are free from material misstatement whetherdue to fraud or error.

8. 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.

9. Those Board of Directors are also responsible for overseeing the Company's financialreporting process.

Auditor's Responsibilities for the Audit of the Standalone Financial Statements

10. 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 Standards on Auditing will always detect a material misstatement when it exists.Misstatements can arise from fraud or error and are considered material if individuallyor in the aggregate they could reasonably be expected to influence the economic decisionsof users taken on the basis of these standalone financial statements.

11. As part of an audit in accordance with Standards on Auditing we exerciseprofessional judgment and maintain 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 system in place and the operating effectiveness ofsuch 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.

12. We communicate with those charged with governance regarding among other mattersthe planned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit.

13. We also provide those charged with governance with a statement that we havecomplied with relevant ethical requirements regarding independence and to communicatewith them all relationships and other matters that may reasonably be thought to bear onour independence and where applicable related safeguards.

14. From the matters communicated with those charged with governance we determinethose matters that were of most significance in the audit of the standalone financialstatements of the current period and are therefore the key audit matters. We describethese matters in our auditor's report unless law or regulation precludes public disclosureabout the matter or when in extremely rare circumstances we determine that a mattershould not be communicated in our report because the adverse consequences of doing sowould reasonably be expected to outweigh the public interest benefits of suchcommunication.

Report on Other Legal and Regulatory Requirements

15. As required by section 197(16) of the Act we report that the Company has paidremuneration to its directors during the year in accordance with the provisions of andlimits laid down under section 197 read with Schedule V to the Act.

16. As required by the Companies (Auditor's Report) Order 2016 (‘the Order')issued by the Central Government of India in terms of section 143(11) of the Act we givein the Annexure Aa statement on the matters specified in paragraphs 3 and 4 of the Order.

17. Further to our comments in Annexure A as required by section 143(3) of the Act wereport 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 it appears from our examination of those books;

c) the standalone financial statements dealt with by this report are in agreement withthe books of account;

d) in our opinion the aforesaid standalone financial statements comply with Ind ASspecified under section 133 of the Act;

e) on the basis of the written representations received from the directors and taken onrecord by the Board of Directors none of the directors is disqualified as on 31 March2019 from being appointed as a director in terms of section 164(2) of the Act;

f) we have also audited the internal financial controls over financial reporting(IFCoFR) of the Company as on 31 March 2019 in conjunction with our audit of thestandalone financial statements of the Company for the year ended on that date and ourreport dated 17 May 2019 as per Annexure B expressed an unmodified opinion;

g) with respect to the other matters to be included in the Auditor's Report inaccordance with rule 11 of the Companies (Audit and Auditors) Rules 2014 (as amended) inour opinion and to the best of our information and according to the explanations given tous:

i. the Company does not have any pending litigation which would impact its financialposition as at 31 March 2019;

ii. the Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses as at 31 March 2019;

iii. there were no amounts which were required to be transferred to the InvestorEducation and Protection Fund by the Company during the year ended 31 March 2019;

iv. the disclosure requirements relating to holdings as well as dealings in specifiedbank notes were applicable for the period from 8 November 2016 to 30 December 2016 whichare not relevant to these standalone financial statements. Hence reporting under thisclause is not applicable.

For Walker Chandiok & Co LLP
Chartered Accountants
Firm's Registration No.: 001076N/N500013
Place: Chennai Sumesh E S
Date: May 17 2019 Partner
Membership No.: 206931

Annexure A

Based on the audit procedures performed for the purpose of reporting a true and fairview on the financial statements of the Company and taking into consideration theinformation and explanations given to us and the books of account and other recordsexamined by us in the normal course of audit and to the best of our knowledge and beliefwe report that:

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

(b) The Company has a regular program of physical verification of its fixed assetsunder which fixed assets are verified in a phased manner over a period of two yearswhich in our opinion is reasonable having regard to the size of the Company and thenature of its assets. In accordance with this program certain fixed assets were verifiedduring the year and no material discrepancies were noticed on such verification

(c) The Company does not hold any immovable property (in the nature of ‘fixedassets'). Accordingly the provisions of clause 3(i) (c) of the Order are not applicable.

(ii) The Company does not have any inventory. Accordingly the provisions of clause3(ii) of the Order are not applicable.

(iii) The Company has not granted any loan secured or unsecured to companies firmsLimited Liability Partnerships (LLPs) or other parties covered in the register maintainedunder Section 189 of the Act. Accordingly the provisions of clauses 3(iii)(a) 3(iii)(b)and 3(iii)(c) of the Order are not applicable.

(iv) In our opinion the Company has not entered into any transaction covered underSections 185 and 186 of the Act. Accordingly the provisions of clause 3(iv) of the Orderare not applicable.

(V) In our opinion the company has not accepted any deposits within the meaning ofSection 73 to 76 of the Act and the companies (Acceptance of Deposits) Rules 2014 (asamended). Accordingly the provisions of clause 3(v) of the order are not applicable

(vi) The Central Government has not specified maintenance of cost records undersub-section (1) of Section 148 of the Act in respect of Company's services. Accordinglythe provisions of clause 3(vi) of the Order are not applicable.

