To the Members of Ashika Credit Capital Limited
Report on the Audit of the Financial Statements Qualified
We have audited the accompanying financial statements of Ashika Credit Capital Limited("the Company") which comprise the Balance Sheet as at 31st March 2019 theStatement of Profit and Loss and the Cash Flow Statement for the year then ended and notesto the financial statements including a summary of significant accounting policies andother explanatory information.
In our opinion and to the best of our information and according to the explanationsgiven to us except for the effects of the mater described in the Basis for QualifiedOpinion section of our report the aforesaid financial statements give the informationrequired by the Companies Act 2013 ("the Act") in the manner so required andgive a true and fair view in conformity with the accounting principles generally acceptedin India of the state of affairs of the Company as at 31st March 2019 its profit andits cash flows for the year ended on that date.
Basis for Qualified Opinion
The Company is yet to fully comply with the requirements of Para 21 of the Non-BankingFinancial Company-Non Systemically Important Non-Deposit taking Company (Reserve Bank)Directions 2016 in respect of :-
a) Maintaining a Loan to Value (LTV) ratio of 50% for loans granted against thecollateral of shares and
b) Accepting only Group 1 securities (specified in SMD/Policy/Cir- 9/2003 dated March112003 as amended from time to time issued by SEBI) as collateral for loans of valuemore than C5 lakh.
The impact of the aforesaid if any on the financial statements cannot be ascertained.
We conducted our audit in accordance with the Standards on Auditing ('SAs') specifiedunder section 143(10) of the Act. Our responsibilities under those Standards are furtherdescribed in the Auditor's Responsibilities for the Audit of the Financial Statementssection of our report. We are independent of the Company in accordance with the Code ofEthics issued by the Institute of Chartered Accountants of India ('ICAI') together withthe ethical requirements that are relevant to our audit of the financial statements underthe provisions 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 qualified opinion.
Key Audit Matters
Key audit matters are those matters that in our professional judgement 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. Inaddition to the matter described in the Basis for Qualified Opinion section we havedetermined the matters described below to be the key audit matters to be communicated inour report.
|Kev Audit Matter ||Auditor's Response - Principal Audit Procedures |
|Compliance with the requirements of the Non- Banking Financial Company-Non Systemically Important Non-Deposit taking Company (Reserve Bank) Directions 2016 ||Our audit approach consisted testing of the design and operating effectiveness of the internal controls and substantive procedures as follows:- |
|The Company being an NBFC is governed by the aforesaid Directions of RBI and compliance with the same Is of paramount importance. The Prudential Regulations of the aforesaid Directions especially those relating to income recognition asset classification and provisioning have a direct bearing on the Company's results and financial position as reflected by the financial statements. ||- We assessed the Company's process to identify the impact of the Company coming within the purview of Para 21 of the said Directions and evaluated the design of internal controls put in place to ensure compliance with Para 21 norms. |
| ||- Selected a sample of continuing and new contracts in respect of loans against security of shares and tested the operating effectiveness of the internal controls relating to compliance with Para 21 norms of LTV etc. |
|Further Para 21 of the aforesaid Directions regarding "Loans against security of shares" has become applicable to the Company during the FY 2018-19 which has a critical impact on the business model of the Company as parameters like Loan to Value ratio and specified securities against which loan can be given have been specified by Para 21. || |
| ||- Tested the relevant information technology systems' access and change management controls relating to loan contracts and related information used in recording and disclosing income from these loans and any provisioning requirements in respect thereof. |
| ||- Selected a sample of continuing and new loan contracts and performed the following procedures: |
| || Read analysed and identified the distinct performance obligations in these contracts viz. payment of interest repayment of principal topping up of security in case LTV breached etc. |
| || Compared these performance obligations with that identified and recorded by the Company in the books of accounts |
| || In case performance obligations were not met whether the consequential impact as envisaged under income recognition asset classification and provisioning norms in the said Directions were reflected in the books of accounts by the Company. |
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 ManagementDiscussion and Analysis Board's Report including Annexures to Board's Report CorporateGovernance Report but does not include the financial statements and our auditor's reportthereon. Management Discussion and Analysis Board's Report including Annexures to Board'sReport and Corporate Governance Report are expected to be made available to us after thedate of this auditor's report.
