To the Members of Credit Access Grameen Limited (formerly known as Grameen KootaFinancial Services Private Limited)
Report on the Audit of the Ind AS Financial Statements
We have audited the accompanying Ind AS financial statements of Credit AccessGrameen Limited (formerly known as Grameen Koota Financial Services Private Limited)(the Company) which comprise the Balance sheet as at March 31 2019 theStatement of Profit and Loss including the statement of Other Comprehensive Income theCash Flow Statement and the Statement of Changes in Equity for the year then ended andnotes to the financial statements including a summary of significant accounting policiesand other explanatory information.
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid Ind AS financial statements give the information required bythe Companies 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 March 31 2019 its profit including othercomprehensive income its cash flows and the changes in equity for the year ended on thatdate.
Basis for Opinion
We conducted our audit of the Ind AS financial statements in accordance with theStandards on Auditing (Sas) as specified under section 143(10) of the Act. Ourresponsibilities under those Standards are further described in the Auditor'sResponsibilities for the Audit of the Ind AS Financial Statements' section of our report.We are independent of the Company in accordance with the Code of Ethics' issued bythe Institute of Chartered Accountants of India together with the ethical requirementsthat are relevant to our audit of the financial statements under the provisions of the Actand the Rules thereunder and we have fulfilled our other ethical responsibilities inaccordance with these requirements and the Code of Ethics. We believe that the auditevidence we have obtained is sufficient and appropriate to provide a basis for our auditopinion on the Ind AS financial statements.
Key Audit Matters
Key audit matters are those matters that in our professional judgement were of mostsignificance in our audit of the Ind AS financial statements for the financial year endedMarch 31 2019. These matters were addressed in the context of our audit of the Ind ASfinancial statements as a whole and in forming our opinion thereon and we do not providea separate opinion on these matters. For each matter below our description of how ouraudit addressed the matter is provided in that context.
We have determined the matters described below to be the key audit matters to becommunicated in our report. We have fulfilled the responsibilities described in theAuditor's responsibilities for the audit of the Ind AS financial statements section of ourreport including in relation to these matters. Accordingly our audit included theperformance of procedures designed to respond to our assessment of the risks of materialmisstatement of the Ind AS financial statements. The results of our audit proceduresincluding the procedures performed to address the matters below provide the basis for ouraudit opinion on the accompanying Ind AS financial statements.
|Key audit matters ||How our audit addressed the key audit matter |
|(a) Transition to Ind AS accounting framework (as described in note 40 of the Ind AS financial statements) || |
|In accordance with the roadmap for implementation of Ind AS for non-banking financial companies as announced by the Ministry of Corporate Affairs the Company has adopted Ind AS from April 1 2018 with an effective date of April 1 2017 for such transition. For periods up to and including the year ended March 31 2018 the Company had prepared and presented its financial statements in accordance with the erstwhile generally accepted accounting principles in India (Indian GAAP). In order to give effect of the transition to Ind AS these financial statements for the year ended March 31 2019 together with the comparative financial information for the previous year ended March 31 2018 and the transition date balance sheet as at April 1 2017 have been prepared under Ind AS. || Considered the Ind AS impact assessment performed by management to identify areas to be impacted on account of Ind AS transition. Also considered the changes made to the accounting policies in light of the requirements of the new framework. |
| || Understood the financial statement closure process and the additional controls (including IT controls) established by the Company for transition to Ind AS. |
| || Tested the accounting adjustments posted as at the transition date and in respect of the previous year to convert the financial information reported under erstwhile Indian GAAP to Ind AS. |
|The transition has involved significant changes in the Company's financial reporting processes including generation of reliable and supportable financial information. The transition has also required the management to exercise judgement in determining the impact of Ind AS on specific disclosure requirements prescribed under extant Reserve Bank of India (RBI) directions. || Assessed the judgement applied by the management in reporting of areas where the accounting treatment prescribed under Ind AS was different from the extant RBI directions and the impact of such differences on specific regulatory disclosures such as capital to risk- weighted assets ratio (CRAR) and net interest margin (NIM). |
|In view of the complexities in implementing Ind AS discussed above we have focused on this area in our audit. || Compared the disclosures included in the Ind AS financial statementsin respect of the previous periods presentedwith the requirements of Ind AS 101. |
|(b) Impairment of financial instruments (expected credit losses) (as described in note 6 of the Ind AS financial statements) || |
