To the Members of NIIT Limited
Report on the Audit of the Standalone Financial Statements Opinion
We have audited the accompanying standalone financial statements of NIIT Limited ("the Company"), which comprise the Balance sheet as at March 31,2024, the Statement of Profit and Loss, including the statement of Other Comprehensive Income, the Cash Flow Statement and the Statement of Changes in Equity for the year then ended, and notes to the standalone financial statements, including a summary of material accounting policies and other explanatory information.
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 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 state of affairs of the Company as at March 31, 2024, its profit including other comprehensive income, its cash flows and the changes in equity for the year ended on that date.
Basis for Opinion
We conducted our audit of the standalone 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 'Auditor's Responsibilities for the Audit of the Standalone Financial Statements' section of our report. We are independent of the Company 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 standalone 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 standalone financial statements for the financial year ended March 31,2024. These matters were addressed in the context of our audit of the standalone 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 Auditor's responsibilities for the audit of the standalone 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 financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying standalone financial statements.
|
Key audit matters
|
How our audit addressed the key audit matter
|
|
Revenue recognition and recoverability of trade receivables and unbilled revenue (refer to the summary of material accounting policies in point 2(c), (g) (iii) and (i) and the disclosure in note 8(ii), 8(iii) and 17 of the standalone financial statements)
|
|
The Company derives significant portion of its revenue from training delivery under time and material contracts. The Company recognizes revenue from services over a period of time. We identified revenue recognition as a key audit matter because revenue is one of the Company's key performance indicators and there is an inherent risk around the accuracy of revenue which is dependent upon confirmation of training delivery from customer.
Further, the Company has significant amount of trade receivables and unbilled revenue of Rs. 280.32 Million (net of provisions) in the balance sheet. The Company has determined the allowance for expected credit losses based on historical loss experience adjusted to reflect current and estimated future economic conditions. We focused on this risk as the balances are material and there are significant judgements involved in assessing the recoverability of trade receivables and unbilled revenue for calculating expected credit losses.
|
Our audit procedures included the following:
We have performed a walkthrough and obtained an understanding of the process and tested the operating effectiveness of key controls associated with the revenue recognition and accounts receivable process.
We made enquiries of management and analysed contracts on sample basis to evaluate revenue recognition in accordance with the terms and conditions of the contract. We have:
• Assessed the Company's accounting policies relating to revenue recognition;
• Checked the revenue recognition from training and material contracts by reading the supporting documents including inspection of contracts/ statement of work/ purchase orders from customers and documents evidencing satisfaction of performance obligation, on a test check basis;
• Checked, pre and post-year end, sample of revenue recognized, with supporting documents;
• Circulated the confirmations for outstanding trade receivables on sample basis on year-end, and performed alternate procedures for confirmations not received;
• Tested the ageing of trade receivables for a sample of invoices;
• Checked the subsequent collection made from trade receivables and subsequent billing for unbilled revenue and inquired of management for the reasons of any long outstanding amounts and correspondences with customers;
• Checked the calculation of expected credit loss model, based upon the past trend and forward-looking scenarios and ensured that recognition of the calculation of expected credit loss in accordance with the provision of Ind AS 109;
• Tested the journal entries impacting revenue, using data extracted from the accounting system, made in the preparation of the Standalone financial statements; and
• Checked the adequacy of disclosure given in the standalone financial statements for compliance with the Accounting Standards;
|
|
Impairment of Investments (refer to the summary of material accounting policies in point 2(g) and the disclosure in note 8(i) of the standalone financial statements)
|
|
The Company has a net investment of Rs. 1,843.83 Million in subsidiaries.
Annually, the management assess the existence of impairment indicators of each investment in subsidiaries and in case where impairment indicators exist, such investments are subjected to an impairment test.
For the purpose of impairment testing, value in use is determined by forecasting and discounting future cash flows which is highly sensitive to changes in some of the key inputs used for forecasting the future cash flows. Further, the determination of the recoverable amount of the unquoted investments involve exercise of significant judgment by management due to inherent complexities in the assumptions supporting the recoverable amount.
Accordingly, determination of recoverable amounts of investments in subsidiaries was considered to be a key audit matter in our audit of the standalone financial statements.
Annually, the management assess the impairment of internally generated intangible assets for each cash generating unit (CGU) for an impairment test.
As at the reporting date, the Company has internally generated intangible assets for each CGU (including intangible assets under development) for which management has evaluated future economic benefits in accordance with Indian Accounting Standard ('Ind-AS') 36, "Impairment of Assets".