(vii) (a) The Company is regular in depositing undisputed statutory dues includingprovident fund employees' state insurance income-tax sales-tax service tax duty ofcustoms duty of excise value added tax cess and other material statutory dues asapplicable to the appropriate authorities. Further no undisputed amounts payable inrespect thereof were outstanding at the year-end for a period of more than six months fromthe date they become payable.

(b) There are no dues in respect of income-tax sales tax service tax duty ofcustoms duty of excise and value added tax that have not been deposited with theappropriate authorities on account of any dispute.

(viii) The Company has not defaulted in repayment of loans or borrowings to any bank orfinancial institution or government during the year. The Company did not have anyoutstanding debentures during the year.

(ix) In our opinion the Company has applied moneys raised by way of term loans for thepurposes for which these were raised. The Company did not raise moneys by way of initialpublic offer/ further public offer (including debt instruments) during the year

(x) No fraud by the Company or on the company by its officers or employees has beennoticed or reported during the period covered by our audit.

(xi) Managerial remuneration has been paid / provided by the company in accordance withthe requisite approvals mandated by the provisions of Section 197 of the Act read withSchedule V to the Act.

(xii) In our opinion the Company is not a Nidhi Company. Accordingly provisions ofclause 3(xii) of the Order are not applicable.

(xiii) In our opinion all transactions with the related parties are in compliance withSections 177 and 188 of Act where applicable and the requisite details have beendisclosed in the financial statements etc. as required by the applicable Ind AS.

(xiv) During the year the company has not made any preferential allotment or privateplacement of shares or fully or partly convertible debentures.

(xv) In our opinion the company has not entered into any non-cash transactions withthe directors or persons connected with them covered under Section 192 of the Act.

(xvi) The company is not required to be registered under Section 45-IA of the ReserveBank of India Act 1934.

For Walker Chandiok & Co LLP
Chartered Accountants
Firm's Registration No.: 001076N/N500013
Place: Chennai Sumesh E S
Date: May 17 2019 Partner
Membership No.: 206931

Annexure B

Independent Auditor's Report on the Internal Financial Controls under Clause (i) ofSub-section 3 of Section 143 of the Companies Act 2013 (‘the Act')

1. In conjunction with our audit of the standalone financial statements of AllsecTechnologies Limited (‘the Company') as at and for the year ended 31 March 2019 wehave audited the internal financial controls over financial reporting (‘IFCoFR') ofthe Company as at that date.

Management's Responsibility for Internal Financial Controls

2. The Company's Board of Directors is responsible for establishing and maintaininginternal financial controls based on the internal control over financial reportingcriteria established by the Company considering the essential components of internalcontrol stated in the Guidance Note on Audit of Internal Financial Controls Over FinancialReporting (the “Guidance Note”) issued by the Institute of Chartered Accountantsof India (ICAI). These responsibilities include the designimplementation and maintenanceof adequate internal financial controls that were operating effectively for ensuring theorderly and efficient conduct of the Company's business including adherence totheCompany's policies the safeguarding of its assets the prevention and detection of fraudsand errors the accuracy and completeness of the accounting records and the timelypreparation of reliable financial information as required under the Act.

Auditor's Responsibility

3. Our responsibility is to express an opinion on the Company's IFCoFR based on ouraudit. We conducted our audit in accordance with the Standards on Auditing issued by ICAIand deemed to be prescribed under Section 143(10) of the Act to the extent applicable toan audit of IFCoFR and the Guidance Note issued by the ICAI. Those Standards and theGuidance Note require that we comply with ethical requirements and plan and perform theaudit to obtain reasonable assurance about whether adequate IFCoFR were established andmaintained and if such controls operated effectively in all material respects.

4. Our audit involves performing procedures to obtain audit evidence about the adequacyof the IFCoFR and their operating effectiveness.Our audit of IFCoFR includes obtaining anunderstanding of IFCoFR 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 auditor's judgement including theassessment of the risks of material misstatement of the financial statements whether dueto fraud or error.

5. We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's IFCoFR.

Meaning of Internal Financial Controls over Financial Reporting

6. A company's IFCoFR is a process designed to provide reasonable assurance regardingthe reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles. A company'sIFCoFR include those policiesand procedures that (1) pertain to the maintenance of recordsthat in reasonable detailaccurately and fairly reflect the transactions and dispositionsof the assets of the company; (2) provide reasonable assurance that transactions arerecorded as necessary to permit preparation of financial statements in accordance withgenerally accepted accounting principles and that receipts and expenditures of thecompany are being made only in accordance with authorisations of management and directorsof the company; and (3) provide reasonable assurance regarding prevention or timelydetection of unauthorised acquisition use or disposition of the company's assets thatcould have a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls over Financial Reporting

7. Because of the inherent limitations of IFCoFR includingthe possibility of collusionor improper management override of controls material misstatements due to error or fraudmay occur and not be detected. Also projections of any evaluation of the IFCoFR to futureperiods are subject to the risk that the IFCoFR may become inadequate because of changesin conditions or that the degree of compliance with the policies or procedures maydeteriorate.

Opinion

8. In our opinion the Company has in all material respects adequate internalfinancial controls over financial reporting and such controls were operating effectivelyas at 31 March 2019 based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note issued by the ICAI.

For Walker Chandiok & Co LLP
Chartered Accountants
Firm's Registration No.: 001076N/N500013
Place: Chennai Sumesh E S
Date: May 17 2019 Partner
Membership No.: 206931


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