|Ind AS 109 requires the Company to provide for impairment of its financial instruments using the expected credit loss (ECL) approach. ECL involves an estimation of probability-weighted loss on financial instruments over their life considering reasonable and supportable information about past events current conditions and forecasts of future economic conditions which could impact the credit quality of the Company's loans and advances. In the process a significant degree of judgement has been applied by the management in respect of following matters: || Our audit procedures included considering the Company's accounting policies for impairment of financial instruments and assessing compliance with the policies in terms of Ind AS 109. |
| || Engaged our specialists to review management's approach for calculating the impairment provision and assess the key assumptions i.e. Probability of Default (PD) and Loss Given Default (LGD) used to determine the impairment provision. |
|a) Defining thresholds for significant increase in credit risk' and default'. || Tested the assumptions used by the Company for grouping and staging of loan portfolio into various categories and default buckets for determining the PD and LGD rates. |
|b) Grouping of the loan portfolio under homogenous pools in order to determine probability of default on a collective basis. || Tested the operating effectiveness of the controls for staging of loans based on their past-due status.Tested a sample of performing (stage 1) loans to assess whether any loss indicators were present requiring them to be classified under stage 2 or 3. |
|c) Determining effect of less frequent past events on future probability of default. || |
|d) Estimation of management overlay for macro- economic factors which could impact the credit quality of the loans. || Tested the input data used for determining the PD and LGD rates and agreed the data with the underlying books of accounts and records. |
|Given the complexity and judgement involved in the estimation of expected credit losses we have considered this area as a key audit matter. || Tested the arithmetical accuracy of computation of ECL provision performed by the Company in spreadsheets. |
| || Tested assumptions used for management overlay in accordance with the governance framework approved by the Board of Directors. |
| || Compared the disclosures included in the Ind AS financial statements in respect of expected credit losses with the requirements of Ind AS 107 and 109. |
|(a) IT systems and controls || |
|We identified IT systems and controls over financial reporting as a key audit matter for the Company because its financial accounting and reporting systems are fundamentally reliant on IT systems and IT controls to process significant transaction volumes. Automated accounting procedures and IT environment controls which include IT governance general IT controls over program development and changes access to programs and data and IT operations are required to be designed and to operate effectively to ensure accurate financial reporting. ||For testing the IT general controls we included specialized IT auditors as part of our audit team. The specialized team also assisted in testing the information produced by the Company's IT systems. |
| ||We tested the design and operating effectiveness of the Company's IT access controls over the information systems that are critical to financial reporting. |
| ||We tested IT general controls (logical access changes management and aspects of IT operational controls). This included testing that requests for access to systems were appropriately reviewed and authorized. |
| ||We tested the Company's periodic review of access rights. We inspected requests of changes to systems for appropriate approval and authorization. We considered the control environment relating to various interfaces configuration and other application controls identified as key to our audit. |
| ||In addition to the above we tested the design and operating effectiveness of certain automated controls that were considered as key internal controls over financial reporting. |
| ||Where deficiencies were identified we tested compensating controls or performed alternate procedures. |
The Company's Board of Directors is responsible for the other information. The otherinformation comprises the annual report but does not include the Ind AS financialstatements and our auditor's report thereon. The Annual Report is expected to be madeavailable to us after the date of this auditor's report.
Our opinion on the Ind AS financial statements does not cover the other information andwe will not express any form of assurance conclusion thereon.
In connection with our audit of the Ind AS financial statements our responsibility isto read the other information identified above when it becomes available and in doing soconsider whether such other information is materially inconsistent with the Ind ASfinancial statements or our knowledge obtained in the audit or otherwise appears to bematerially misstated.
When we read such other information if we conclude that there is a materialmisstatement therein we are required to communicate the matter to those charged withgovernance and to comply with the relevant applicable requirements of the standard onauditing for auditor's responsibility in relation to other information in documentscontaining audited financial statements.
Responsibilities of Management and Those Charged with Governance for the Ind ASFinancial 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 Ind AS 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 accounting principles generally accepted in India including the IndianAccounting Standards (Ind AS) specified under section 133 of the Act read with theCompanies (Indian Accounting Standards) Rules 2015 as amended. This responsibility alsoincludes maintenance of adequate accounting records in accordance with the provisions ofthe Act for safeguarding of the assets of the Company and for preventing and detectingfrauds and other irregularities; selection and application of appropriate accountingpolicies; making judgements and estimates that are reasonable and prudent; and the 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 Ind AS financial statementsthat give a true and fair view and are free from material misstatement whether due tofraud or error.