Our opinion on the financial statements does not cover the other information and wewill not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements our responsibility is to readthe other information identified above when it becomes available and in doing soconsider whether the other information is materially inconsistent with the financialstatements or our knowledge obtained in the audit or otherwise appears to be materiallymisstated.
Responsibilities of Management and Those Charged with Governance for the FinancialStatements
The Company's Board of Directors is responsible for the matters stated in section134(5) of the Act with respect to the preparation of these financial statements that givea true and fair view of the financial position financial performance and cash flows ofthe Company in accordance with the accounting principles generally accepted in Indiaincluding the Accounting Standards specified under section 133 of the Act read withrelevant rules issued thereunder. This responsibility also includes maintenance ofadequate accounting records in accordance with the provisions of the Act for safeguardingthe assets of the Company and for preventing and detecting frauds and otherirregularities; selection and application of appropriate accounting policies; makingjudgements and estimates that are reasonable and prudent; and design implementation andmaintenance of adequate internal financial controls that were operating effectively forensuring the accuracy and completeness of the accounting records relevant to thepreparation and presentation of the financial statements that give a true and fair viewand are free from material misstatement whether due to fraud or error.
In preparing the financial statements the Board of Directors 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 unlessthe Board of Directors either intends to liquidate the Company or to cease operations orhas no realistic alternative but to do so.
Those Board of Directors are also responsible for overseeing the Company's financialreporting process.
Auditor's Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financialstatements as a whole are free from material misstatement whether due to fraud or errorand to issue an auditor's report that includes our opinion. Reasonable assurance is a highlevel of assurance but is not a guarantee that an audit conducted in accordance with SAswill always detect a material misstatement when it exists. Misstatements can arise fromfraud or error and are considered material if individually or in the aggregate theycould reasonably be expected to influence the economic decisions of users taken on thebasis of these financial statements. As part of an audit in accordance with SAs weexercise professional judgement and maintain professional skepticism throughout the audit.We also:
Identify and assess the risks of material misstatement of the financialstatements whether due to fraud or error design and perform audit procedures responsiveto those risks and obtain audit evidence that is sufficient and appropriate to provide abasis for our opinion. The risk of not detecting a material misstatement resulting fromfraud is higher than for one resulting from error as fraud may involve collusionforgery intentional omissions misrepresentations or the override of internal control.
Obtain an understanding of internal controls 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 financial statements or if such disclosures are inadequate to modify our opinion.Our conclusions are based on the audit evidence obtained up to the date of our auditor'sreport. However future events or conditions may cause the Company to cease to continue asa going concern.
Evaluate the overall presentation structure and content of the financialstatements including the disclosures and whether the financial statements represent theunderlying transactions and events in a manner that achieves fair presentation.
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 also provide those charged with governance with a statement that we have compliedwith relevant ethical requirements regarding independence and 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 Section 143 ofthe Act we give in "Annexure 1" a statement on the matters specified inparagraphs 3 and 4 of the Order to the extent applicable.
(2) 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 and the Cash Flow Statementdealt with by this Report are in agreement with the books of account;
d. In our opinion the aforesaid financial statements comply with the AccountingStandards specified under Section 133 of the Act read with Rule 7 of the Companies(Accounts) Rules 2014;
e. The matters described in the Basis for Qualified Opinion paragraph above in ouropinion may have an adverse effect on the functioning of the Company;
f. On the basis of the written representations received from the directors as on 31stMarch 2019 and taken on record by the Board of Directors none of the directors isdisqualified as on 31st March 2019 from being appointed as a director in terms of Section164 (2) of the Act;
g. The qualification relating to the maintenance of accounts and other mattersconnected therewith is as stated in the Basis for Qualified Opinion paragraph above.
h. 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 2";
i. 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 on its financialposition in its financial statements - Refer Note 22 to the financial statements;
(ii) The Company did not have any long-term contracts including derivative contractsfor which there were any material foreseeable losses;
(iii) There were no amounts which were required to be transferred to the InvestorEducation and Protection Fund by the Company.
