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Sobha Ltd.

BSE: 532784 Sector: Infrastructure
NSE: SOBHA ISIN Code: INE671H01015
BSE 00:00 | 24 Apr 2020 Sobha Ltd
NSE 05:30 | 01 Jan 1970 Sobha Ltd

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OPEN 221.90
PREVIOUS CLOSE 213.75
VOLUME 18475
52-Week high 587.95
52-Week low 117.90
P/E 5.48
Mkt Cap.(Rs cr) 1,926
Buy Price 203.10
Buy Qty 100.00
Sell Price 203.10
Sell Qty 32.00
OPEN 221.90
CLOSE 213.75
VOLUME 18475
52-Week high 587.95
52-Week low 117.90
P/E 5.48
Mkt Cap.(Rs cr) 1,926
Buy Price 203.10
Buy Qty 100.00
Sell Price 203.10
Sell Qty 32.00

Sobha Ltd. (SOBHA) - Auditors Report


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Company auditors report

To the Members of Sobha Limited

Report on the Audit of the Standalone Financial Statements Opinion

We have audited the standalone financial statements of Sobha Limited ("theCompany") which comprise the standalone balance sheet as at 31 March 2019 and thestandalone statement of profit and loss (including other comprehensive income) standalonestatement of changes in equity and standalone statement of cash flows for the year thenended and notes to the standalone financial statements including a summary of thesignificant accounting policies and other explanatory information.

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 andfair view in conformity with the accounting principles generally accepted in India of thestate of affairs of the Company as at 31 March 2019 and profit and other comprehensiveincome changes in equity and its cash flows for the year ended on that date.

Basis for Opinion

We conducted our audit in accordance with the Standards on Auditing (SAs) specifiedunder section 143(10) of the Act. Our responsibilities under those SAs are furtherdescribed in the Auditor’s Responsibilities for the Audit of the StandaloneFinancial Statements section of our report. We are independent of the Company inaccordance with the Code of Ethics issued by the Institute of Chartered Accountants ofIndia together with the ethical requirements that are relevant to our audit of thestandalone financial statements under the provisions of the Act and the Rules thereunderand we have fulfilled our other ethical responsibilities in accordance with theserequirements and the Code of Ethics. We believe that the audit evidence we have obtainedis sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the standalone financial statements of the current period.These matters were addressed in the context of our audit of the standalone financialstatements as a whole and in forming our opinion thereon and we do not provide aseparate opinion on these matters.

A. Revenue recognition - refer note 2.2 (a) (ii)(a) to the standalone financialstatements

Key Audit Matter How the matter was addressed in our audit
Measurement of revenue recorded from sale of residential units Our audit procedures on revenue recognition included the following:
Revenues from sale of residential units represents the largest portion of the total revenues of the Company. • Evaluating that the Company's revenue recognition accounting policies are in line with the applicable accounting standards and their application to customer contracts including consistent application;

A. Revenue recognition (continued) - refer note 2.2 (a) (ii)(a) to the standalonefinancial statements

Key Audit Matter How the matter was addressed in our audit
Revenue is recognised upon transfer of control of residential units to customers for an amount that reflects the consideration which the Company expects to receive in exchange for those units. The point of revenue recognition is normally on handover of the unit to the customer on completion of the project post which the contract becomes non-cancellable by the parties. The Company records revenue at a point in time upon transfer of control of residential units to the customers. • Identify and test operating effectiveness of key controls around approvals of contracts milestone billing intimation of possession letters and controls over collection from customers;
• For samples selected verifying the underlying documents - handover letter sale agreement signed by the customer and the collections;
• Revenue recognition cut-off procedures for determination of revenue in the appropriate reporting period;
Due to the large volume of the Company's projects spread across different regions within the country and the competitive business environment there is a risk that revenue could be overstated (for example through premature revenue recognition i.e. recording revenue prior to handover of unit to the customers) or understated (for example through improperly shifting revenues to a later period) in order to present consistent financial results. Since revenue recognition has direct impact on the Company's profitability there is a possibility of management bias. • Conducting site visits during the year for selected projects to understand the scope nature and status of the projects and to assess the progress of the projects; and
• Considered the adequacy of the disclosures in note 2.2(a)(ii)(a) to the standalone financial statements in respect of the judgments taken in recognising revenue for residential units.
Measurement of revenue recorded over time which is dependent on the estimates of the costs to complete Our audit procedures on revenue recognition included the following:
Revenue recognition from contractual projects represents a significant portion of the total revenues of the Company. • Evaluating that the Company's revenue recognition accounting policies are in line with the applicable accounting standards and their application to customer contracts including consistent application;
Revenue recognition from contractual projects involves significant estimates related to measurement of costs to complete the projects. Revenue from projects is recorded based on management's assessment of the work completed costs incurred and accrued and the estimate of the balance costs to complete. • For samples selected during the year verifying the underlying documents - contracts entered into with customers invoices raised and collections from the customers;
• Review of the costs to complete workings comparing the costs to complete with the budgeted costs and inquiring into reasons for variance;

