To The Members of JM Financial Limited
Report on the Audit of Standalone Financial Statements
We have audited the accompanying standalone financial statements of JMFinancial Limited (the "Company") which comprise the Balance Sheet as atMarch 31 2019 and the Statement of Profit and Loss (including other comprehensiveincome) the Cash Flow Statement and the Statement of Changes in Equity for the year thenended and a summary of significant accounting policies and other explanatory information(the "standalone financial statements"). In our opinion and to the best of ourinformation and according to the explanations given to us the aforesaid standalonefinancial statements give the information required by the Companies Act 2013 (the"Act") in the manner so required and give a true and fair view in conformitywith the Indian Accounting Standards prescribed under Section 133 of the Act read with theCompanies (Indian Accounting Standards) Rules 2015 as amended ("Ind AS") andother accounting principles generally accepted in India of the state of affairs of theCompany as at March 31 2019 and its profit total comprehensive income its cash flow andthe changes in equity for the year ended on that date.
Basis for Opinion
We conducted our audit of the standalone financial statements inaccordance with the Standards on Auditing specified under Section 143(10) of the Act(SAs). Our responsibilities under those Standards are further described in theAuditors' Responsibility for the Audit of the Standalone Financial Statements Sectionof our report. We are independent of the Company in accordance with the Code of Ethicsissued by the Institute of Chartered Accountants of India ICAI) together with the ethicalrequirements that are relevant to our audit of the standalone 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 obtained by us is sufficient and appropriate toprovide a basis for our audit opinion on the standalone financial statements.
Key Audit Matters
Key audit matters are those matters that in our professional judgmentwere of most significance in our audit of the standalone financial statements of thecurrent period. These matters were addressed in the context of our audit of thestandalone financial statements as a whole and in forming our opinion thereon and we donot provide a separate opinion on these matters. We have determined the matters describedbelow to be the key audit matters to be communicated in our report.
A. Application of new Accounting Standards (refer note 4 to thestandalone financial statements) Key Audit Matter Description
The Company has adopted Indian Accounting Standards (Ind AS) witheffect from April 1 2018 in terms of the Companies (Indian Accounting Standards) Rules2015 as amended. The transition date balance sheet as on April 1 2017 and thecomparative financial statements for the year ended March 31 2018 included in thesestandalone Ind AS financial statements is based on the statutory financial statementsprepared in accordance with the Companies (Accounting Standard) Rules 2006 and have beenrestated to comply with Ind AS. The application of mandatory and optional transitionaladjustment involves significant level of judgment by the management and there is asignificant increase in the disclosure requirements under Ind AS. Hence this has beenidentified as a key audit matter.
How the Key Audit Matter Was Addressed in the Audit
Obtained an understanding of the management's process and testedinternal controls in respect of identification and application of the differences betweenthe existing accounting policies and the requirements under Ind AS.
Evaluated the completeness of the adjustments identified by themanagement in terms of requirements of Ind AS.
Verified the basis and calculations of the material adjustments viz.fair valuation of certain financial assets and retrospective application of businesscombination.
B. Revenue recognition (refer note 24 to the standalone financialstatements) Key Audit Matter Description
Revenue from operations comprises of revenue from investment bankingservices which mainly includes lead manager's fee selling commission underwritingcommission fees for mergers acquisitions and advisory assignments and arranger'sfees for mobilising debt funds. Revenue is recognised when the services for thetransaction are determined to be completed or when specific obligation are determined tobe fulfilled as set forth under the terms of the engagement. The variety and number of theobligations within the contracts can make it complex and requires significant involvementof management to determine completion of the performance condition associated with therevenue. Due to this complexity and significant level of judgement involved this has beenidentified as a potential fraud risk and therefore a Key Audit Matter in respect ofstandalone financial statements.
How the Key Audit Matter Was Addressed in the Audit
The audit procedures performed included the following:
Obtained a detailed understanding and verified the design and testedeffectiveness of controls that the Company has established to determine the completion ofthe performance obligations for the purpose of revenue recognition including maintenanceof the Revenue Mandate Register.
For selected samples evaluated fulfilment of the performanceobligation as per the terms of contract with customers by verifying the supportingdocuments evidencing the completion of the performance conditions.
