ON STANDALONE FINANCIAL STATEMENTS
To,
The Unit holders of Shrem InvIT
Report on the Audit of Standalone Financial Statements
1. Opinion
We have audited the accompanying standalone financial statements of
Shrem InvIT ("the InvIT"), which comprises of Balance Sheet as at March 31,
2023, the Statement of Profit and Loss including Other Comprehensive Income, the Statement
of Changes in Unit holders Equity and the Statement of Cash Flow for the year ended
and the Statement of Net Assets at fair value as at March 31, 2023, the Statement of Total
Returns at fair value, the statement of Net Distributable Cash Flows(NDCFs) of the
InvIT for the year ended, and notes to the standalone financial statements, including a
summary of signifiicant 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 (the "InvIT Regulation") in the manner so
required and give a true and fair view in conformity with Indian Accounting Standards (Ind
AS) and any addendum thereto as defined in the Rule 2(1)(a) of the Companies (Indian
Accounting Standards) Rule, 2015 and other accounting principles generally accepted in
India, of the state of affairs of the InvIT as at March 31, 2023, its profit and total
comprehensive income,its statement of changes in unit holders equity, its cash flows
for the year ended March 31, 2023, its net assets at fair value as at March 31, 2023, its
total returns at fair value and Net Distributable Cash Flows of the InvIT for the year
ended March 31, 2023.
2. Basis for Opinion
We conducted our audit of the standalone financial statements in
accordance with the Standards on Auditing (SAs) issued by Institute of Chartered
Accountants of India ("ICAI"). Our responsibilities under those Standards are
further described in the ‘Auditors Responsibilities for the Audit of the
Standalone Financial Statements section of our report. We are independent of the InvIT in
accordance with the Code of Ethics issued by the ICAI together with ethical requirements
that are relevant to our audit of the standalone financial statement under provisions of
the InvIT Regulations and we have fulfilled our other ethical responsibilities in
accordance with the Code of Ethics. We believe that the audit evidence we have obtained is
suJicient and appropriate to provide a basis for our audit opinion on the standalone
financial statements.
3. Key Audit Matters
Key audit matters are those matters that, in our professional judgment,
were of most signifiicance in our audit of the standalone financial statements for the
financial year ended March 31, 2023. These matters were addressed in the context of our
audit of the standalone financial statements as a whole, and in forming our opinion
thereon, 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.
| Sr. Key Audit Matter |
Auditors Response |
| 1 Assessing Impairment of investments and loans to
subsidiary companies |
Our audit procedures included the following: |
| As at March 31, 2023 carrying values of InvITs
investment in subsidiaries amounted to Rs. 377,601.80 Lakhs and loans and advances is Rs.
23,016.34 lakhs |
- Assessed the appropriateness of the Trusts Valuation
Methodology applied in determining the recoverable amount. In making this assessment, we
also evaluated the objectivity, independence and competency of specialists involved in the
process; |
| Management reviews regularly whether there are any indicators
of impairment of such investments/ loans by reference to the requirements under Ind AS.
Management performs its impairment assessment by comparing the carrying value of these
investments/ loans made to their recoverable amount to determine whether impairment needs
to be recognized. |
|
|
- We obtained and read the valuation report of the
InvITs independent valuation expert and assessed the experts competence,
capability and objectivity. We tested completeness, arithmetical accuracy and validity of
the used in the calculations. data |
| The Assessment of Impairment loss involves management
estimates and judgments includes future cash flows from the operations of the
subsidiaries, discounting rate, operating expenses which are considered in assessing
whether a diminution in the value of investments/ recoverability of loans is other than
temporary in nature. |
- We have further assessed assumption around key drivers of
revenue projections, future cash flow, discount rate, weighted average cost of capital
(WACC) that were used by expert in determining recoverable amount including consideration
due to current economic and market condition. |
| Considering the judgment involved in determination of the
fair values due to inherent uncertainty and complexity of the assumption used in
determination of fair values, this is considered as key audit matter. |
- Asregardloansgrantedtosubsidiarycompanies, we have obtained
and considered management evaluations of recoverability of loans granted to its subsidiary
companies. |
| Refer note 2.3.4 for the accounting policy on impairment of
investment & note 3 for investment as at March 31, 2023. |
|
| 2 Computation and disclosures as prescribed in the InvIT
regulations relating to Statement of NetAssets and Total Returns at Fair Value |
Our audit procedures include the following- |
| As per the provisions of InvIT Regulations, the Trust is
required to disclose Statement of Net Assets at Fair Value and Statement of Total Returns
at Fair Value which requires fair valuation of assets. For this purpose, fair value is
determined by forecasting and discounting future cash flows. The inputs to the valuation
models are taken from observable markets wherever possible, but where this is not
feasible, a degree of judgment is required in establishing fair values. Judgments include
considerations of inputs such as WACC, Tax rates, Inflation rates etc. |
- Read the requirements of SEBI InvIT regulations for
disclosures relating to Statement of Net Assets at Fair Value and Statement of Total
Returns at Fair Value. |
|
- Assessed the appropriateness of independent valuers
and managements valuation methodology applied in determining the fair values. |
|
- Tested controls implemented by management to determine
inputs for fair valuation as well as assumptions used in the fair valuation. |
| Accordingly, the aforementioned computation and disclosures
are determined to be a key audit matter in our audit of the standalone financial
statements. |
- We have relied on the valuation report issued by the
independent valuer appointed by the Investment Manager in accordance with SEBI InvIT
Regulations. |
| 3 Related Party transactions and Disclosures |
Our audit procedures include the following |
| The InvIT has undertaken transactions with its related
parties in the normal course of business. |
- Obtained, read and assessed the InvITs Policies,
processes and procedures in respect of identifying related parties, obtaining necessary
approvals, recording and disclosure of related party transactions, including compliance of
transactions and disclosures in accordance with InvIT regulations. |
| These include giving loans to SPVs, interest on such loans,
investment in the financial instruments of the SPVs and interest thereon,
reimbursement of expenses incurred on behalf of such SPVs. |
|
| We have identifiied the accuracy and completeness of related
party transactions and its disclosure as a key audit matter due to the signifiicance of
transactions with related parties during the year ended March 31, 2023 and regulatory
compliance thereon. |
- Verifiied on sample basis the related party transactions
with the underlying contracts and other supporting documents for appropriate approval of
such transactions. |
|
- Reviewed minutes of Board of Directors and relevant
committee meetings in connection with transactions with related parties effected during
the year by the Trust. |
4. Information other than standalone financial statements and
Auditors report thereon
The Board of Directors of Shrem Financial Private Limited
(‘Investment Manager) is responsible for the other information. The other
information comprises the information included in the Annual
Report of the investment manager including the annexure to the
investment manager report and other information required to be given by SEBI InvIT
regulations, but does not include the standalone financial statements and our
auditors report thereon. The Annual Report is expected to be made available to us
after the date of this auditors report.
