To the Members of Indiabulls Real Estate Limited
Report on the Audit of the Standalone Financial
1. We have audited the accompanying standalone financial statements of Indiabulls RealEstate Limited ('the Company') which comprise the Balance Sheet as at 31 March 2019 theStatement of Profit and Loss (including Other Comprehensive Income) the Cash FlowStatement and the Statement of Changes in Equity for the year then ended and a summary ofthe 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 fair viewin conformity with the accounting principles generally accepted in India including IndianAccounting Standards ('Ind AS') specified under section 133 of the Act of the state ofaffairs (financial position) of the Company as at 31 March 2019 and its profit (financialperformance including other comprehensive income) its cash flows and the changes inequity 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 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 ('I CAI') together withthe ethical requirements that are relevant to our audit of the financial statements underthe provisions of the Act and the rules thereunder and we have fulfilled our otherethical responsibilities in accordance with these requirements and the Code of Ethics. Webelieve that the audit evidence we have obtained is sufficient and appropriate to providea 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 financial statements as awhole and in forming our opinion thereon and we do not provide a separate opinion onthese matters.
5. We have determined the matters described below to be the key audit matters to becommunicated in our report.
|Key Audit Matter ||How our audit addressed the Key Audit Matter |
|Accounting for sale of stake in a subsidiary || |
|The Company's policies on the accounting for sale of investments is set out in note 5.6 to the standalone financial statements. ||Our audit procedures in relation to the accounting for sale of stake in a subsidiary included but not limited to the following: |
| || Understood the nature of transaction i.e. understanding of the contract terms of multiple agreements with respect to the sale and assessing the proposed accounting treatment in relation to the accounting policies and relevant Ind AS; |
|During the year the Company has executed definitive agreement to divest 100% stake in tranches in one of its wholly owned subsidiary and as part of said transaction during the year the Company has divested partial stake (through sale and buy back) in the said subsidiary which has resulted in loss of control. || |
| || Reviewed the management's process for review and implementation of such transactions; |
|The sale resulted in recognition of profit on sale of investments amounting to Rs 9787.59 lakhs as presented in note 25 to the standalone financial statements. || Tested the completeness and accuracy of the data used in the computation of profit on sale of investments and gain on fair valuation of the remaining stake; and |
|Investment held for remaining stake amounting to Rs 29216.56 lakhs is classified as 'Investments held for sale' as presented in note 18 to the standalone financial statements. This was fair valued on the basis of the agreed total sales consideration for the entity and has resulted in a gain on fair valuation of Rs 5489.80 lakhs as disclosed in note 18 to the standalone financial statements. || Ensured appropriate disclosures in the standalone financial statements with respect to sale of stake in the subsidiary. |
|Key Audit Matter ||How our audit addressed the Key Audit Matter |
|The above transaction required audit focus due to complex contractual terms multiple agreements (judgement involved) and due to the significant impact on standalone financial statement the matter has been considered to be of most significance to the audit and accordingly has been considered as a key audit matter for the current year audit. || |
|Impairment assessment of investments and loans made to its subsidiaries and joint ventures || |
|The Company's policies on the impairment assessment of the investments and loans is set out in note 5.12 to the standalone financial statements. ||Our procedures in relation to the impairment assessment of investments and loans included but not limited to the following: |
|The Company has made investments amounting to Rs 597518.31 lakhs and has || Assessed the appropriateness of the Company's accounting policy by comparing with applicable Ind AS. |
|given loans amounting to Rs 361000.12 lakhs to its subsidiaries and joint ventures as at 31 March 2019 as disclosed under the note 8A 8B and note 9B to the standalone financial statements. || We obtained an understanding of the management process for identification of possible impairment indicators and process performed by the management for impairment testing. |
| || Enquired of the management and understood the internal controls related to completeness of the list of loans and investment along with the process followed to recover/adjust these and assessed whether further provisioning is required. |
| || Performed test of details: |
| ||a. For all significant additions made during the year underlying supporting documents were verified to ensure that the transaction has been accurately recorded in the standalone financial statement; |
|Impairment assessment of these investments and loans is considered as a significant risk as there is a risk that recoverability of the investments and loans could not be established and potential impairment charge might be required to be recorded in the standalone financial statements. The recoverability of these investments is inherently subjective due to reliance on either the net worth of investee or valuations of the properties held or cash flow projections of real estate properties in these investee companies. ||b. For all significant investments and loans outstanding as at 31 March 2019 confirmations were circulated and received. Further all the significant reconciling items were tested; |
| ||c. All material investments and significant loans as at 31 March 2019 were discussed on case to case basis with the management for their plan of recovery/adjustment; |