Verified the reconciliation between the revenue mandate registerprepared by the management and the financial ledger and journal entries posted to therevenue accounts.
Information Other than the Financial Statements and Auditors'Report Thereon
The Company's Board of Directors is responsible for the otherinformation. The other information comprises the information included in theDirector's report Management Discussion and Analysis and Corporate Governance Reportbut does not include the financial statements and our auditors' report thereon.
Our opinion on the financial statements does not cover the otherinformation and we do not and will not express any form of assurance conclusion thereon.
In connection with our audit of the standalone financial statementsour responsibility is to read the other information identified above when it becomesavailable and in doing so consider whether the other information is materiallyinconsistent with the financial statements or our knowledge obtained during the course ofour audit or otherwise appears to be materially misstated.
If based on the work we have performed on the other information thatwe obtained prior to the date of this auditor's report we conclude that there is amaterial misstatement of this other information we are required to report that fact. Wehave nothing to report in this regard.
Management's Responsibility for the Standalone FinancialStatements
The Company's Board of Directors is responsible for the mattersstated in Section 134(5) of the Act with respect to the preparation of these standalonefinancial statements that give a true and fair view of the financial position financialperformance (including other comprehensive income) cash flow and changes in equity of theCompany in accordance with the Ind AS and other accounting principles generally acceptedin India. This responsibility also includes maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding the assets of the Company andfor preventing and detecting frauds and other irregularities; selection and application ofappropriate accounting policies; making judgments and estimates that are reasonable andprudent; and design implementation and maintenance of adequate internal financialcontrols that were operating effectively for ensuring the accuracy and completeness ofthe accounting records relevant to the preparation and presentation of the financialstatement that give a true and fair view and are free from material misstatement whetherdue to fraud or error. In preparing the standalone financial statements management isresponsible for assessing the Company's ability to continue as a going concerndisclosing as applicable matters related to going concern and using the going concernbasis of accounting unless management either intends to liquidate the Company or to ceaseoperations or has no realistic alternative but to do so. Those Board of Directors arealso responsible for overseeing the Company's financial reporting process.
Auditors' Responsibility for the Audit of the Standalone FinancialStatements
Our objectives are to obtain reasonable assurance about whether thestandalone financial statements as a whole are free from material misstatement whetherdue to fraud or error and to issue an auditors' report that includes our opinion.Reasonable assurance is a high level of assurance but is not a guarantee that an auditconducted in accordance with SAs will always detect a material misstatement when itexists. Misstatements can arise from fraud or error and are considered material ifindividually or in the aggregate they could reasonably be expected to influence theeconomic decisions of users taken on the basis of these financial statements. As part ofan audit in accordance with SAs we exercise professional judgment and maintainprofessional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of thestandalone financial statements whether due to fraud or error design and perform auditprocedures responsive to those risks and obtain audit evidence that is sufficient andappropriate to provide a basis for our opinion. The risk of not detecting a materialmisstatement resulting from fraud is higher than for one resulting from error as fraudmay involve collusion forgery intentional omissions misrepresentations or the overrideof internal control.
Obtain an understanding of internal financial control relevant to theaudit in order to design audit procedures that are appropriate in the circumstances. UnderSection 143(3)(i) of the Act we are also responsible for expressing our opinion onwhether the company has adequate internal financial controls system in place and theoperating effectiveness of such controls.
Evaluate the appropriateness of accounting policies used and thereasonableness of accounting estimates and related disclosures made by the management.
Conclude on the appropriateness of management's use of the goingconcern basis of accounting and based on the audit evidence obtained whether a materialuncertainty exists related to events or conditions that may cast significant doubt on theCompany's ability to continue as a going concern. If we conclude that a materialuncertainty exists we are required to draw attention in our auditors' report to therelated disclosures in the standalone financial statements or if such disclosures areinadequate to modify our opinion. Our conclusions are based on the audit evidenceobtained up to the date of our auditors' report. However future events or conditionsmay cause the Company to cease to continue as a going concern.
