To,
The Unit holders of IRB InvIT Fund
Report on the Audit of the Consolidated Financial
Statements
Opinion
We have audited the accompanying consolidated financial statements of IRB InvIT Fund
(hereinafter referred to as “the Fund”) and its subsidiaries (the Fund and
its subsidiaries together referred to as “the Group”), which comprise the
consolidated Balance Sheet as at March 31, 2023, the consolidated Statement of Profit and
Loss (including other comprehensive income), the consolidated Statement of Changes in Unit
Holde Equity and the consolidated Statement of cash flows for the year then ended, and the
consolidated Statement of Net Assets at fair value as at March 31, 2023, the consolidated
Statement of Total Returns at fair value and the Statement of Net Distributable Cash Flows
(NDCFs) of the Fund and each of its subsidiaries 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
Securities and Exchange Board of India (Infrastructure Investment Trusts) Regulations,
2014 as amended from time to time including any guidelines and circulars issued
thereunder, in the manner so required and give a true and fair view in conformity with
Indian Accounting Standards (Ind AS) and/
or any addendum thereto as defined in the Rule 2(1)(a) of the Companies (Indian
Accounting Standards) Rules, 2015 and other accounting principles generally accepted in
India, of the consolidated state of affairs of the Group as at March 31, 2023, its
consolidated profit and total comprehensive income, its consolidated movement of the unit
hold funds and its consolidated cash flows for the year ended March 31, 2023, its
consolidated net assets at fair value as at March 31, 2023, its consolidated total returns
at fair value and the net distributable cash flows of the Fund and each of its
subsidiaries for the year ended March 31, 2023.
Basis of Opinion
We conducted our audit of consolidated 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 Auditor 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 ICAI and we have fulfilled our other ethical responsibilities in
accordance with the ICAI 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.
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 of the current period.
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. We have determined the matters described below to be
the key audit matters to be communicated in our report.
Sr.
Key Audit Matter No. |
How our audit addressed the key audit matter |
1 Assessing Impairment of Intangible assets (note 3.21 and 4) |
Our audit procedures included the following: |
| The Group operates toll assets which is constructed on Build Operate and
Transfer (BOT) basis. The carrying value of the toll collection rights as at March 31,
2023 is Rs1,069,052.69 Lakhs. In accordance with its accounting policy and requirements
under Ind AS 36 “Impairment of Assets”, the Management has performed an
impairment assessment by comparing the carrying value of the toll collection rights to
their recoverable amount. For impairment testing, value in use has been determined by
forecasting and discounting future cash flows. Further, the value in use is highly
sensitive to changes in critical variable used for forecasting the future cash flows
including traffic projections and discounting rates. |
• Assessed the appropriateness of the Fund 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. |
| The determination of the recoverable amount of the toll collection right
involves significant judgment and accordingly, the evaluation of impairment of toll
collection rights has been determined as a key audit matter. |
• Assessed, based on the report of external expert, the assumptions
around the key drivers of the cash flow forecasts, discount rates, revenue projection
based on the independent expert traffic study reports after considering the impact on
account of COVID-19 scenario, etc. |
| Also, refer Note 4 to the consolidated financial statements |
• Assessed the appropriateness of the weighted average cost of
capital used in the determining recoverable amount by engaging valuation expert. |
|
• Discussed/Evaluated potential changes in key drivers as compared
to previous year / actual performance with management in order to evaluate whether the
inputs and assumptions used in the cash flow forecasts were suitable, including
considerations due to current economic and market conditions including effects of COVID-
19 pandemic. |
|
• Assessed the recoverable value headroom by performing sensitivity
analysis of key assumptions used. |
|
• Tested the arithmetical accuracy of the model. |
2 Toll revenue in respect of toll collection under the Service
Concession Agreement |
Our audit procedures included the following: |
| The Group right to collect toll under the concession agreement with
National Highway (NHAI) Authority of India falls within the scope of Appendix C of Ind AS
115, “Service Concession Arrangements”. The Group operates and earns revenue by
collecting toll on the road constructed. This involves cash collection and automated toll
collection using customized equipment installed at the toll plazas for correctly
identifying vehicle type, calculating fare and for appropriate billing and collection. The
Group uses information technology systems for the related automated and IT dependent
controls. |
• Obtained an understanding of the processes and control placed for
toll collection and evaluating the key controls around such process and testing those
controls for the operating effectiveness. |
| Refer Note 3.8 and Note 21 to the consolidated financial statements |
• Checked a selection of Information Technology General Controls
(ITGCs) supporting the integrity of the tolling system operation, including access,
operations and change management controls. |
|
• Verified the reconciliation of toll collection as per transaction
report (generated from toll system) with cash deposited in bank and revenue recorded in
the books. |
|
• Reviewed the management rationalization, by multiplying that toll
rate charged for each category of vehicle as per NHAI notification with the number of
vehicles (as per Schedule M submitted with NHAI) and its reconciliation with the revenue
recorded in accounts. |
|
• On test check basis, traced the daily collection from bank
statement to daily cash toll collected and the revenue recorded in the books. |
|
• Performed analytics procedures on transactions to detect unusual
transactions for further examination. |
|
• Performed revenue cut off procedures. |
3 Provisioning for resurfacing expense |
Our audit procedures included the following: |
| As per the Concession Agreement, the Group is obligated to carry out
resurfacing of the roads. The Group estimates the provision required towards resurfacing
in accordance with Ind AS 37 “Provisions, Contingent Liabilities and Contingent
Assets. The estimate made by the Group over the concession period, involves detailed
calculation and judgment. In view of the nature of provision and amount involved, the
provision for resurfacing expense is considered to be a key audit matter. |
• Understood the Group process associated with the estimation of
resurfacing obligation. |
| Refer Note 3.17, Note 16 and Note 38 to the consolidated financial
statements. |
• Verified the requirement under Concession Agreement and Group
policies. |
|
• Tested the assumption used in determining the resurfacing
provisions. |
|
• Tested the arithmetical accuracy and also verified the disclosure
in the consolidated financial statements. |
4 Computation and disclosures as prescribed in the InvIT
