To the Members of Bharat Financial Inclusion Limited (formerly SKS Microfinance
Limited)
Report on the Financial Statements
We have audited the accompanying financial statements of Bharat Financial Inclusion
Limited (formerly SKS Microfinance Limited) ("the Company"), which comprise the
Balance Sheet as at 31 March 2018, the Statement of Profit and Loss, the Cash Flow
Statement for the year then ended, and a summary of the significant accounting policies
and other explanatory information (collectively referred to as the ‘financial
statements).
Managements Responsibility for the Financial Statements
The Companys Board of Directors is responsible for the matters stated in Section
134(5) of the Companies Act, 2013 ("the Act") with respect to the preparation of
these financial statements that give a true and fair view of the financial position,
financial in accordance with the accounting principles generally accepted in India,
including the Accounting Standards specified under Section 133 of the Act, read with Rule
7 of the Companies (Accounts) Rules, 2014. This responsibility also includes maintenance
of adequate accounting records in accordance with the provisions of the Act for
safeguarding the assets of the Company 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 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 financial statements that give a true and fair view
and are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the
Companys ability 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 Company or to cease operations, or has no realistic
alternative but to do so.
Auditors Responsibility
Our responsibility is to express an opinion on these financial statements based on our
audit.
We have taken into account the provisions of the Act, the accounting and auditing
standards and matters which are required to be included in the Audit Report under the
provisions of the Act and the Rules made thereunder.
We conducted our audit in accordance with the Standards on Auditing specified under
Section 143(10) of the Act. Those Standards require that we comply with ethical
requirements and plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
the disclosures in the financial statements. The procedures selected depend on the
auditors judgment, including the assessment of the risks of material misstatement of the
financial statements, whether due to fraud or error. In making those risk assessments, the
auditor considers internal financial control relevant to the Companys preparation of the
financial statements that give a true and fair view in order to design audit procedures
that are appropriate in the circumstances. An audit also includes evaluating the
appropriateness of the accounting policies used and the reasonableness of the accounting
estimates made by the Companys Directors, as well as evaluating the overall presentation
of the financial statements.
We are also responsible to 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 significant
doubt on the entitys ability to continue as a going concern. If we conclude that a
material uncertainty exists, we are required to draw attention in the auditors report to
the related disclosures in the financial statements or, if such disclosures are
inadequate, to modify the opinion. Our conclusions are based on the audit evidence
obtained up to the date of the auditors report. However, future events or conditions may
cause an entity to cease to continue as a going concern.
We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our audit opinion on the financial statements.
Opinion
In our opinion and to the best of our information and according to the explanations
given to us, the aforesaid financial statements give the information required by 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 state of affairs of the Company as at 31
March 2018, its profit and its cash flows for the year ended on that date.
Other matters
The comparative financial information of the Company for the year ended 31 March 2017
have been audited by predecessor auditor whose reports dated 1 May 2017 expressed
unmodified opinion on those financial statements.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditors Report) Order, 2016 ("the Order")
issued by the Central Government of India in terms of sub-section (11) of Section 143 of
the Act, and on the basis of such checks of the books and records of the Company as we
consider appropriate and according to the information and explanation given to us, we give
in the "Annexure A" a statement on the matters specified in paragraphs 3 and 4
of the said Order to the extent applicable.
2. 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 best
of 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 the
Company so far as it appears from our examination of those books;
(c) The Balance Sheet, the Statement of Profit and Loss, and the Cash Flow Statement
dealt with by this Report are in agreement with the books of account;
(d) In our opinion, the aforesaid financial statements comply with the Accounting
Standards specified under Section 133 of the Act, read with Rule 7 of the Companies
(Accounts) Rules, 2014;
(e) On the basis of the written representations received from the directors and taken
on record by the Board of Directors, none of the directors is disqualified as on 31 March
2018 from being appointed as a director in terms of Section 164 (2) of the Act;
(f) With respect to the adequacy of the internal financial controls over financial
reporting of the Company and the operating effectiveness of such controls, refer to our
separate report in "Annexure B"; and
(g) With respect to the other matters to be included in the Auditors Report in
accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion
and 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 2018 on
its financial position in its financial statements Refer Note 36 and 38.
ii. The Company did not have any long-term contracts including derivative contracts for
which there were any material foreseeable losses.