In consideration of the judgements required in particular with reference to the forecast of CGU cash flows and the assumptions used in estimating the value-in-use of these intangible assets. Based on the management's assessment, we have identified this matter to be a key audit matter in our audit of the standalone financial statements.
|
Our
|
audit procedures included the following:
Assessed the Company's valuation methodology applied in determining the recoverable amount;
Obtained financial statements of subsidiaries from the management where impairment indicators exist;
Verified the supporting information used in determining cash flow forecasts, discount rates, expected growth rates and terminal growth rates;
Assessed historical accuracy of management's budgets and forecasts by comparing them to actual performance;
Assessed the recoverable value headroom by performing sensitivity testing of key assumptions used;
Discussed changes in assumptions as compared to previous year / actual performance with management in order to evaluate the inputs and assumptions used in the cash flow forecasts;
Tested the arithmetical accuracy of the models; and
Assessed the appropriateness of disclosures given in the standalone
financial statements for compliance with applicable disclosure
requirements.
|
|
Key audit matters | How our audit addressed the key audit matter
|
|
Impairment of intangible assets (refer to the summary of material accounting policies in point 2(m) and (n) and the disclosure in note 5 of the standalone financial statements)
|
|
Annually, the management assess the impairment of internally generated intangible assets for each cash generating unit (CGU) for an impairment test.
As at the reporting date, the Company has internally generated intangible assets (including intangible assets under development) for which management has evaluated future economic benefits in accordance with Indian Accounting Standard ('Ind-AS') 36, "Impairment of Assets".
In consideration of the Significant judgements is required applied by the management in particularly for with reference to the forecast of CGU cash flows and the assumptions used in estimating the value-in-use of each cash generating unit (CGU) these intangible assets.
Based on the management's assessment, we have identified this matter to be a key audit matter in our audit of the standalone financial statements.
|
Our audit procedures included the following:
• Assessed the Company's valuation methodology applied in determining the value-in-use;
• Inspected and assessed management's most recent forecasts and the underlying assumptions/ calculations having considered information on capacity and expected growth rates from recent industry sources;
• Assessed historical accuracy of management's budgets and forecasts by comparing them to actual performance;
• We assessed the key information used in determining the valuation including the weighted average cost of capital, cash flow forecasts and the implicit growth.
• Assessed potential changes in key drivers with management in order to evaluate whether the inputs and assumptions used in the cash flow forecasts were appropriate.
• Assessed the recoverable value headroom by performing sensitivity testing of key assumptions used;
• Obtained management's most recent financial results forecasts and liquidity analysis underlying their impairment assessment and tested the integrity of the forecasts, including the mathematical accuracy; and
• Checked the disclosure given in the standalone financial statements for compliance with the Accounting Standards.
|
|
Recoverability of deferred tax assets (refer to the summary of significant accounting policies in point 2(e) and the disclosure in note 9(i) of the standalone financial statements)
|
|
The Company has recognized deferred tax assets of Rs. 130.45 Million on timing differences. There is inherent uncertainty involved in forecasting future taxable profits, which determines the extent to which deferred tax assets are recognized.
The analysis of the recoverability of such deferred involves judgement regarding the future profitability and the likelihood of the realization of these assets, in particular whether there will be taxable profits in future periods that support the recognition of these assets.
There is an inherent uncertainty involved in forecasting future taxable profits, which determines the extent to which deferred tax assets are recognized. We have identified this matter to be a key audit matter in our audit of the standalone financial statements.
|
Our audit procedures included the following:
• Checked management's calculation of the deferred tax assets and the key assumptions used;
• Evaluated the design and implementation of key controls relating to calculation of deferred tax asset;
• Checked the basis for estimating projected future taxable profits and evaluated the assumptions used by the management in these profits forecasts;
• Tested the tax adjustments, with the support from tax specialists, which are taken into account to estimate the taxable income, applicable tax legislation and the decisions concerning the possibilities of using applicable benefits;
• Performed sensitivity analysis on projections used for determining future taxable income to understand and challenge the key assumptions used by the management;
• Tested the arithmetical accuracy of the deferred tax calculation; and
• Checked the disclosure given in the standalone financial statements for compliance with the Accounting Standards.
|
Other Information
The Company's 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 standalone financial statements and our auditor's report thereon. The Annual report is expected to be made available to us after the date of this auditor's 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 identified above when it becomes available and, in doing so, consider whether such other information is materially inconsistent with the standalone financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.
Responsibilities of Management for the Standalone Financial Statements
The Company's Board of Directors is responsible for the matters stated in Section 134(5) of the Act with respect to the preparation of these standalone financial statements that give a true and fair view of the financial position, financial performance including other comprehensive income, cash flows and changes in equity of the Company 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. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of 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 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 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, management is responsible for assessing the Company's 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.