Evaluate the overall presentation structure and content of thestandalone financial statements including the disclosures and whether the standalonefinancial statements represent the underlying transactions and events in a manner thatachieves fair presentation. Materiality is the magnitude of misstatements in thestandalone financial statements that individually or in aggregate makes it probable thatthe economic decisions of a reasonably knowledgeable user of the standalone financialstatements may be influenced. We consider quantitative materiality and qualitative factorsin (i) planning the scope of our audit work and in evaluating the results of our work; and(ii) to evaluate the effect of any identified misstatements in the standalone financialstatements.
We communicate with those charged with governance regarding amongother matters the planned scope and timing of the audit and significant audit findingsincluding any significant defficiencies in internal control that we identify during ouraudit. 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. From the matters communicatedwith those charged with governance we determine those matters that were of mostsignificance in the audit of the standalone financial statements of the current period andare therefore the key audit matters. We describe these matters in our auditors'report unless law or regulation precludes public disclosure about the matter or when inextremely rare circumstances we determine that a matter should not be communicated in ourreport because the adverse consequences of doing so would reasonably be expected tooutweigh the public interest benefits of such communication.
The comparative financial information of the Company for transitiondate opening balance sheet as at April 1 2017 included in these standalone financialstatements have been prepared after adjusting previously issued the standalone financialstatements prepared in accordance with the Companies (Accounting Standards) Rules 2006 tocomply with Ind AS. The previously issued standalone financial statements were audited bythe predecessor auditor whose report for the year ended March 31 2017 dated May 2 2017expressed an unmodified opinion on this standalone financial statements. Adjustments madeto the previously issued standalone financial statements to comply with Ind AS have beenaudited by us. Our opinion on the standalone financial statements is not modified inrespect of the above matter on the comparative financial information.
Report on Other Legal and Regulatory Requirements
1. As required by Section 143(3) of the Act based on our audit wereport that: (a) We have sought and obtained all the information and explanations which tothe best of our knowledge and belief were necessary for the purposes of our audit. (b) Inour opinion proper books of account as required by law relating to preparation of thestandalone financial statements have been kept by the Company so far as it appears fromour examination of those books. (c) The Balance Sheet the Statement of Profit and Loss(including Other Comprehensive Income) the Cash Flow Statement and Statement of Changesin Equity dealt with by this Report are in agreement with the relevant books of account.
(d) In our opinion the aforesaid standalone financial statementscomply with the Ind AS specified under Section 133 of the Act.
(e) On the basis of the written representations received from thedirectors of the Company and taken on record by the Board of Directors none of thedirectors is disqualified as on March 31 2019 from being appointed as a director in termsof Section 164 (2) of the Act.
(f) With respect to the adequacy of the internal financial controlsover financial reporting of the Company and the operating effectiveness of such controlsrefer to our separate Report in "Annexure A". Our report expresses an unmodifiedopinion on the adequacy and operating effectiveness of the Company's internalfinancial controls over financial reporting. (g) With respect to the other matters to beincluded in the Auditor's Report in accordance with the requirements of Section197(16) of the Act as amended in our opinion and to the best of our information andaccording to the explanations given to us the remuneration paid by the Company to itsdirectors during the year is in accordance with the provisions of Section 197 of the Act.
(h) With respect to the other matters to be included in theAuditors' Report in accordance with Rule 11 of the Companies (Audit and Auditors)Rules 2014 as amended in our opinion and to the best of our information and accordingto the explanations given to us:
i. the Company has disclosed the impact of pending litigations on itsfinancial position in its standalone financial statements (Refer note 33 to the standalonefinancial statements). ii. the Company did not have any long-term contracts includingderivative contracts as at the year-end for which there were any material foreseeablelosses. iii. there has been no delay in transferring amounts required to be transferredto the Investor Education and Protection Fund by the Company.
2. As required by the Companies (Auditor's Report) Order 2016(the "Order") issued by the Central Government in terms of Section 143(11) ofthe Act we give in "Annexure B" a statement on the matters specified inparagraphs 3 and 4 of the Order.
For Deloitte Haskins & Sells LLP
Chartered Accountants (Firm's Registration No.117366W/W-100018)
Abhijit A. Damle
(Partner) Mumbai dated: May 2 2019 (Membership No. 102912)