TO THE MEMBERS OF AFFLE (INDIA) LIMITED
Report on the Audit of the Consolidated Financial Statements
Opinion
We have audited the accompanying consolidated financial statements of Affle (India) Limited (hereinafter referred to as "the Holding Company"), its subsidiaries (the Holding Company and its subsidiaries together referred to as "the Group") comprising of the consolidated Balance sheet as at March 31 2023, the consolidated Statement of Profit and Loss, including other comprehensive income, the consolidated Cash Flow Statement and the consolidated Statement of Changes in Equity for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies and other explanatory information (hereinafter referred to as "the consolidated financial statements").
In our opinion and to the best of our information and according to the explanations given to us and based on the consideration of reports of other auditors on separate financial statements and on the other financial information of the subsidiaries, the aforesaid consolidated financial statements give the information required by the Companies Act, 2013, as amended ("the Act") in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the consolidated state of affairs of the Group as at March 31, 2023, their consolidated profit including other comprehensive income, their consolidated cash flows and the consolidated statement of changes in equity for the year ended on that date.
Basis for Opinion
We conducted our audit of the consolidated financial statements in accordance with the Standards on Auditing (SAs), as specified under section 143(10) of the Act. Our responsibilities under those Standards are further described in the Auditors
Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group 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 financial statements under the provisions of the Act and the Rules thereunder, 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 audit opinion on the consolidated financial statements.
Emphasis of Matter
We draw your attention to note 39.2 to the consolidated financial statements, which indicate that business combination under common control has been accounted for using purchase method in accordance with previous GAAP resulting in recognition of goodwill amounting to INR 59.24 million as on March 31, 2023 as prescribed under court scheme instead of using pooling of interest method as prescribed under Ind AS 103 Business Combinations as the approved court scheme will prevail over applicable accounting standard.
Our opinion is not modified in respect of this matter.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements for the financial year ended March 31, 2023. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context.
We have determined the matters described below to be the key audit matters to be communicated
in our report. We have fulfilled the responsibilities described in the Auditors responsibilities for the audit of the consolidated financial statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to
our assessment of the risks of material misstatement of the consolidated financial statements. The results of audit procedures performed by us, including those procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying consolidated financial statements.
Key audit matters | How our audit addressed the key audit matter | |
Revenue recognition and recoverability of trade receivables and contract assets (as described in Note 10 and 19 of the consolidated financial statements) | ||
The Group derives its revenue mainly from rendering of mobile advertising services using a network of publishers. The Group recognizes revenue from its customers at the time of delivery of advertisement. We identified revenue recognition as a key audit matter because revenue is one of the Groups key performance indicators and there is an inherent risk around the accuracy of revenue recorded which is dependent upon reconciliations of billing data as per Group records with those of customer. | Our audit procedures included the following, amongst others: | |
• We obtained an understanding of the systems, processes and controls implemented for recognizing revenues. | ||
• We have tested the operating effectiveness of the controls related to revenues and associated receivables and contract assets. | ||
• For a sample of transactions, we performed the following procedures: | ||
Further, the Group has a significant balance of trade receivables and contract assets amounting to INR 3,488.17 million as at March 31, 2023. The Group has determined the allowance for credit losses based on past experience and adjusted to reflect current and estimated future economic conditions. | a. assessed the supporting documents including contractual terms and conditions, release order from customers, delivery documents in the form of email confirmation, | |
b. tested the reconciliation of service provided to the customer with the amount of invoice raised. | ||
• We assessed the Groups accounting policies relating to revenue recognition. | ||
Due to significance of carrying values of trade receivables and judgments involved in assessing recoverability of trade receivables and contract assets and calculating the expected credit losses, this matter was considered key audit matter to our audit. | ||
Our audit procedures on the carrying value of trade receivables and contract assets, included the following, amongst others: | ||
• We obtained an understanding of the systems, processes and controls implemented for recording allowance for credit losses. | ||
• We tested the ageing of contract assets and trade receivables for a sample of invoices; | ||
• We obtained direct confirmation of trade receivables and performed other alternate procedures which included testing of invoice, testing of customer purchase/release order and subsequent collection of invoices for the confirmations not received | ||
• We tested billings and receipts after year-end | ||