In preparing the Ind AS financial statements management is responsible for assessingthe Company's ability to continue as a going concern disclosing as applicable mattersrelated to going concern and using the going concern basis of accounting unless managementeither intends to liquidate the Company or to cease operations or has no realisticalternative but to do so.
Those Charged with Governance are also responsible for overseeing the Company'sfinancial reporting process.
Auditor's Responsibilities for the Audit of the Ind AS Financial Statements
Our objectives are to obtain reasonable assurance about whether the Ind AS 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 Ind AS financial statements.
As part of an audit in accordance with SAs we exercise professional judgement andmaintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the Ind AS 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 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 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 Ind AS financialstatements including the disclosures and whether the Ind AS financial statementsrepresent 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 Ind AS financial statements forthe financial year ended March 31 2019 and are therefore the key audit matters. Wedescribe these matters in our auditor's report unless law or regulation precludes publicdisclosure about the matter or when in extremely rare circumstances we determine that amatter should not be communicated in our report because the adverse consequences of doingso would reasonably be expected to outweigh the public interest benefits of suchcommunication.
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 the Annexure 1a statement on the matters specified inparagraphs 3 and 4 of the Order.
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 including the Statement ofOther Comprehensive Income the Cash Flow Statement and Statement of Changes in Equitydealt with by this Report are in agreement with the books of account;
(d) In our opinion the aforesaid Ind AS financial statements comply with theAccounting Standards specified under Section 133 of the Act read with Companies (IndianAccounting Standards) Rules 2015 as amended;
(e) On the basis of the written representations received from the directors as on March31 2019 taken on record by the Board of Directors none of the directors is disqualifiedas on March 31 2019 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 with reference to these Ind AS financial statements and theoperating effectiveness of such controls refer to our separate Report in Annexure2 to this report;
(g) In our opinion the managerial remuneration for the year ended March 31 2019 hasbeen paid / provided by the Company to its directors in accordance with the provisions ofsection 197 read with Schedule V to 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 Ind AS financial statements Refer Note 30 to the Ind AS financialstatements;
ii. The Company did not have any long-term contracts including derivative contracts forwhich 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.
For S R Batliboi & Co. LLP
ICAI Firm Registration Number: 301003E/E300005
per Shrawan Jalan
Membership Number: 102102
May 8 2019
Annexure 1 referred to in paragraph 1 under the heading Report on other legal andregulatory requirements of our report of even date
Re: CA Grameen
(i) (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.
(b) Fixed assets have been physically verified by the management during the year and nomaterial discrepancies were identified on such verification.
(c) According to the information and explanations given by the management there are noimmovable properties included in property plant and equipment of the Company andaccordingly the requirements under clause 3(i)(c) of the Order are not applicable to theCompany.
(ii) The Company's business does not involve inventories and accordingly therequirements under clause 3(ii) of the Order are not applicable to the Company and hencenot commented upon.
(iii) According to the information and explanations given to us the Company has notgranted any loans secured or unsecured to companies firms limited liabilitypartnerships or other parties covered in the register maintained under section 189 of theAct. Accordingly the provisions of clause 3(iii) (a) (b) and (c) of the Order are notapplicable to the Company and hence not commented upon.
(iv) In our opinion and according to the information and explanations given to usthere are no loans investments guarantees and securities granted in respect of whichprovisions of section 185 and 186 of the Act are applicable and hence not commented upon.
(v) The Company has not accepted any deposits within the meaning of Sections 73 to 76of the Act and the Companies (Acceptance of Deposits) Rules 2014 (as amended).Accordingly the provisions of clause 3(v) of the Order are not applicable.
(vi) To the best of our knowledge and as explained the Central Government has notspecified the maintenance of cost records under section 148(1) of the Act for theservices of the Company.
(vii) (a) Undisputed statutory dues including provident fund employees' stateinsurance income-tax sales-tax service tax duty of customs duty of excise valueadded tax goods and service tax cess and other statutory dues have been regularlydeposited with the appropriate authorities.
According to the information and explanations given to us no undisputed amountspayable in respect of provident fund employees' state insurance income-tax service taxsales-tax duty of custom duty of excise value added tax goods and service taxcess andother statutory dues were outstanding at the year end for a period of more than sixmonths from the date they became payable.