(3) As required by Section 197(16) of the Act we report that 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.
ANNEXURE 1 TO THE INDEPENDENT AUDITOR'S REPORT
[Referred to in paragraph 1 under 'Report on Other Legal and Regulatory Requirements'in our Independent Auditor's Report of even date to the members of the Company on thefinancial statements for the year ended 31st March 2019]
(i) (a) The Company is maintaining proper records showing full particulars includingquantitative details and situation of fixed assets.
(b) According to the information and explanations given to us the Company's Management("management") physically verifies its fixed assets annually which in ouropinion is reasonable having regard to the size of the Company and the nature of itsassets. As informed no material discrepancies were noticed on such verification of fixedassets during the year.
(c) The title deeds of immovable properties recorded as fixed assets in the books ofaccount of the Company are held in the name of the Company except as detailed hereinbelow :-
|Land/ Building ||Total number of cases ||Leasehold/ Freehold ||Gross Block as at 31st March 2019 (H) ||Net Block as at 31st March 2019 (H) ||Remarks |
|Building ||1 ||Freehold ||1562394 ||1301746 ||Conveyance is pending |
(ii) The Company is a Non-Banking Finance Company ("NBFC") and it does nothold any inventory. Thus paragraph 3(ii) of the Order is not applicable.
(iii) The Company has granted unsecured loans to Companies covered in the registermaintained under Section 189 of the Act.
(a) According to the information and explanation given to us we are of the opinionthat the terms and conditions of the grant of the aforesaid loans are not prejudicial tothe Company's interest.
(b) The schedule of repayment of principal and payment of interest in respect of theaforesaid loans has been stipulated and the payment of interest is regular. As per theschedule of repayment of principal no amount was repayable as at 31st March 2019.
(c) There is no amount which is overdue in respect of the aforesaid loans.
(iv) According to the information and explanations given to us in respect of loansinvestments guarantees and security the Company has complied with the provisions ofsection 185 and 186 of the Act wherever applicable.
(v) According to the information and explanations given to us the Company has notaccepted any deposits from the public.
(vi) Being a Non-Banking Financial Company the provisions of clause 3(vi) of the Orderwith regard to the maintenance of cost records are not applicable to the Company.
(vii) (a) According to the records of the Company amounts deducted/accrued in thebooks of account in respect of undisputed statutory dues including provident fundemployees' state insurance income-tax goods and services tax cess and any othermaterial statutory dues have generally been regularly deposited with the appropriateauthorities.
According to the information and explanations given to us no undisputed amountspayable in respect of the aforesaid dues were in arrears as at 31st March 2019 for aperiod of more than six months from the date they became payable.
(b) According to the information and explanations given to us the dues as at 31stMarch 2019 of income-tax sales tax service tax duty of customs duty of excise valueadded tax and goods and services tax which have not been deposited on account of anydispute are as follows :
|Name of the Statute ||Nature of dues ||Amount (H) ||Period to which the amount relates (Financial Year) ||Forum where dispute is pending |
|Income Tax Act 1961 ||Income Tax ||34590 ||2014-15 ||CIT (Appeals) Kolkata |
(viii) Based on our audit procedures and as per the information and explanations givento us by the management we are of the opinion that during the year the Company has notdefaulted in repayment of loans or borrowings to a financial institution bank orGovernment. The Company has not issued any debentures as at the balance sheet date.
(ix) The Company has neither raised money by way of initial public offer or furtherpublic offer (including debt instruments) nor has obtained any term loans. Thereforeparagraph 3(ix) of the Order is not applicable to the Company.
(x) Based upon the audit procedures performed for the purpose of reporting the true andfair view of the financial statements and as per the information and explanations given tous by the management we report that we have neither come across any instance of fraud bythe Company or on the Company by its officers or employees noticed or reported during theyear nor have we been informed of any such case by the management.