• We examined the Groups assessment of recoverability basis historical payment patterns and macroeconomic information. | ||
• We tested the management computation of the allowance for credit loss. | ||
Key audit matters | How our audit addressed the key audit matter | |
Internally generated intangible assets (as described in Note 4 of the consolidated financial statements) | ||
The Group recognizes internally generated intangible assets i.e. software and application platform amounting to INR 1,609.80 million. Initial recognition is based on assessing each project in relation to specific recognition criteria that needs to be met for capitalization. The assessment involves management judgment on matters such as technical feasibility, intention and ability to complete the development of such intangible asset, ability to use or sell the asset, generation of future economic benefits and the ability to measure costs reliably. Due to the materiality of the assets recognized and the level of management judgement involved being significant, initial recognition and measurement of internally generated intangible assets is a key audit matter. | Our audit procedures including the audit procedures carried out by the component auditor for the subsidiary included the following, amongst others: | |
• Assessed the management process and procedures related to initial recognition criteria for intangible assets, allocation of budgets, measurement of time recorded on development and establish the basis for capitalization. | ||
• Tested the amount capitalized from the underlying records and information for expenses; | ||
• Performed inquires with management regarding key assumptions used and estimates made in capitalizing development costs and assessed those assumptions and estimates. | ||
• Considered the useful economic life attributed to the assets. | ||
Accounting for business combination (as described in Note 39.1 of the consolidated financial statements) | ||
For the business combinations as detailed in Note 39.1, the Group has used an expert for the purchase price allocations (PPA) to determine the fair value of assets acquired. | Our audit procedures on PPA included the following, amongst others: | |
• In respect of PPA performed in the books of subsidiary, we made inquiries on audit procedures performed by the component auditor. | ||
Further, the group recognized earn-out liabilities based on the contingent consideration as part of business combination at fair value. | ||
• We also assessed the disclosures given in the consolidated financial statements for compliance with disclosure requirements under the accounting standards. | ||
Considering, the identification and valuation of intangible assets is inherently subjective and involves significant judgements and assumptions around future cash flows and discount rates and fair value measurement of contingent consideration require managements estimation and significant judgement on post-acquisition performance of acquired business, we have considered this as a key audit matter. | ||
The audit procedures carried out by component auditor for the subsidiary included the following: | ||
• Read the business purchase agreement and assessed identification and measurement of fair value of the acquired assets and liabilities and contingent consideration payable. | ||
• Evaluated the competences, capabilities and objectivity of the managements expert. | ||
• Involved valuation specialists to evaluate and test the methodologies used by the managements expert. | ||
Evaluated performance forecast and key assumptions used by management for contingent consideration payable. |
Key audit matters | How our audit addressed the key audit matter |
Impairment of goodwill and other intangible assets (as described in Note 2(xi) of the consolidated Ind AS financial statements) | |
The Group holds significant amounts of goodwill and intangible assets arising from business combinations and including self-generated and other intangibles, on the balance sheet amounting to INR 8,288.49 million. Accounting Standard (Ind AS) 36, "Impairment of Assets requires management to test the goodwill for impairment as part of the non-current assets of (groups of) Cash Generating Unit ("CGUs") to which it is allocated, both annually and if there is a trigger for testing. | Our audit procedures on impairment test included the following, amongst others: |
• We assessed the key information used in determining the valuation including the weighted average cost of capital, cash flow forecasts and the implicit growth. | |
• We assessed the Groups valuation methodology applied in determining the value in use; | |
• We assessed the assumptions used in the cash flow forecasts including discount rates, expected growth rates and terminal growth rates used; | |
Such goodwill and other intangible assets are tested for impairment using discounted cash-flow model of the CGUs recoverable value compared to the carrying value of the assets. A deficit between the recoverable value and the CGUs net assets would result in impairment. | |
• We assessed historical accuracy of managements budgets and forecasts by comparing them to actual performance; | |
• We assessed the recoverable value headroom by performing sensitivity testing of key assumptions used; | |
The impairment tests were a key audit matter due to the significant judgements and assumptions made by management which are affected by uncertainties around future market or economic conditions. | • We tested the arithmetical accuracy of the models; |
• We also assessed the disclosures given in the consolidated financial statements for compliance with disclosure requirements under the accounting standards. |
Other Information
The Holding Companys Board of Directors is responsible for the other information. The other information comprises the information included in the Annual report, but does not include the consolidated financial statements and our auditors report thereon.
Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether such other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the 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 Management for the Consolidated Financial Statements
The Holding Companys Board of Directors is responsible for the preparation and presentation of these consolidated financial statements in terms of the requirements of the Act that give a true and fair view of the consolidated financial position, consolidated financial performance including other comprehensive income, consolidated cash flows and consolidated statement of changes in equity of the Group in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards (Ind AS) specified under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended. The respective Board of Directors of the companies included in the Group are responsible for maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of their respective companies 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; and the design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy
and completeness of the accounting records, relevant to the preparation and presentation of the consolidated financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error, which have been used for the purpose of preparation of the consolidated financial statements by the Directors of the Holding Company, as aforesaid.
In preparing the consolidated financial statements, the respective Board of Directors of the companies included in the Group are responsible for assessing the ability of their respective companies to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.
Those respective Board of Directors of the companies included in the Group are also responsible for overseeing the financial reporting process of their respective companies.
Auditors Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated 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 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 consolidated 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 consolidated 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
subsidiaries, is based solely on the reports of such other auditors.
Certain of these subsidiaries are located outside India whose financial statements and other financial information have been prepared in accordance with accounting principles generally accepted in their respective countries and which have been audited by other auditors under generally accepted auditing standards applicable in their respective countries. The Holding Companys management has converted the financial statements of such subsidiaries located outside India from accounting principles generally accepted in their respective countries to accounting principles generally accepted in India. We have audited these conversion adjustments made by the Holding Companys management. Our opinion in so far as it relates to the balances and affairs of such subsidiaries located outside India is based on the report of other auditors and the conversion adjustments prepared by the management of the Holding Company and audited by us.
b. The accompanying consolidated financial statements include unaudited financial statements and other unaudited financial information in respect of one subsidiary, whose financial statements and other financial information reflect total assets of INR 72 million as at March 31, 2023, and total revenues of INR 442 million and net cash inflows of INR 43 million for the year ended on that date. These unaudited financial statements and other unaudited financial information have been furnished to us by the management. The consolidated financial statements also include the Groups share of net loss of INR 7 Mn for the period from April 1, 2022 to May 14, 2022, as considered in the consolidated financial statements, in respect of one associate (now classified under investment held for sale), whose financial statements, other financial information have not been audited and whose unaudited financial statements, other unaudited financial information have been furnished to us by the Management. Our opinion, in so far as it relates amounts and disclosures included in respect of this subsidiary and our report in terms of subsections (3) of Section 143 of the Act in so far as it relates to the aforesaid subsidiary is based solely on such unaudited financial statements and other unaudited financial information. In our opinion and according to the information and
explanations given to us by the Management, these financial statements and other financial information are not material to the Group.
Our opinion above on the consolidated financial statements, and our report on Other Legal and Regulatory Requirements below, is not modified in respect of the above matters with respect to our reliance on the work done and the reports of the other auditors and the financial statements and other financial information certified by the Management.
Report on Other Legal and Regulatory
Requirements
1. As required by the Companies (Auditors Report) Order, 2020 ("the Order"), issued by the Central Government of India in terms of sub-section (11) of section 143 of the Act, based on our audit, we give in the "Annexure 1" a statement on the matters specified in paragraph 3(xxi) of the Order.