A. Revenue recognition (continued) - refer note 2.2 (a) (ii)(a) to the standalonefinancial statements

Key Audit Matter How the matter was addressed in our audit
Due to the inherent nature of the projects and significant judgment involved in the estimate of costs to complete there is risk of overstatement or understatement of revenue. • Sighting approvals for changes in budgeted costs with the rationale for the changes; and
• Assessment of nature of costs taken to inventory.

B. Inventories - refer note 3(b)(iii) to the standalone financial statements

Key Audit Matter How the matter was addressed in our audit
Assessment of net realisable value (NRV) of inventories Our audit procedures to assess the net realisable value (NRV) of inventories included the following:
Inventories comprising raw materials and components building materials land stock work- in-progress stock-in-trade flats and finished goods represents a significant portion of the Company's total assets. • Discussion with the management to understand the basis of calculation and justification for the estimated recoverable amounts of the unsold units ("the NRV assessment");
The Company recognises profit on each sale by reference to the overall project margin. A project comprises multiple units the construction of which can last a number of years. The recognition of profit for sale of a unit is therefore dependent on the estimate of future selling prices and construction costs. Further estimation uncertainty and exposure to cyclicality exists within long- term projects. • Evaluating the management's valuation methodology and assessing the key estimates data inputs and assumptions adopted in the valuations which included comparing expected future average selling prices with available market data such as recently transacted prices for similar properties located in the nearby vicinity of each property development project and the sales budget plans maintained by the Company; and
Forecasts of future sales are dependent on market conditions which can be difficult to predict and be influenced by political and economic factors. • Verifying the NRV assessment and comparing the estimated construction costs to complete each development with the Company's updated budgets.
Further due to their materiality in the context of total assets of the Company this is considered significant to our overall audit.

C. Land advances - refer note 3(b)(iii) to the standalone financial statements

Key Audit Matter How the matter was addressed in our audit
Assessment of recoverability of land advances Our audit procedures to assess the recoverability of land advances included the following:
Land advance represents a sizeable portion of the Company's total assets. • For our samples verified the underlying agreements in possession of the Company based on which land advances were given;

C. Land advances (continued) - refer note 3(b)(iii) to the standalone financialstatements

Key Audit Matter How the matter was addressed in our audit
Land advance represents the amount paid towards procurement of land parcels to be used in the future for construction of residential projects. These advances are carried at cost less impairment losses if any. These land advances will be converted into land parcels as per the terms of the underlying contracts under which these land advances have been given. To assess the carrying value of land advances these advances are tested for recoverability by the Company by comparing the valuation of land parcels in the same area for which land advances have been given. • Discussion with the management to understand their plan for conversion of these land advances into land parcels; and
• For our samples verified the valuation reports of land stock.
Further due to their materiality in the context of total assets of the Company this is considered significant to our overall audit.