|However due to their materiality in the context of the Company's financial statements as a whole and significant degree of judgement and subjectivity involved in the estimates and key assumptions used in determining the cash flows used in the impairment evaluation this is considered to be the area to be of most significance to the audit and accordingly has been considered as a key audit matter for the current year audit. ||d. Compared the carrying value of material investments and significant loans to the net assets of the underlying entity to identify whether the net assets being an approximation of their minimum recoverable amount were in excess of their carrying amount; and |
| ||e. Wherever the net assets were lower than the recoverable amount for material amounts: |
| ||i. We obtained and verified the management certified cash flow projections of real estate properties and tested the underlying assumptions used by the management in arriving at those projections; |
| ||ii. We challenged the managements on the underlying assumptions used for the cash flow projections considering evidence available to support these assumptions and our understanding of the business; |
| ||iii. We obtained and verified the valuation of land parcels as per the government prescribed circle rates; and |
| ||iv. We assessed the appropriateness and adequacy of the disclosures made by the management for the impairment losses recognized in accordance with applicable accounting standards. |
Information other than the 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 financial statements and our auditor's report thereon. The Annual Report is expectedto be made available to us after the date 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.
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 financial statements thatgive a true and fair view and are free from material misstatement whether due to fraud orerror.
8. In preparing the financial statements management is responsible for assessing theCompany'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.
9. Those Board of Directors are also responsible for overseeing the Company's financialreporting process.
Auditor's Responsibilities for the Audit of the Financial
10. 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 withStandards 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 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 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; and
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.
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 financial statements ofthe current period and are therefore the key audit matters. We describe these matters inour auditor's report unless law or regulation precludes public disclosure about the matteror 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
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 bythe Central Government of India in terms of section 143(11) of the Act we give in theAnnexure A a 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 23 April 2019 as per Annexure B expressed unmodified opinion; and
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 as detailed in note 38A to the standalone financial statements hasdisclosed the impact of pending litigations on its financial position 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 has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company during the year ended 31 March2019; and
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
Firm's Registration No.: 001076N/N500013
Membership No.: 502103
Date: 23 April 2019
Annexure A to the Independent Auditor's Report of even date to the members ofIndiabulls Real Estate Limited on the standalone financial statements for the year ended31 March 2019
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 including quantitative details and situation of propertyplant and equipment and intangible assets.
(b) The property plant and equipment have been physically verified by the managementduring the year and no material discrepancies were noticed on such verification. In ouropinion the frequency of verification of the property plant and equipment is reasonablehaving regard to the size of the Company and the nature of its assets.
(c) The Company does not hold any immovable property (in the nature of 'property plantand equipment'). Accordingly the provisions of clause 3(i)(c) of the Order are notapplicable.
(ii) In our opinion the management has conducted physical verification of inventory atreasonable intervals during the year and no material discrepancies between physicalinventory and book records were noticed on physical verification.
(iii) The Company has granted interest free as well as interest bearing unsecured loansto companies covered in the register maintained under Section 189 of the Act; and withrespect to the same:
(a) in our opinion the terms and conditions of grant of such loans are not primafacie prejudicial to the Company's interest.
(b) the schedule of repayment of principal has been stipulated wherein the principalamounts are repayable on demand and since the repayment of such loans has not beendemanded in our opinion repayment of the principal amount and the interest are regularexcept for the loans given to the companies which are interest free; and
(c) there is no overdue amount in respect of loans granted to such companies.
(iv) In our opinion the Company has complied with the provisions of Sections 185 and186 of the Act in respect of loans investments guarantees and security.
(v) In our opinion the Company has not accepted any deposits within the meaning ofSections 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) We have broadly reviewed the books of account maintained by the Company pursuantto the Rules made by the Central Government for the maintenance of cost records undersub-section (1) of Section 148 of the Act in respect of Company's products/ services andare of the opinion that prima facie the prescribed accounts and records have been madeand maintained. However we have not made a detailed examination of the cost records witha view to determine whether they are accurate or complete.
