To the Unitholders of Embassy Office Parks REIT
Report on the Audit of the Standalone Ind
AS Financial Statements
Opinion
We have audited the accompanying standalone Ind AS financial statements of Embassy
Office Parks REIT (hereinafter referred to as "the REIT"), comprising of the
Balance Sheet as at March 31, 2023, the Statement of Profit and Loss, including the
statement of Other Comprehensive Income, the Cash Flow Statement and the Statement of
Changes in Unitholders equity for the year then ended and the Statement of Net Assets at
fair value as at March 31, 2023 and the Statement of Total Returns at fair value and the
Statement of Net Distributable Cash Flows of the REIT for the year then ended and notes to
the standalone Ind AS financial statements, including a summary of significant accounting
policies and other explanatory information (hereinafter referred to as "standalone
Ind AS financial statements).
In our opinion and to the best of our information and according to the explanations
given to us, the aforesaid standalone Ind AS financial statements give the information
required by the Securities and Exchange Board of India (Real Estate Investment Trusts)
Regulations, 2014 as amended from time to time including any guidelines and circulars
issued thereunder read with SEBI Circular No. CIR/IMD/ DF/146/2016 dated December 29, 2016
(the "REIT regulations") in the manner so required and give a true and fair view
in conformity with the accounting principles generally accepted in India, to the extent
not inconsistent with REIT regulations, of the state of affairs of the REIT as at March
31, 2023, its profit including other comprehensive income, its cash flows, its statement
of changes in Unitholders equity for the year ended on that date, its net assets at fair
value as at March 31, 2023, its total returns at fair value and the Net Distributable Cash
Flows of the REIT for the year ended March 31, 2023.
Basis for Opinion
We conducted our audit of the standalone Ind AS 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 Auditors
Responsibilities for the Audit of the Standalone Ind AS Financial Statements section of
our report. We are independent of the REIT in accordance with the Code of Ethics issued
by the Institute of Chartered Accountants of India 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 sufficient and appropriate to provide a basis for our audit opinion on
the standalone Ind AS financial statements
Key Audit Matters
Key audit matters are those matters that, in our professional Judgement, were of most
significance in our audit of the standalone Ind AS financial statements for the financial
year ended March 31. 2023. These matters were addressed in the context of our audit of the
standalone Ind AS 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 standalone Ind AS 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 standalone Ind AS financial statements. The results of
audit procedures performed lay us, including those procedures performed to address the
matters below, provide the basis for our audit opinion on the accompanying standalone Ind
AS financial statements.
Key audit matters |
How our audit addressed the key audit matter |
Assessing impairment of Investments and loans made by
the REIT in subsidiaries and joint venture entity (as described in note 2.2 (c), 3, 4 and
7 of the standalone Ind AS financial statements) |
As at March 31, 2023, the carrying values of REITs investment in
subsidiaries and joint venture entity amounted to Rs.246,260.89 million. Further the REIT
has granted loans to its subsidiaries amounting to Rs.93,860.84 million. |
Our audit procedures included, among others, the following: |
|
- We assessed the REITs valuation methodology applied in determining
the recoverable amount. |
|
- We involved valuation specialists to: |
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 an impairment
needs to be recognised. |
(a) Assess the valuation reports issued by the independent valuer
engaged by the management and compared key property related data used as input with actual
data. |
|
(b) Assess the key assumptions included in the cash flow forecasts by
management and independent valuer. |
For the purpose of the above impairment testing, value in use has been
determined by forecasting and discounting future cash flows. Significant judgements are
required to determine the key assumptions used in determination of value in use. |
(c) Discussed changes in key drivers as compared to actual performance
with management in order to evaluate whether the inputs and assumptions used in the
valuation models by management and independent valuer were reasonable. |
Considering the impairment assessment involves significant assumptions
and judgement, we regard this as a key audit matter. |
- We compared the recoverable amount of the investment to the carrying
value in books as at March 31, 2023. |
|
- As regards loans granted, we obtained and considered management
evaluation of recoverability of loans and advances granted to its subsidiaries and joint
venture entity. |
|
- We read/assessed the disclosures in the standalone Ind AS financial