D. Investment in subsidiaries - refer note 2.2(h) to the standalone financialstatements

Key Audit Matter How the matter was addressed in our audit
Assessment of impairment of investment Our audit procedures to assess recoverability included the following:
The carrying amount of the investments in subsidiaries held at cost less impairment represents a significant portion of the Company's total assets. • Comparing the carrying amount of investments in the Company's books with the relevant subsidiaries' audited balance sheet and joint venture's unaudited balance sheet to identify whether their net assets (being an approximation of their minimum recoverable amount) were in excess of their carrying amount;
The Company has investments in subsidiaries and a joint venture. These investments are carried at cost less any diminution in value of such investments. • Assess whether those subsidiaries and joint venture have historically been profit-making;
The investments are reviewed for impairment at each reporting date by comparing the carrying value of investments in the Company's books with the net assets of the relevant subsidiaries' and joint venture's balance sheet. Further the Company's review includes assessment of the projected cash flows of the real estate projects in these underlying entities which involve significant estimates and judgment due to the inherent uncertainty involved in forecasting future cash flows. There is significant judgment in estimating the timing of the cash flows and the appropriate discount rate. • For the investments where the carrying amount exceeded the Company's share in net asset value we compared the carrying amount of the investment with the projected cash flows and profitability based on approved business plans of the subsidiaries and joint venture; and
In addition considering the materiality of the investments in subsidiaries and joint venture vis-a-vis the total assets of the Company this is considered to be significant to our overall audit. • Considering the adequacy of disclosures in respect of the investment in subsidiaries and joint venture.

Information Other than the Standalone Financial Statements and Auditors’ ReportThereon

The Company's management and Board of Directors are responsible for the otherinformation. The other information comprises the information included in the Company'sannual report but does not include the financial statements and our auditors' reportthereon. The annual report is expected to be made available to us after the date of thisauditor's report.

Our opinion on the standalone financial statements does not cover the other informationand we do 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.

Management's Responsibility for the Standalone Financial Statements

The Company's management and Board of Directors are responsible for the matters statedin section 134(5) of the Act with respect to the preparation of these standalone financialstatements that give a true and fair view of the state of affairs profit/loss and othercomprehensive income changes in equity and cash flows of the Company in accordance withthe accounting principles generally accepted in India including the Indian AccountingStandards (Ind AS) specified under section 133 of the Act. 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 judgments and estimates that are reasonable and prudent; and designimplementation and maintenance of adequate internal financial controls that were operatingeffectively for ensuring the accuracy and completeness of the accounting records relevantto the preparation and presentation of the standalone financial statements that give atrue and fair view and are free from material misstatement whether due to fraud or error.

In preparing the standalone financial statements management and Board of Directors areresponsible 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.

The Board of Directors is also responsible for overseeing the Company's financialreporting process.

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

Our objectives are to obtain reasonable assurance about whether the standalonefinancial statements as a whole are free from material misstatement whether due to fraudor error and to issue an auditor's report that includes our opinion. Reasonable assuranceis a high level of assurance but is not a guarantee that an audit conducted in accordancewith SAs will always detect a material misstatement when it exists. Misstatements canarise from fraud or error and are considered material if individually or in theaggregate they could reasonably be expected to influence the economic decisions of userstaken on the basis of these standalone financial statements.

As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the standalonefinancial statements whether due to fraud or error design and perform audit proceduresresponsive to those risks and obtain audit evidence that is sufficient and appropriate toprovide a basis for our opinion. The risk of not detecting a material misstatementresulting from fraud is higher than for one resulting from error as fraud may involvecollusion forgery intentional omissions misrepresentations or the override of internalcontrol.

• Obtain an understanding of internal control relevant to the audit in order todesign audit procedures that are appropriate in the circumstances. Under section 143(3)(i)of the Act we are also responsible for expressing our opinion on whether the company hasadequate internal financial controls with reference to financial statements in place andthe operating effectiveness of such controls.

• Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management's use of the going concern basisof accounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the Company'sability to continue as a going concern. If we conclude that a material uncertainty existswe are required to draw attention in our auditor's report to the related disclosures inthe standalone financial statements or if such disclosures are inadequate to modify ouropinion. Our conclusions are based on the audit evidence obtained up to the date of ourauditor's report. However future events or conditions may cause the Company to cease tocontinue as a going concern.

• Evaluate the overall presentation structure and content of the standalonefinancial statements including the disclosures and whether the standalone financialstatements represent the underlying transactions and events in a manner that achieves fairpresentation.

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 standalone financial statementsof the current period and are therefore the key audit matters. We describe these mattersin our auditors' report unless law or regulation precludes public disclosure about thematter or 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

1. As required by the Companies (Auditors' Report) Order 2016 ("the Order")issued by the Central Government in terms of section 143 (11) of the Act we give in the"Annexure A" a statement on the matters specified in paragraphs 3 and 4 of theOrder to the extent applicable.