(xi) According to the information and explanations given to us managerial remunerationhas been paid / provided in accordance with the requisite approvals mandated by theprovisions of Section 197 read with Schedule V to the Act.
(xii) The Company is not a Nidhi Company.
(xiii) According to the information and explanation given to us and based on ourexamination of the records of the Company transactions entered into by the Company withthe related parties are in compliance with Sections 177 and 188 of the Act whereapplicable and the details have been disclosed in the Financial Statements as required bythe applicable accounting standards.
(xiv) The Company had made preferential allotment of fully convertible equity warrantsduring the FY 2017-18 and pursuant to exercise of option by the warrant holder certainwarrants were converted into fully paid-up equity shares during the year under review.According to the information and explanations given to us the requirements of Section 42of the Act have been complied with and the amount raised has been used for the purposesfor which the funds were raised.
(xv) As per the information and explanations given to us the Company has not enteredinto any non-cash transactions during the year with directors or persons connected withthem.
(xvi) The Company is required to be registered under Section 45-IA of the Reserve Bankof India Act 1934 and the registration has been obtained.
ANNEXURE 2 TO THE INDEPENDENT AUDITOR'S REPORT
[Referred to in paragraph 2(h) under 'Report on Other Legal and RegulatoryRequirements' in our Independent Auditor's Report of even date to the members of theCompany on the financial statements for the year ended 31st March 2019]
Report on the Internal Financial Controls with reference to Financial Statements underClause (i) of Sub-section 3 of Section 143 of the Companies Act 2013 ("theAct")
We have audited the internal financial controls with reference to Financial Statementsof the Company as of 31st March 2019 in conjunction with our audit of the financialstatements of the Company for the year ended on that date.
Management's Responsibility for Internal Financial Controls
The Company's Board of Directors is responsible for establishing and maintaininginternal financial controls based on the internal control with reference to financialstatements criteria established by the Company considering the essential components ofinternal control stated in the Guidance Note on Audit of Internal Financial Controls OverFinancial Reporting (the"Guidance Note") issued by the Institute of CharteredAccountants of India ("ICAI"). These responsibilities include the designimplementation and maintenance of adequate internal financial controls that wereoperating 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 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 specified under section143(10) of the Act to the extent applicable to an audit of internal financial controlsboth issued by the ICAI. Those Standards and the Guidance Note require that we comply withethical requirements and plan and perform the audit to obtain reasonable assurance aboutwhether adequate internal financial controls with reference to financial statements wereestablished and maintained and if such controls operated effectively in all materialrespects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls with reference to financial statements and their operatingeffectiveness. Our audit of internal financial controls with reference to financialstatements included obtaining an understanding of internal financial controls withreference to financial statements assessing the risk that a material weakness exists andtesting and evaluating the design and operating effectiveness of internal control based onthe assessed risk. The procedures selected depend on the auditor's judgement includingthe assessment of the risks of material misstatement of the financial statements whetherdue 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 withreference to financial statements.
Meaning of Internal Financial Controls with reference to Financial Statements
A company's internal financial control 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 control withreference to financial statements includes those policies and procedures that (1) pertainto the maintenance of records that in reasonable detail accurately and fairly reflectthe 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) providereasonable assurance regarding prevention or timely detection of unauthorised acquisitionuse or disposition of the Company's assets that could have a material effect on thefinancial statements.
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 control with reference to financial statements may become inadequatebecause of changes in conditions or that the degree of compliance with the policies orprocedures may deteriorate.
In our opinion the Company has in all material respects an adequate internalfinancial controls with reference to financial statements and such internal financialcontrols with reference to financial statements were operating effectively as at 31stMarch 2019 based on the internal control with reference to financial statements criteriaestablished by the Company considering the essential components of internal controlstated in the Guidance Note issued by the ICAI.
| ||For Haribhakti & Co. LLP |
| ||Chartered Accountants |
| ||ICAI Firm Registration No. 103523W/ W100048 |
| ||Anand Kumar Jhunjhunwala |
|Kolkata ||Partner |
|22nd April 2019 ||Membership No. 056613 |