(vii) (a) The Company is generally regular in depositing undisputed statutory duesincluding provident fund employees' state insurance income-tax sales-tax service taxduty of customs duty of excise value added tax goods and services tax cess and othermaterial statutory dues as applicable to the appropriate authorities. Further noundisputed amounts payable in respect thereof were outstanding at the year- end for aperiod of more than six months from the date they become payable.
(b) The dues outstanding in respect of income-tax sales- tax service-tax duty ofcustoms duty of excise and value added tax on account of any dispute are as follows:
Statement of Disputed Dues
|Name of the statute ||Nature of dues ||Amount (Rs in lakhs) ||Amount paidunder protest ||Period to which the amount relates ||Forum where dispute is pending |
| || || ||(Rs in lakhs) || || |
|Income-tax Act 1961 ||Disallowance under section 14A ||146.26 ||- ||Assessment Year 2009-10 ||Hon'ble High Court of Mumbai |
|Income-tax Act 1961 ||Disallowance under section 14A ||161.88 ||- ||Assessment Year 2010-11 ||Hon'ble High Court of Mumbai |
|Income-tax Act 1961 ||Disallowance under section 14A ||213.05 ||- ||Assessment Year 2011-12 ||Hon'ble High Court of Mumbai |
|Income-tax Act 1961 ||Disallowance under section 14A and interest under section 234C ||1272.21 || ||Assessment Year 2012-13 ||Income Tax Appellate Tribunal |
|Income-tax Act 1961 ||Disallowance of employee stock option expense under section 14A and section 32 ||247.66 || ||Assessment Year 2013-14 ||Commissioner of Income Tax (Appeals) |
|The Finance Act 2004 and Service tax rules ||Denial of service tax input credit ||1695.25 || ||Assessment year 2011-12 to 2014-15 ||Assistant Commissioner of Service Tax |
(viii) The Company has not defaulted in repayment of loans or borrowings to any bank orany dues to debenture-holders during the year. Further the Company has no loans orborrowings payable to financial institution or government during the year.
(ix) The Company did not raise moneys by way of initial public offer or further publicoffer (equity instruments). In our opinion the Company has applied money raised byissuance of nonconvertible debt instruments and the term loans for the purposes for whichthose were raised.
(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 and provided by the Company in accordancewith the requisite approvals mandated by the provisions of Section 197 of the Act readwith Schedule 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) As detailed in Note 44 to the financial statement the Company is not required tobe registered under Section 45-IA of the Reserve Bank of India Act 1934.
For Walker Chandiok & Co LLP
Firm's Registration No.: 001076N/N500013
Membership No.: 502103
Date: 23 April 2019
Annexure B to the Independent Auditor's Report of even date to the members ofIndiabulls Real Estate Limited on the standalone financial statements for the year ended31 March 2019
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 IndiabullsReal Estate Limited ('the Company') as at and for the year ended 31 March 2019 we haveaudited the internal financial controls over financial reporting ('IFCoFR') of the Companyas 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 Accountants of India(ICAI). These responsibilities include the design implementation and maintenance ofadequate internal financial controls that were operating effectively for ensuring theorderly and efficient conduct of the Company's business including adherence to theCompany'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.
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 theICAI and deemed to be prescribed under Section 143(10) of the Act to the extentapplicable to an audit of IFCoFR and the Guidance Note issued by the ICAI. ThoseStandards and the Guidance Note require that we comply with ethical requirements and planand perform the audit to obtain reasonable assurance about whether adequate IFCoFR wereestablished and maintained and if such controls operated effectively in all materialrespects.
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 policies and procedures that (1) pertain to the maintenance ofrecords that in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the company; (2) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles and that receipts andexpenditures of the company are being made only in accordance with authorisations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorised acquisition use or disposition of thecompany's assets that could 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 including the possibility ofcollusion or improper management override of controls material misstatements due to erroror fraud may occur and not be detected. Also projections of any evaluation of the IFCoFRto future periods are subject to the risk that the IFCoFR may become inadequate because ofchanges in conditions or that the degree of compliance with the policies or proceduresmay deteriorate.
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
Firm's Registration No.: 001076N/N500013
Membership No.: 502103
Date: 23 April 2019