(A) 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 standalone balance sheet the standalone statement of profit and loss (includingother comprehensive income) the standalone statement of changes in equity and thestandalone statement of cash flows dealt with by this Report are in agreement with thebooks of account;

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

e) On the basis of the written representations received from the directors as on 31March 2019 taken on record by the Board of Directors none of the directors isdisqualified as on 31 March 2019 from being appointed as a director in terms of Section164(2) of the Act; and

f) 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 B".

(B) With respect to the other matters to be included in the Auditors' 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 as at 31 March 2019 onits financial position in its standalone financial statements - Refer Note 38 to thestandalone financial statements;

ii. The Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses;

iii. There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company ; and

iv. The disclosures in the standalone financial statements regarding holdings as wellas dealings in specified bank notes during the period from 8 November 2016 to 30 December2016 have not been made in these financial statements since they do not pertain to thefinancial year ended 31 March 2019.

(C) With respect to the matter to be included in the Auditors' Report under section197(16):

In our opinion and according to the information and explanations given to us theremuneration paid by the Company to its directors during the current year is in accordancewith the provisions of Section 197 of the Act. The remuneration paid to any director isnot in excess of the limit laid down under Section 197 of the Act. The Ministry ofCorporate Affairs has not prescribed other details under Section 197(16) which arerequired to be commented upon by us.

for B S R & Co. LLP

Chartered Accountants

ICAI Firm registration number: 101248W/W-100022

Supreet Sachdev

Partner

Membership number: 205385

Bangalore

17 May 2019

Annexure A to the Independent Auditors’ Report on the standalone financialstatements of Sobha Limited (‘the Company’)

The Annexure A referred to in our report to the members of the Company for the yearended 31 March 2019.

We report that:

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

(b) The Company has a regular programme of physical verification of its fixed assets bywhich all fixed assets are verified in a phased manner over a period of 3 years. In ouropinion this periodicity of physical verification is reasonable having regard to the sizeof the Company and the nature of its assets. Pursuant to the programme certain fixedassets were physically verified during the year. No material discrepancies were noticed onsuch verification.

(c) In our opinion and according to the information and explanations given to us and onthe basis of our examination of the records of the Company the title deeds of immovableproperties included in property plant and equipment are held in the name of the Company.

(ii) The inventory has been physically verified by the management during the year. Inour opinion the frequency of such verification is reasonable. The discrepancies noticedon verification between physical stock and the book records were not material.

(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 theCompanies Act 2013 ("the Act"). Accordingly the provisions of clause 3(iii)(a) (b) and (c) of the Order are not applicable to the Company.

(iv) In our opinion and according to the information and explanations given to us theCompany has complied with the provisions of Sections 185 and 186 of the Act with respectto investments made and guarantees given. Further there are no loans and security givenin respect of which provisions of Sections 185 and 186 of the Act are applicable.

(v) The Company has not accepted any deposits from the public within the meaning thedirectives issued by the Reserve Bank of India provisions of Section 73 to 76 of the Actany other relevant provisions of the Act and the relevant rules framed thereunder.

(vi) We have broadly reviewed the books of account maintained by the Company pursuantto the rules prescribed by the Central Government for maintenance of cost records underSection 148 of the Act in respect of the construction industry and are of the opinion thatprima facie the prescribed accounts and records have been made and maintained. Howeverwe have not made a detailed examination of the records.

(vii) (a) According to the information and explanations given to us and on the basis ofour examination of

the records of the Company amounts deducted / accrued in the books of account inrespect of undisputed statutory dues including provident fund employees state insuranceincome-tax goods and service tax duty of customs cess and any other material statutorydues have generally been regularly deposited with the appropriate authorities. Asexplained to us the Company did not have any dues on account of sales-tax service-taxduty of excise and value added tax during the year.

According to the information and explanations given to us no undisputed amountspayable in respect of provident fund employees state insurance income-tax goods andservice tax duty of customs cess and any other material statutory dues were in arrearsas at 31 March 2019 for a period of more than six months from the date they becamepayable. As explained to us the Company did not have any dues on account of sales-taxservice-tax duty of excise and value added tax during the year.