statements for compliance with the relevant accounting standards requirements. |
Key audit matters |
How our audit addressed the key audit matter |
Classification of Unitholders funds as equity (as described in
note 10(a) of the standalone Ind AS financial statements) |
|
The REIT is required to distribute to its Unitholders not less than
ninety percent of its net distributable cash flows for each financial year. Accordingly, a
portion of the Unitholders funds contains a contractual obligation of the REIT to pay
cash distributions to its Unitholders. |
Our audit procedures included evaluating the requirements for
classification of financial liability and equity under Ind AS 32 and evaluating the
provisions of SEBI Circulars for classification/ presentation of Unitholders funds in the
standalone Ind AS financial statements of the REIT. |
The Unitholders funds could have been classified as compound
financial instrument which contains both equity and liability components in accordance
with Ind AS 32 - Financial Instruments: Presentation. Elowever, in accordance with SEBI
Circulars No. CIR/IMD/ DF/141/2016 dated December 26, 2016 and No. CIR/ IMD/DF/146/2016
dated December 29, 2016 ("SEBI Circulars") issued under the REIT Regulations,
the Unitholders funds have been classified as equity in order to comply with the
mandatory requirements of Section H of Annexure A to the SEBI Circular elated December 26,
2016 dealing with the minimum disclosures for key financial statements. |
We assessed the disclosures in the standalone Ind AS financial
statements for compliance with the relevant requirements of REIT regulations. |
Based on the above, the classification of Unitholders funds as equity
involved considerable management judgement. Accordingly, it is considered as a key audit
matter. |
|
Key audit matters |
How our audit addressed the key audit matter |
Computation and disclosures of Net Assets and Total
Returns at Fair Value (as described in note 2.2(c) and in Statement of Net assets at
fair value and Statement of total returns at fair value of the standalone Incl AS
financial statements) |
As per the provisions of REIT Regulations, the REIT 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. |
Our audit procedures include, among others, the following- |
For this purpose, fair value is determined by forecasting and
discounting future cash flows. The determination of fair value involves judgement due to
inherent uncertainty in the underlying assumptions and it is highly sensitive to changes
in some of the inputs used e.g. the discounting rate (WACC), capitalisation rates, rental
growth rates etc. |
- Read the requirements of SEBI REIT 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. |
Accordingly, the aforementioned computation and disclosures are
determined to be a key audit matter in our audit of the standalone Ind AS financial
statements. |
- Tested controls implemented by management to determine inputs for
fair valuation as well as assumptions used in the fair valuation. |
|
- We involved valuation specialists to: |
|
(a) Assess the valuation reports issued by the independent valuer
engaged by the management and compared key property related data used as input with actual
data. |
|
(b) Assess the key assumptions included in the cash flow forecasts by
management and independent valuer. |
|
(c) Discussed changes in key drivers as compared to actual performance
with management in order to evaluate whether the inputs and assumptions used in the
valuation models by management and independent valuer were reasonable. |
|
- Tested the arithmetical accuracy of computation in the Statement of
Net Assets and Total Returns at Fair Value. |
|
- Read/Assessed the disclosures in the standalone Ind AS financial
statements for compliance with the relevant requirements of REIT Regulations. |
Key audit matters |
How our audit addressed the key audit matter |
Related party transactions and disclosures |
|
| (as described in note 26 of the standalone Ind AS financial statements) |
|
| The REIT has undertaken transactions with its related parties in the
normal course of business. |
Our audit procedures included, among others, the following: |
| These include making new or additional investments; lending of loans to
SPVs, interest and dividend income on such loans/ investments, fees for services provided
by related parties to REIT etc as disclosed in Note 26 of the standalone Incl AS financial
statements. |
- Obtained, read and assessed the REITs policies, processes and
procedures in respect of identifying related parties, evaluation of arms length,
obtaining necessary approvals, recording and disclosure of related party transactions,
including compliance of transactions and disclosures in accordance with REIT regulations. |
| We identified the recording of all possible related party transactions
and its disclosure as set out in respective notes to the standalone Ind AS financial
statements as a key audit matter due to the significance of transactions with related
parties during the year ended March 31, 2023 and regulatory compliance thereon. |
- We tested, on a sample basis, related party transactions with the