(b) According to the information and explanations given to us there are no dues ofincome tax sales-taxservice tax customs duty excise duty value added tax goods andservice tax and cess which have not been deposited on account of any dispute.
(viii) In our opinion and according to the information and explanations given by themanagement the Company has not defaulted in repayment of loans or borrowings to afinancial institution or bank or dues to debenture holders.
(ix) In our opinion and according to the information and explanations given by themanagement the Company has utilised the monies raised by way of initial public offer inthe nature of equity shares for the purposes for which they were raised.
Further monies raised by the Company by way of term loans were applied for the purposefor which those were raised though idle/surplus funds which were not required forimmediate utilization were gainfully invested in liquid assets payable on demand.
(x) Based upon the audit procedures performed for the purpose of reporting the true andfair view of the Ind AS financial statements and according to the information andexplanations given by the management we report that no fraud by the Company or nomaterial fraud on the Company by the officers and employees of the Company has beennoticed or reported during the year.
(xi) According to the information and explanations given by the management themanagerial remuneration has been paid / provided in accordance with the requisiteapprovals mandated by the provisions of section 197 read with Schedule V to the Act.
(xii) In our opinion the Company is not a nidhi company. Therefore the provisions ofclause 3(xii) of the Order are not applicable to the Company and hence not commented upon.
(xiii) According to the information and explanations given by the managementtransactions with the related parties are in compliance with section 177 and 188 of theAct where applicable and the details have been disclosed in the notes to the Ind ASfinancial statements as required by the applicable accounting standards.
(xiv) According to the information and explanations given to us and on an overallexamination of the balance sheet the Company has not made any preferential allotment orprivate placement of shares or fully or partly convertible debentures during the yearunder review and hence reporting requirements under clause 3(xiv) are not applicable tothe Company.
(xv) According to the information and explanations given by the management the Companyhas not entered into any non-cash transactions with directors or persons connected withdirectors as referred to in section 192 of the Act.
(xvi) According to the information and explanations given to us we report that theCompany has registered as required under section 45-IA of the Reserve Bank of India Act1934.
For S R Batliboi & Co. LLP
ICAI Firm Registration Number: 301003E/E300005
per Shrawan Jalan
Membership Number: 102102
May 8 2019
Annexure 2 referred to in paragraph 2 (f) under the heading Report on other legaland regulatory requirements of our report of even date
Report on Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143of the Companies Act 2013 (the Act)
We have audited the internal financial controls over financial reporting ofCreditAccess Grameen Limited (the Company) as of March 31 2019 in conjunctionwith our audit of the Ind AS financial statements of the Company for the year ended onthat date.
Management's Responsibility for Internal Financial Controls
The Company's Management is responsible for establishing and maintaining internalfinancial controls based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal Financial Controls Over Financial Reportingissued by the Institute of Chartered Accountants of India. These responsibilities 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 the Company's policies the safeguarding of its assets theprevention and detection of frauds and errors the accuracy and completeness of theaccounting records and the timely preparation of reliable financial information asrequired under the Act.
Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting based on our audit. We conducted our audit in accordancewith the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting(the Guidance Note) and the Standards on Auditing as specified under section143(10) of the Act to the extent applicable to an audit of internal financial controlsand both issued by the Institute of Chartered Accountants of India. Those Standards andthe Guidance Note require that we comply with ethical requirements and plan and performthe audit to obtain reasonable assurance about whether adequate internal financialcontrols over financial reporting was established and maintained and if such controlsoperated 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 Ind AS 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 internal financial controls system overfinancial 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 Ind AS financial statements for external purposes in accordance withgenerally accepted accounting principles. A company's internal financial control overfinancial reporting includes those policies and procedures that (1) pertain to themaintenance of records that in reasonable detail accurately and fairly reflect thetransactions and dispositions of the assets of the company; (2) provide reasonableassurance that transactions are recorded as necessary to permit preparation of Ind ASfinancial 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 Ind ASfinancial 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 the Company has in all material respects an adequate internalfinancial controls system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at March 31 2019 based on theinternal control over financial reporting criteria 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.
For S R Batliboi & Co. LLP
ICAI Firm Registration Number: 301003E/E300005
per Shrawan Jalan
Membership Number: 102102
May 8 2019