iii. The Company has transferred amount required to be transferred to the Investor
Education and Protection Fund. Refer Note 42 to the financial statements.
iv. The disclosure regarding holdings as well as dealings in specified bank notes
during the period from 8 November 2016 to 30 December 2016 is not applicable for the
financial year ended 31 March 2018. Amounts as appearing in the audited financial
statements for the period ended 31 March 2017 have been disclosed.
for B S R & Associates LLP
Chartered Accountants
ICAI Firm Registration Number: 116231W/W-100024
Sriram Mahalingam
Partner
Membership Number: 049642
Place: Hyderabad
Date: 23 April 2018
Annexure A to the Independent Auditors Report on the financial statements
The Annexure A referred to in our Independent Auditors Report of even date to the
Members of Bharat Financial Inclusion Limited (formerly SKS Microfinance Limited)
("the Company") on the financial statements for the year ended 31 March 2018, we
report that: i. (a) The Company has maintained proper records showing full particulars,
including quantitative details and situation of fixed assets.
(b) The Company has a regular programme of physical verification of its fixed assets by
which all the fixed assets are verified every year. In our opinion, the periodicity of
physical verification is reasonable having regard to the size of the Company and the
nature of its assets. No material discrepancies were noticed on such verification.
(c) The Company does not own any immovable properties. Hence, the provisions of Clause
3(i)(c) of the said Order are not applicable to the Company.
ii. The Company was engaged in the business of providing Micro credit. Accordingly, it
does not hold any physical inventories. Hence, the provisions of Clause 3(ii) of the said
Order are not applicable to the Company.
iii. The Company has not granted any loans, secured or unsecured, to companies, firms,
Limited Liability Partnerships or other parties covered in the register maintained under
Section 189 of the Act. Hence, the provisions of Clause 3(iii)(a), (iii)(b) and (iii)(c)
of the said Order are not applicable to the Company.
iv. The Company has not given loans, investments, guarantees and security covered under
Section 185 and 186 of the Act. Therefore, paragraph 3(iv) of the Order is not applicable
to the Company.
v. The Company has not accepted any deposits from the public.
vi. The Central Government of India has not prescribed the maintenance of cost records
under sub-section (1) of Section 148 of the Act for any of the services rendered by the
Company.
vii. (a) According to the information and explanations given to us and on the basis of
our examination of the records of the Company, amounts deducted/accrued in the books of
account in respect of undisputed statutory dues including Provident Fund, Employees state
insurance, Income-tax, Service tax, Goods and services tax, Cess and other material
statutory dues have generally been regularly deposited by the Company with the appropriate
authorities, the Company did not have any dues on account of Sales tax, duty of Customs,
duty of Excise and Value added tax.
According to the information and explanations given to us, no undisputed amounts
payable in respect of Provident Fund, Employees state insurance, Income-tax, Service tax,
Goods and services tax, Cess and other material statutory dues were in arrears as at 31
March 2018 for a period of more than six months from the date they became payable.
(b) According to the information and explanations given to us, there are no dues of
Goods and services tax, duty of Customs, duty of Excise and Value added tax, which have
not been deposited with appropriate authorities on account of any dispute. However, the
Company disputes the following Income tax and service tax dues.
| Name of the Statute |
Nature of the Dues |
Amount |
Amount paid |
Period to which the amount relates |
Forum where the dispute is pending |
|
|
(Rs.)* |
# (Rs.) |
|
|
| Income Tax Act, 1961 |
Income tax |
8,117,274 |
8,117,274 |
Assessment year 2012-13 |
Income Tax Appellate Tribunal |
| Chapter V of the Finance Act, 1994 |
Service tax |
777,874,850 |
50,762,370 |
Financial years 2006-07 to 2014-15 |
Customs Excise and Service Tax Appellate Tribunal |
* Excluding interest and penalty, as applicable # The Company has paid this amount
under protest
viii. According to the records of the Company examined by us and the information and
explanation given to us, the Company has not defaulted in repayment of loans or borrowings
to any financial institution or bank or dues to debenture holders as at the balance sheet
date. The Company did not have any dues to Government.
ix. The Company has not raised any monies by way of initial public offer or further
public offer (including debt instruments). In our opinion, and according to the
information and explanations given to us, monies raised by way of term loans have been
applied, on an overall basis, for the purposes for which they were obtained.