(b) According to the information and explanations given to us there are no dues ofincome tax or sales tax or service tax or value added tax or goods and service taxes orduty of customs or duty of excise which have not been deposited by the Company on accountof disputes except for the following:

Nature of statue Nature of dues Amount (Rs in

million) *

Period to which amount relates Forum where dispute is pending
Andhra Pradesh Sales Tax Act Basis of charge of sales tax 2.05 2002-05 High Court of Andhra Pradesh
Karnataka Sales Tax Act Basis of charge of sales tax 127.27 2007-08 High Court of Karnataka
Karnataka Sales Tax Act Basis of charge of sales tax 25.60 2008-09 High Court of Karnataka
Karnataka Sales Tax Act Basis of charge of sales tax 27.62 2009-10 High Court of Karnataka
Karnataka Sales Tax Act Basis of charge of sales tax 67.71 2010-11 High Court of Karnataka
Karnataka Sales Tax Act Basis of charge of sales tax 43.98 2011-12 High Court of Karnataka
Karnataka Sales Tax Act Basis of charge of sales tax 64.63 2013-14 High Court of Karnataka
Karnataka Sales Tax Act Basis of charge of sales tax 43.52 2014-15 High Court of Karnataka
Karnataka Sales Tax Act Basis of charge of sales tax 11.71 2012-13 High Court of Karnataka
Kerala Sales Tax Act Basis of charge of sales tax 29.66 2013-14 District Commissioner - (Appeals) Thiruvananthapuram
Kerala Sales Tax Act Basis of charge of sales tax 23.52 2011-12 District Commissioner - (Appeals) Thiruvananthapuram
Haryana Sales Tax Act Basis of charge of sales tax 1.28 2011-12 Commissioner Appeal Gurgaon
Maharashtra Value Added Tax Act Basis of charge of sales tax 5.87 2008-09 Joint Commissioner of Sales Tax appeal Pune
Maharashtra Value Added Tax Act Basis of charge of sales tax 6.22 2010-11 Joint Commissioner of Sales Tax appeal Pune
Maharashtra Value Added Tax Act Basis of charge of sales tax 2.91 2009-10 Joint Commissioner of Sales Tax appeal Pune
Maharashtra Value Added Tax Act Basis of charge of sales tax 1.43 2010-11 Joint Commissioner of Sales Tax appeal Pune
Maharashtra Value Added Tax Act Basis of charge of sales tax 0.34 2008-09 Joint Commissioner of Sales Tax appeal Pune
Maharashtra Value Added Tax Act Basis of charge of sales tax 0.38 2011-12 Commissioner of Central Tax Pune
Maharashtra Value Added Tax Act Basis of charge of sales tax 3.93 2013-14 Commissioner of Central Tax Pune
Kolkata Value Added Tax Act Basis of charge of sales tax 1.00 2009-10 West Bengal Commercial Taxes appellate Kolkata
Finance Act 1994 (service tax provisions) Disallowance 1.18 2002-07 Central Excise and Service Tax Appellate Tribunal Bangalore
Finance Act 1994 (service tax provisions) Service tax demand 370.46 2006-12 Central Excise and Service Tax Appellate Tribunal Bangalore
Finance Act 1994 (service tax provisions) Service tax demand 2.36 2006-12 Central Excise and Service Tax Appellate Tribunal Bhiwadi district
Finance Act 1994 (service tax provisions) Service tax demand 93.86 2008-16 Commissioner of Central Tax GST Commissioner Bangalore
Finance Act 1994 (service tax provisions) Service tax demand 0.33 2008-11 Commissioner of Central Excise and Service Tax (Appeals) Bangalore
Excise duty Excise duty demand 6 2013-15 Central Excise and Service Tax Appellate Tribunal Bangalore
Customs Act 1962 Differential tax treatment 1.27 2010-11 Central Excise and Service Tax Appellate Tribunal Bangalore
Income tax Act Disallowance 108.05 2005-08 Assistant Commissioner of Income tax Bangalore
Income tax Act Disallowance 72.06 2007-15 Income Tax Appellate Tribunal Bangalore

* Net of ' 543.01 million in total paid under protest

(viii) In our opinion and according to the information and explanations given to usthe Company has not defaulted in repayment of loans or borrowings to financialinstitutions and banks and debenture holders during the year. The Company did not have anyoutstanding loans or borrowings from government during the year.