2. As required by Section 143(3) of the Act, based on our audit and on the consideration of report of the other auditors on separate financial statements and the other financial information of subsidiaries, as noted in the other matter paragraph we report, to the extent applicable, that:
a. We/the other auditors whose report we have relied upon 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 of the aforesaid consolidated financial statements;
b. In our opinion, proper books of account as required by law relating to preparation of the aforesaid consolidation of the financial statements have been kept so far as it appears from our examination of those books;
c. The Consolidated Balance Sheet, the Consolidated Statement of Profit and Loss including the Statement of Other Comprehensive Income, the Consolidated Cash Flow Statement and Consolidated Statement of Changes in Equity dealt with by this Report are in agreement with the books of account maintained for the purpose of
auditors notice that has caused us or the other auditors to believe that the representations under sub-clause (a) and (b) contain any material mis-statement.
v. No dividend has been declared or paid during the year by the Holding Company.
vi. As proviso to Rule 3(1) of the Companies (Accounts) Rules, 2014 is applicable only w.e.f. April 1, 2023 for the Holding Company, hence reporting under this clause is not applicable.
For S.R. Batliboi & Associates LLP Chartered Accountants
ICAI Firm Registration Number: 101049W/E300004
per Nikhil Aggarwal Partner
Membership Number: 504274 UDIN: 23504274BGXRFE3510
Place of Signature: Gurugram Date: May 13, 2023
Annexure 2
TO THE INDEPENDENT AUDITORS REPORT OF EVEN DATE ON THE CONSOLIDATED FINANCIAL STATEMENTS OF AFFLE (INDIA) LIMITED
Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 ("the Act")
In conjunction with our audit of the consolidated financial statements of Affle (India) Limited (hereinafter referred to as the "Holding Company") as of and for the year ended March 31, 2023, we have audited the internal financial controls with reference to consolidated financial statements of the Holding Company, which is the company incorporated in India, as of that date.
Managements Responsibility for Internal Financial Controls
The Board of Directors of the Holding company, which is the company incorporated in India, are responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Holding Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India (ICAI). These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to the respective companys policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Companies Act, 2013.
Auditors Responsibility
Our responsibility is to express an opinion on the Holding Companys internal financial controls with reference to consolidated financial statements based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (the "Guidance Note") and the Standards on Auditing, specified under section 143(10) of the
Act, to the extent applicable to an audit of internal financial controls, both, issued by ICAI. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls with reference to consolidated financial statements was established and maintained and if such controls operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls with reference to consolidated financial statements and their operating effectiveness. Our audit of internal financial controls with reference to consolidated financial statements included obtaining an understanding of internal financial controls with reference to consolidated financial statements, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditors judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.
We believe that the audit evidence we have obtained, is sufficient and appropriate to provide a basis for our audit opinion on the internal financial controls with reference to consolidated financial statements.
Meaning of Internal Financial Controls With Reference to Consolidated Financial Statements
A companys internal financial control with reference to consolidated financial statements is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal financial control with reference to consolidated financial statements includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorisations of management
www.indiainfoline.com is part of the IIFL Group, a leading financial services player and a diversified NBFC. The site provides comprehensive and real time information on Indian corporates, sectors, financial markets and economy. On the site we feature industry and political leaders, entrepreneurs, and trend setters. The research, personal finance and market tutorial sections are widely followed by students, academia, corporates and investors among others.
Copyright © IIFL Securities Ltd. All rights Reserved.
Stock Broker SEBI Regn. No: INZ000164132, PMS SEBI Regn. No: INP000002213, IA SEBI Regn. No: INA000000623, SEBI RA Regn. No: INH000000248
This certificate demonstrates that IIFL as an organization has defined and put in place best-practice information security processes.
www.indiainfoline.com is part of the IIFL Group, a leading financial services player and a diversified NBFC. The site provides comprehensive and real time information on Indian corporates, sectors, financial markets and economy. On the site we feature industry and political leaders, entrepreneurs, and trend setters. The research, personal finance and market tutorial sections are widely followed by students, academia, corporates and investors among others.
Copyright © IIFL Securities Ltd. All rights Reserved.
Stock Broker SEBI Regn. No: INZ000164132, PMS SEBI Regn. No: INP000002213, IA SEBI Regn. No: INA000000623, SEBI RA Regn. No: INH000000248
This certificate demonstrates that IIFL as an organization has defined and put in place best-practice information security processes.