x. According to the information and explanations given to us, we report that no
material fraud by the Company or by its employees or officers has been noticed or reported
during the year except for instances of cash embezzlements by certain employees of the
Company aggregating to an amount of Rs. 25,520,321 and out of which an amount of
Rs.7,790,197 has been recovered. The services of the concerned employees have been
terminated.
xi. According to the information and explanations given to us and based on our
examination of the records of the Company, the Company has paid/provided for the
managerial remuneration in accordance with the requisite approvals mandated by the
provisions of Section 197 read with Schedule V to the Act.
xii. The Company is not a Nidhi Company and the Nidhi Rules, 2014 are not applicable to
it. Accordingly, the provisions of Clause 3(xii) of the Order are not applicable to the
Company.
xiii. According to the information and explanations given to us, the transactions with
related parties are in compliance with the provisions of Sections 177 and 188 of the Act
where applicable and the details of such related party transactions have been disclosed in
the financial statements as required under Accounting Standard (AS) 18, Related Party
Disclosures specified under Section 133 of the Act, read with Rule 7 of the Companies
(Accounts) Rules, 2014.
xiv. The Company has not made any preferential allotment or private placement of shares
or fully or partly convertible debentures during the year. Therefore, paragraph 3(xiv) of
the Order is not applicable to the Company.
xv. The Company has not entered into any non-cash transactions with its directors or
persons connected with him. Accordingly, the provisions of Clause 3(xv) of the Order are
not applicable to the Company. xvi. The Company has been registered under Section 45 IA of
the Reserve Bank of India Act, 1934 as a Non-Banking Finance Company Micro Finance
Institution
for B S R & Associates LLP
Chartered Accountants
ICAI Firm Registration Number. : 116231W/W-100024
Sriram Mahalingam
Partner
Membership Number: 049642
Place : Hyderabad
Date: 23 April 2018
Annexure B to the Independent Auditors Report on the financial statements
The Annexure B referred to in our Independent Auditors Report of even date to the
Members of Bharat Financial Inclusion Limited ("the Company") on the financial
statements for the year ended 31 March 2018.
Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of the
Section 143 of the Companies Act, 2013 ("the Act")
We have audited the internal financial controls over financial reporting of Bharat
Financial Inclusion Limited (formerly SKS Microfinance Limited) ("the Company")
as of 31 March 2018 in conjunction with our audit of the financial statements of the
Company for the year ended on that date.
Managements Responsibility for Internal Financial Controls
The Companys management is responsible for establishing and maintaining internal
financial controls based on the internal control over financial reporting criteria
established by the 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 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 Companys internal financial
controls over financial reporting 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, issued by ICAI and deemed
to be prescribed under Section 143(10) of the Companies Act, 2013, to the extent
applicable to an audit of internal financial controls, both issued by the Institute of
Chartered Accountants of India. 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 over financial reporting 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 system over financial reporting and their operating
effectiveness. Our audit of internal financial controls over financial reporting included
obtaining an understanding of internal financial controls over financial reporting,
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 judgment, 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 Companys internal financial controls system
over financial reporting.
Meaning of Internal Financial Controls Over Financial Reporting
A companys internal financial control over financial reporting 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 the generally
accepted accounting principles. A companys internal financial control over financial
reporting 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 authorizations of
management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the financial statements.
Inherent Limitations of Internal Financial Controls Over Financial Reporting
Because of the inherent limitations of internal financial controls over financial
reporting, including the possibility of collusion or improper management override of
controls, material misstatements due to error or fraud may occur and not be detected.
Also, projections of any evaluation of the internal financial controls over financial
reporting to future periods are subject to the risk that the internal financial control
over financial reporting may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
Opinion
In our opinion, the Company has, in all material respects, an adequate internal
financial controls system over financial reporting and such internal financial controls
over financial reporting were operating effectively as at 31 March 2018, based on the
internal control over financial reporting criteria established by the 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.
for B S R & Associates LLP
Chartered Accountants
ICAI Firm Registration No. : 116231 W/W-100024
Sriram Mahalingam
Partner
Membership Number: 049642
Place : Hyderabad Date : 23 April 2018
+91-9892691696