(ix) According to the information and explanations given to us and based on examinationof the records of the Company the term loans obtained during the year were applied forthe purpose for which they were obtained. The Company has not raised any money by way ofinitial public offer or further public offer (including debt instruments) during the year.

(x) According to the information and explanations given to us no material fraud on theCompany by its officers and employees or fraud by the Company has been noticed or reportedduring the course of our audit.

(xi) According to the information and explanations given to us and based on examinationof the records of the Company the Company has paid managerial remuneration in accordancewith the requisite approvals mandated by the provisions of Section 197 read with ScheduleV to the Act.

(xii) According to the information and explanations given to us in our opinion theCompany is not a Nidhi Company as prescribed under Section 406 of the Act.

(xiii) According to the information and explanations given to us and based on ourexamination of the records of the Company transactions with the related parties are incompliance with Sections 177 and 188 of the Act where applicable and details of alltransactions have been disclosed in the standalone financial statements as required by theapplicable accounting standards.

(xiv) According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not made preferential allotmentor private placement of shares or fully or partly convertible debentures during the year.

(xv) According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not entered into non-cashtransactions with directors or persons connected with him.

(xvi) According to the information and explanation given to us and in our opinion theCompany is not required to be registered under Section 45-IA of the Reserve Bank of IndiaAct 1934.

forB S R & Co. LLP

Chartered Accountants

ICAI Firm registration number: 101248W/W-100022

Supreet Sachdev

Partner

Membership number: 205385

Bangalore

17 May 2019

Annexure B to the Independent Auditors’ Report on the standalone financialstatements of Sobha Limited (‘the Company’) for the year ended 31 March 2019

Report on the internal financial controls with reference to the aforesaid standalonefinancial statements under Clause (i) of Sub-section 3 of Section 143 of the CompaniesAct 2013

(Referred to in paragraph (f) under ‘Report on Other Legal and RegulatoryRequirements’ section of our report of even date)

Opinion

We have audited the internal financial controls with reference to financial statementsof Sobha Limited ("the Company") as of 31 March 2019 in conjunction with ouraudit of the standalone financial statements of the Company for the year ended on thatdate.

In our opinion the Company has in all material respects adequate internal financialcontrols with reference to financial statements and such internal financial controls wereoperating effectively as at 31 March 2019 based on the internal financial controls withreference to financial statements criteria established by the Company considering theessential components of internal control stated in the Guidance Note on Audit of InternalFinancial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India (the "Guidance Note").

Management’s Responsibility for Internal Financial Controls

The Company's management and the Board of Directors are responsible for establishingand maintaining internal financial controls based on the internal financial controls withreference to financial statements criteria established by the Company considering theessential components of internal control stated in the Guidance Note. Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of its business including adherence to company's policies the safeguarding ofits assets the prevention and detection of frauds and errors the accuracy andcompleteness of the accounting records and the timely preparation of reliable financialinformation as required under the Companies Act 2013 (hereinafter referred to as"the Act").

Auditors’ Responsibility

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 prescribed undersection 143(10) of the Act to the extent applicable to an audit of internal financialcontrols with reference to financial statements. Those Standards and the Guidance Noterequire that we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether adequate internal financial controls with reference tofinancial statements were established and maintained and whether such controls operatedeffectively in all material respects.

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 such internal financial controlsassessing 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 standalone financial statements whether due to fraud orerror.

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 controls 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 controlswith reference to financial statements include those policies and procedures that (1)pertain to the maintenance of records that in reasonable detail accurately and fairlyreflect the transactions and dispositions of the assets of the company; (2) providereasonable assurance that transactions are recorded as necessary to permit preparation offinancial 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 financialstatements.

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 controls with reference to financial statements may become inadequatebecause of changes in conditions or that the degree of compliance with the policies orprocedures may deteriorate.

forB S R & Co. LLP

Chartered Accountants

ICAI Firm registration number: 101248W/W-100022

Supreet Sachdev

Partner

Membership number: 205385

Bangalore

17 May 2019


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