Those Board of Directors are also responsible for overseeing the Company's financial reporting process.
Auditor's 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 auditor's 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 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 standalone 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 control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under Section 143(3)(i) of the Act, we are also responsible for expressing our opinion on whether the Company has adequate internal financial controls with reference to financial statements in place and the operating 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's 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 Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the 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's report. However, future events or conditions may cause the Company to cease to continue as a going concern.
• 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 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 standalone financial statements for the financial year ended March 31,2024 and are therefore the key audit matters. We describe these matters in our auditor's 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
1. As required by the Companies (Auditor's Report) Order, 2020 ("the Order"), issued by the Central Government of India in terms of sub-section (11) of Section 143 of the Act, we give in the "Annexure 1" a statement on the matters specified in paragraphs 3 and 4 of the Order.
2. As required by Section 143(3) of the Act, we report, to the extent applicable, 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 except as stated in Note 40 (xii) to the standalone financial statements
(a) w.r.t. one software relating to other books of account for which the backup in electronic mode has not been maintained on servers physically located in India ; and
(b) for the matters stated in the paragraph 2 (i) (vi) below on reporting under Rule 11(g);
(c) The Balance Sheet, the Statement of Profit and Loss including the Statement of Other Comprehensive Income, the Cash Flow Statement and Statement of Changes in Equity dealt with by this Report are in agreement with the books of account;
(d) In our opinion, the aforesaid standalone financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Companies (Indian Accounting Standards) Rules, 2015, as amended;
(e) On the basis of the written representations received from the directors as on March 31,2024 taken on record by the Board of Directors, none of the directors is disqualified as on March 31,2024 from being appointed as a director in terms of Section 164 (2) of the Act;
(f) The modification relating to the maintenance of accounts and other matters connected therewith are as stated in paragraph (b) above on reporting under Section 143(3)(b) and paragraph 2(i)(vi) below on reporting under Rule
11(g);
(g) With respect to the adequacy of the internal financial controls with reference to these standalone financial statements and the operating effectiveness of such controls, refer to our separate Report in "Annexure 2" to this report;
(h) In our opinion, the managerial remuneration for the year ended March 31,2024 has been paid / provided by the Company to its directors in accordance with the provisions of Section 197 read with Schedule V to the Act;
(i) With respect to the other matters to be included in the Auditor's Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, as amended 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 on its financial position in its standalone financial statements - Refer Note 31 to the standalone financial statements;
ii. The Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses;
iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.
iv. a) The management has represented that, to the best of its knowledge and belief, other than as disclosed
in the note 40(viii) to the standalone financial statements, no funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the Company to or in any other persons or entities, including foreign entities ("Intermediaries"), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall, whether, directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Company ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries;
b) The management has represented that, to the best of its knowledge and belief, other than as disclosed in the note 40(ix) to the standalone financial statements, no funds have been received by the Company from any persons or entities, including foreign entities ("Funding Parties"), with the understanding, whether recorded in writing or otherwise, that the Company shall, whether, directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries; and
c) Based on such audit procedures performed that have been considered reasonable and appropriate in the circumstances, nothing has come to our notice that has caused us to believe that the representations under sub-clause (a) and (b) contain any material misstatement.
v. The interim dividend declared and paid by the Company during the year and until the date of this audit report is in accordance with Section 123 of the Act.
As stated in Note 33 (ii) to the standalone financial statements, the Board of Directors of the Company have proposed final dividend for the year which is subject to the approval of the members at the ensuing Annual General Meeting. The dividend declared is in accordance with Section 123 of the Act to the extent it applies to declaration of dividend.
vi. Based on our examination which included test checks, the Company has used accounting software and certain related software for maintaining its books of account which has a feature of recording audit trail (edit log) facility and the same has operated throughout the year for all relevant transactions recorded in software except that, as mentioned in note 40 (xi) to the financial statement:
a) audit trail feature is not enabled w.r.t. accounting software at application level for direct changes to data when using certain privileged/ administrative access rights.
b) Audit trail for accounting and certain related software was not enabled at the database level to log any direct changes to the database.
During the course of our audit, we did not come across any instance of audit trail feature being tampered with
respect of the accounting software.
For S.R. Batliboi & Associates LLP
Chartered Accountants
ICAI Firm Registration Number: 101049W/E300004
per Sanjay Bachchani
Partner
Place of Signature: Gurugram Membership Number: 400419
Date: May 24, 2024 UDIN: 24400419BKFRFL7382
|