underlying contracts and other supporting documents for appropriate authorisation and
approval for such transactions. |
|
- We read minutes of Unitholder meetings, Board and its relevant
committee meetings and minutes of meetings of those charged with governance of the Manager
in connection with transactions with related parties effected during the year and REITs
assessment of related party transactions being in the ordinary course of business at arms
length and in accordance with the REIT regulations. |
|
- Assessed and tested the disclosures made in accordance with the
requirements of Ind AS and REIT regulations. |
Other Information
The Management of Embassy Office Parks Management Services Private Limited ("the
Manager"), acting in its capacity as the manager of Embassy Office Parks REIT is
responsible for the other information. The other information comprises the information
included in the Annual report, but does not include the standalone nd AS financial
statements and our auditors report thereon
Our opinion on the standalone Ind AS 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 standalone Ind AS financial statements, our
responsibility is to read the other information and, in doing so, consider whether such
other information is materially inconsistent with the standalone Ind AS 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 Standalone Ind AS Financial Statements
The Management of the Manager (‘the Management") is responsible for the
preparation and presentation of these standalone Ind AS financial statements that give a
true and fair view of the financial position as at March 31, 2023, financial performance
including other comprehensive income, cash flows, statement of changes in Unitholders
equity 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 the net distributable cash flows of the REIT for
the year ended March 31 2023, in accordance with the requirements of the REIT regulations;
indian Accounting Standards as defined in Rule 2(1)(a) of the Companies (Indian Accounting
Standards) Rules, 2015 (as amended), and other accounting principles generally accepted in
India, to the extent not inconsistent with REIT regulations. This responsibility also
includes the design, implementation and maintenance of adequate controls for ensuring the
accuracy and completeness of the accounting records, relevant to the preparation and
presentation of the standalone Ind AS 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 Ind AS financial statements the Management is responsible
for assessing the ability of the REIT 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 REIT or to cease operations,
or has no realistic alternative but to do so
The Management is also responsible for overseeing the financial reporting process of
the REIT.
Auditors Responsibilities for the Audit of the Standalone Ind AS Financial Statements
Our objectives a re to obtain reasonable assurance about whether the standalone Ind AS
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 standalone Ind AS financial statements.
As part of an audit in accordance with SAs, we exercise professional Judgement and
maintain professional skepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the standalone Ind AS
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, ntentional omissions, misrepresentations, or the override of internal
control
• Obtain an understanding of internal 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 the entity s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness
of accounting estimates and related disclosures made by management.
• 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 ability of
the REIT 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 Ind AS 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 REIT to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the standalone Ind
AS financia statements, including the disclosures, and whether the standalone Ind AS
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 significant audit findings including any
significant deficiencies in internal contro 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 Ind AS financial
statements for the financial year ended March 31, 2023 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
Report on Other Legal and Regulatory Requirements
Based on our audit and as required by the REIT 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) The Balance Sheet and the Statement of Profit and Loss including the Statement of
Other Comprehensive Income dealt with by this Report are in agreement with the books of
account of the REIT: and
(c) In our opinion, the aforesaid standalone Ind AS financial statements comply with
the Indian Accounting Standards as defined in Rule 2(1)(a) of the Companies (Indian
Accounting Standards) Rules, 2015 (as amended), to the extent not inconsistent with REIT
regulations.
for S R Batliboi & Associates LLP
Chartered Accountants
ICAI Firm Registration Number: 101049W/E300004
per Adarsh Ranka
Partner
Membership number: 209567
UDIN: 23209567BGXVYF8769
Place: Bengaluru, India
Date: April 27, 2023
+91-9892691696
