Report on the Audit of the Standalone Ind AS Financial Statements Opinion
We have audited the accompanying standalone financial statements of IndInfravit Trust (“the InvIT” or “the Trust”), which comprise the Balance Sheet as at 31 March 2019, the Statement of Profit and Loss including Other Comprehensive Income, the Statement of Cash Flows and the Statement of Changes in Unit Holders’ Equity for the period 7 March 2018 to 31 March 2019 (“the financial period”), the Statement of Net Assets at fair value as at 31 March 2019, the Statement of Total Returns at fair value, the Statement of Net Distributable Cash Flows for the financial period and notes to the standalone financial statements including a summary of significant accounting policies and other explanatory information (hereinafter referred to as “the standalone financial statements”)
In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone financial statements give the information required by the Securities and Exchange Board of India (Infrastructure Investment Trusts) Regulations, 2014 as amended from time to time including any guidelines and circulars issued thereunder (together referred to as the “SEBI InvIT Regulations”) in the manner so required and give a true and fair view in conformity with the Indian Accounting Standards prescribed under rule 2(1 )(a) of the Companies (Indian Accounting Standards) Rules, 2015, as amended (“Ind AS”) and other accounting principles generally accepted in India, of the state of affairs of the Trust as at 31 March 2019, its profit including other comprehensive income, its cash flows, changes in Unit holders’ equity for the financial period, the net assets as at 31 March 2019, the total returns and the net distributable cash flows for the financial period.
Basis for Opinion
We conducted our audit of the standalone financial statements in accordance with the Standards on Auditing (“SAs”) issued by the Institute of Chartered Accountants of India. Our responsibilities under those Standards are further described in the Auditor’s Responsibilities for the Audit of the Standalone Financial Statements section of this report. We are independent of the Trust in accordance with the code of ethics issued by the Institute of Chartered Accountants of India together with the ethical requirements that are relevant to our audit of the standalone financial statements under the provisions of the SEBI InvIT Regulations and we have fulfilled our other ethical responsibilities in accordance with these requirements and the code of ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion on the standalone financial statements.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the standalone financial statements of the financial period. These matters were addressed in the context of our audit of the standalone financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have determined the matters described below to be the key audit matters to be communicated in our report.
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Key Audit Matter
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Auditor’s Response
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Impairment of investments in equity shares of subsidiaries
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The assessment of impairment loss involves management estimates and judgement which may affect the outcome of the assessment. These estimates and judgements include future cash flows from the operations of the investee entities, discounting rates, operating expenses which are considered in assessing whether a diminution in the value of investments is other than temporary in nature.
There is an inherent risk in the valuation of investment due to the use of estimates and judgements mentioned above.
Therefore, impairment of investments in equity shares of investee entities is considered as a Key Audit Matter.
Refer Note 2.13 for the accounting policy on impairment of investments, note 3 for investments as at 31 March 2019 in the standalone financial statements
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Our audit procedures included the following:
assessing the appropriateness of the Trust’s valuation methodology applied in determining the recoverable amount of investments. In making this assessment, we also evaluated the objectivity, independence and competency of specialists involved in the process;
assessing the assumptions around the key drivers of the revenue projections, future cash flow, discount rates / weighted average cost of capital that were used by the experts in determining recoverable amount; discussing key drivers for valuation with LTIDPL IndvIT Services Limited (“Investment Manager”) in order to evaluate whether the inputs and assumptions used in the cash flow projections were appropriate; performing sensitivity analysis of key assumptions to understand the scenarios incase of changes to key assumptions; test the arithmetical accuracy of the model.
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Information Other than the Standalone Financial Statements and Auditor’s Report there on
The Board of Directors of Investment Manager is responsible for the preparation of the other information. The other information comprises the information included in the Report of Investment Manager including annexures to Investment Manager’s Report and other information as required to be given by SEBI InvIT Regulations, but does not include the standalone financial statements and our report thereon.
Our opinion on the standalone financial statements does not cover the other information and we do not express any form of assurance conclusion there on.
In connection with our audit of the standalone financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the standalone financial statements or our knowledge obtained during the course of our audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Board of Directors of Investment Manager for the Standalone Financial Statements
The Board of Directors of Investment Manager is responsible for the preparation of these standalone financial statements that give a true and fair view of the financial position as at 31 March 2019, financial performance including other comprehensive income, cash flows and changes in unit holders’ equity for the period 7 March 2018 to 31 March 2019, the net assets as at 31 March 2019, the total returns and the net distributable cash flows of the Trust for the period 7 March 2018 to 31 March 2019 in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards specified under Rule 2(1)(a) of Companies (Indian Accounting Standards) Rules, 2015, as amended and relevant rules issued thereunder read with the SEBI InvIT Regulations. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the SEBI InvIT Regulations for safeguarding of the assets of the Trust and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgements and estimates that are reasonable and prudent; and for ensuring the accuracy and completeness of accounting records, relevant to the preparation and presentation of the standalone financial statements that give a true and fair view and are free from material misstatement, whether due to fraud and error.
In preparing the standalone financial statements, the Board of Directors of Investment Manager is responsible for assessing the Trust’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board of Directors of Investment Manager either intends to liquidate the Trust or to cease operations, or has no realistic alternative but to do so.
The Board of Directors of Investment Manager are also responsible for overseeing the Trust’s financial reporting process.
Auditor’s Responsibility for the Audit of the Standalone Ind AS Financial Statements
Our objectives are to obtain reasonable assurance whether the standalone financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
- Identify and assess the risks of material misstatement of the standalone financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations or the override of internal control.
- Obtain an understanding of internal financial control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of such controls.
- Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by Board of Directors of Investment Manager.
- Conclude on the appropriateness of use of the going concern basis of accounting by the Board of Directors of Investment Manager and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Trust’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the 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’s report. However, future events or conditions may cause the Trust to cease to continue as a going concern.
- Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Materiality is the magnitude of misstatements in the standalone financial statements that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the financial statements may be influenced. We consider quantitative materiality and qualitative factors in (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 financial statements.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the standalone financial statements of the current period and are therefore the key audit matters. We describe these matters in our report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
Report on Other Legal and Regulatory Requirements
Based on our audit and as required by SEBI InvIT Regulations, we report that:
(a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit;
(b) In our opinion, proper books of accounts as required by law relating to preparation of the aforesaid standalone financial statements have been kept by the Trust so far as it appears from our examination of those books
(c) The Balance Sheet, the Statement of Profit and Loss, the Statement of Cash Flows, Statement of Changes in Unit Holder’s Equity, the Statement of Net Assets at fair value, the Statement of Total Returns at fair value and the Statement of Net Distributable Cash Flows dealt with by this Report are in agreement with the books of account of the Trust; and
(d) In our opinion, the aforesaid financial statements comply with the Indian Accounting Standards specified under Rule 2(1)(a) of Companies (Indian Accounting Standards) Rules, 2015, as amended.
Place for SHARP & TANNAN
Gurgaon Chartered Accountants
(Firm’s Registration No. 003792S)
Date 16 May 201
V. Viswanathan
Partner Membership No. 215565
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