regulations relating to Statement of Net Assets and Total Returns at Fair Value |
Our audit procedures include the following- |
| (As described in note 38 and in Statement of Net assets at fair value and
Statement of total returns at fair value of the consolidated financial statements) |
• 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. |
| As per the provisions of InvIT Regulations, the Fund 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 where possible, but where this is not feasible, a degree of
judgement is required in establishing fair values. Judgements include considerations of
inputs such as WACC, Tax rates, Inflation rates etc. |
Assessed the appropriateness of independent valuer and management
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 consolidated 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, including considerations due to current economic and
market conditions including effects of COVID-19 pandemic. |
|
c) Discuss 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 values were reasonable, including considerations due
to current economic and market conditions including effects of COVID-19 pandemic. |
|
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 financial statements for
compliance with the relevant requirements of InvIT Regulations. |
Information Other than the Consolidated Financial Statements and Auditor Report Thereon
The management of IRB Infrastructure Private Limited (“Investment Manager”)
is responsible for the preparation of the other information. The other information
comprises the information included in the Management Discussion and Analysis, Investment
Manager Report including Annexures to Investment Manager Report and Investment Manager
Information, but does not include the consolidated financial statements and our auditor
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 the
other information is materially inconsistent with the consolidated 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.
Management Responsibility for the Consolidated Financial Statements
Investment Manager is responsible for the preparation of these consolidated financial
statements that give a true and
fair view of the consolidated financial position as at March 31, 2023, consolidated
financial performance including other comprehensive income, consolidated movement of the
unit holde funds and the consolidated cash flows for the year ended March 31, 2023, its
consolidated net assets at fair value as at March 31, 2023, its consolidated total returns
at fair value of the Fund and the net distributable cash flows of the Fund and each of its
subsidiaries in accordance with accounting principles generally accepted in India,
including the Indian 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
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 there under (together referred to as the “InvIT Regulations”).
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 the up and for preventing and
detecting frauds and other irregularities; the 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 management of the Fund, 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 the
Group 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.
The respective Board of Directors of the Companies included in the Group are also
responsible for overseeing the financial reporting process of the Group.
Auditor 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 auditor 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 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 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.
• Evaluate the appropriateness of accounting policies used and the reasonableness
of accounting estimates and related disclosures made by management.
• Conclude on the appropriateness of management 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 Group to continue as a going concern. If we conclude that a material uncertainty
exists, we are required to draw attention in our auditor report to the related disclosures
in the consolidated 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 report. However, future events or conditions may cause the Group to cease to
continue as a going concern.
• Evaluate the overall presentation, structure and content of the consolidated
financial statements, including the disclosures, and whether the consolidated financial
statements represent the underlying transactions and events in a manner that achieves fair
presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information
of the entities or business activities within the Group of which we are the independent
auditors, to express a opinion on the consolidated financial statements. We are
responsible for the direction, supervision and performance of the audit of the financial
statements of such entities included
in the consolidated financial statements of which we are the independent auditors. For
companies included in the consolidated financial statements, which have been audited by
other auditors, such other auditors remain responsible for the direction, supervision and
performance of the audits carried out by them. We remain solely responsible for our audit
opinion.
Materiality is the magnitude of misstatements in the consolidated 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 consolidated financial statements.
We communicate with those charged with governance of the Fund included in the
consolidated financial statements of which we are the independent auditors 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 consolidated financial
statements of the current period and are therefore the key audit matters. We describe
these matters in our auditor 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.
Other matters
We did not audit the financial statements and other financial information of 8
subsidiaries, whose financial statements reflect total assets of Rs1,285,179.12 Lakhs and
net assets of Rs88,223.59 Lakhs as at March 31, 2023, total revenues of Rs148,839.92
Lakhs and net cash inflows amounting to Rs7,866.34 Lakhs for the year ended on that date,
as considered in the consolidated financial statements before giving effect to elimination
of intra-group transactions. These financial statements and other financial information
have been audited by other auditors whose reports have been furnished to us by the
management and our opinion on the consolidated financial statements, in so far as it
relates to the amounts and disclosures included in respect of these subsidiaries and our
report in terms of InvIT regulations, in so far as it relates to the aforesaid
subsidiaries is based solely on the reports of the other auditors.
Our opinion above on the consolidated financial statements, and our reports on the
Legal and Regulatory Requirements below, is not modified in respect of the above matters
with respect to our reliance on the work done and reports of the other auditors.
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) The Consolidated Balance Sheet, and the Consolidated Statement of Profit and Loss
including other comprehensive income dealt with by this report are in agreement with the
books of account maintained for the purpose of preparation of the consolidated financial
statements; and
c) In our opinion, the aforesaid consolidated 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 SURESH SURANA & ASSOCIATES LLP
Chartered Accountants Firm Reg. No. 121750W/W-100010
|
Ramesh Gupta |
|
Partner |
Place: Mumbai |
Membership No. 102306 |
Dated: May 08, 2023 |
UDIN: 23102306BGWKSX6975 |
+91-9892691696