Our opinion on the standalone financial statements does not cover the
other information and we will not express any form of assurance conclusion thereon.
In connection with our audit of the standalone financial statements,
our responsibility is to read the other information identifiied above when it becomes
available 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. When we read the
other information, if we conclude that there is a material misstatement therein, we are
required to communicate the matter to those charged with governance and determine the
actions under the applicable laws and regulations.
5. Responsibilities of the Board of director of investment
manager for the Standalone Financial Statements
The Board of Directors of Shrem Financial Private Limited
(‘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 March
31, 2023, financial performance including other comprehensive income, movement of unit
holders equity and cash flows for the year ended march 31, 2023, and its total
returns at fair value and net distributable cash flows of the InvIT for the year ended
March 31, 2023 in accordance with the accounting principles generally accepted in India,
including the Indian Accounting Standards (Ind AS) and any addendum thereto as defined in
Rule 2(1)(a) of the Companies (Indian Accounting Standards) Rules, 2015, as amended read
with 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 ‘InvIT Regulations).
This responsibility also includes maintenance of adequate accounting
records in accordance with the provisions InvIT Regulations for safeguarding of the assets
of the InvIT and for preventing and detecting frauds and other irregularities; selection
and application of appropriate accounting policies; making judgments and estimates that
are reasonable and prudent; for ensuring the accuracy and completeness of the 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 or error.
In preparing the standalone financial statements, the board of
Directors of the investment manager is responsible for assessing the InvITs 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
either intends to liquidate the InvIT or to cease operations, or has no realistic
alternative but to do so.
The Board of Directors of the Investment Manager is also responsible
for overseeing the InvITs financial reporting process.
6. Auditors Responsibilities for the Audit of the
Standalone Financial Statements
Our objectives are to obtain reasonable assurance about whether the
standalone financial statements as a whole are free from material misstatement, whether
due 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 audit
conducted in accordance with Standards on auditing 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
standalone financial statements.
As part of an audit in accordance with Standards on auditing, we
exercise professional judgment and maintain professional skepticism throughout the audit.
We also:
i) 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 suJicient 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.
ii) Obtain an understanding of internal financial controls 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.
iii) Evaluate the appropriateness of accounting policies used and the
reasonableness of accounting estimates and related disclosures made by management.
iv) Conclude on the appropriateness of managements use of the
going concern basis of accounting and, based on the audit evidence obtained, whether a
material uncertainty exists related to events or conditions that may cast signifiicant
doubt on the ability of the Trust to continue as a going concern. If we conclude that a
material uncertainty exists, we are required to draw attention in our auditors
report to the related disclosures in the standalone 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 auditors report. However, future events or
conditions may cause the Trust to cease to continue as a going concern.
v) Evaluate the overall presentation, structure and content of the
standalone financial statements, including the disclosures, and whether the standalone
financial statements represent the underlying transactions and events in a manner that
achieves fair presentation.
We communicate with those charged with governance regarding, among
other matters, the planned scope and timing of the audit and signifiicant audit findings,
including any signifiicant 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 signifiicance 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 auditors 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.
7. Report on Other Legal and Regulatory Requirements
Based on our audit and as required by InvIT Regulations, we report
that:
a) We have obtained all the information and explanations which, to the
best of our knowledge and belief were necessary for the purpose of our audit;
b) In our opinion, proper books of accounts as required relating to
preparation of the aforesaid standalone financial statements have been kept by the Trust
so far as it appears from our examination of these books:
c) The balance sheet, and statement of profit and loss including other
comprehensive income, the Statement of Changes in Unit holders Equity and the
Statement of Cash Flow dealt with by this report are in agreement with the books of
account of the InvIT; and
d) In our opinion, the aforesaid standalone financial statements comply
with the Accounting Standards (Ind AS) and/or any addendum thereto as defined in Rule
2(1)(a) of the Companies (Indian Accounting Standards) Rules, 2015, as amended.
| For Mukund M. Chitale & Co. |
| Chartered Accountants |
| Firm Registration No. 106655W |
| S. M. Chitale |
| Partner |
| M. No. 111383 |
| UDIN: 22111383AKGZFT3438 |
| Place: Mumbai |
| Date: 8th May, 2023 |
+91-9892691696
