Xelpmoc Design And Tech Limited
Report on the Audit of the Standalone Financial Statements
OPINION
We have audited the accompanying standalone financial, statement of XeLpmoc Design and Tech Limited (the “Company”), which comprise the Standalone Balance Sheet as at March 31, 2024 and the Standalone Statement of Profit and Loss (including Other Comprehensive Income), Standalone Statement of Changes in Equity and Standalone Statement of Cash Flows for the year ended, and Notes to the Standalone financial statements, including significant accounting policies and other explanatory information (hereinafter referred to as “the standalone financial statements”).
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 (“the Act”) in the manner so required and give a true and fair view in conformity with the Indian Accounting Standards prescribed under Section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended, (“Ind AS”) and other accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2024, the loss and total comprehensive income, changes in equity and its cash flows for the year ended on that date.
BASIS FOR OPINION
We conducted our audit of the standalone financial statement in accordance with the Standards on Auditing (“SAs”) 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 (ICAI) together with the ethical requirements that are relevant to our audit of the standalone financial statements under the provisions of the Act and the Rules made thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the ICAI’s 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 of the current period. 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. We have determined the matters described below to be the key audit matters to be communicated in our report:
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Sr. No. Key Audit Matter
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Auditor’s Response
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1 The Company derives revenue from IT services comprising of software development and reLated services, maintenance, consulting, and reLated advisory services.
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Principal Audit Procedures Performed:
We assessed the Company’s processes and controls to ensure that the revenue accounting standard is appropriately deaLt with.
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Accuracy in recognition, measurement, presentation and disclosures of revenues and other related balances as per Ind AS 115 “Revenue from Contracts with Customers”.
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Our audit approach consisted testing of the design and operating effectiveness of the internaL controLs and substantive testing of revenue from contracts with customers as foLLows:
• EvaLuated the design of internaL controLs and its operating effectiveness reLating to adherence of the revenue accounting standard.
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The application of the revenue accounting standard invoLves certain key judgments relating to identification of distinct performance obLigations, determination of transaction price and avocation of the same to the identified performance obLigations, the appropriateness of the basis used to measure revenue recognized over a period or at a point in time and appropriateness in determining contract asset and contract liability.
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• SeLected a sampLe of continuing and new contracts, and tested the operating effectiveness of the internaL controL, reLating to identification of the distinct performance obLigations, determination of transaction price and aLLocation of transaction price to each performance obLigation.
• We carried out a combination of procedures involving enquiry and observation, re-performance and inspection of evidence in respect of operation of these controLs.
• Tested the reLevant information technoLogy systems’ access and change management controLs reLating to contracts and reLated information used in recording and discLosing revenue in accordance with the new revenue accounting standard.
• Ensured that appropriate discLosures as required are provided.
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The standard requires disclosures which invoLves coLLation of information in respect of disaggregated revenue, periods over which the remaining performance obLigations wiLL be satisfied subsequent to the baLance sheet date and movement in contract asset and contract liability.
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SeLected a sampLe of continuing and new contracts and performed the foLLowing procedures:
• Read, anaLyzed and identified whether the performance ObLigations Listed in these contracts were distinct or not.
• Compared these performance obLigations with that Identified and recorded by the Company. Considered the terms of the contracts to determine the transaction price incLuding any variabLe consideration to verify the transaction price used to record revenue and to test the basis of estimation and recognition of the variabLe consideration.
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These contracts may involve onerous obLigations which requires criticaL assessment of foreseeabLe Losses to be made by the Company.
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• Samples in respect of revenue recorded for time and material contracts were tested using a combination of approved time sheets including customer acceptances, subsequent invoicing and historical trend of collections and disputes.
• ActuaL receipts in case of fixed price contracts were mapped to performance obLigations discharged on the reporting date to caLcuLate the Contract Liability i.e. amount received in advance from customers UnbiLLed revenue was evaLuated to ensure that the performance obLigation has been discharged and onLy the act of raising the invoice on the customer was pending. SampLe of revenues disaggregated by type, Geography and industry verticaLs was tested with the performance obLigations specified in the underLying contracts.
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• Performed anaLyticaL procedures for reasonabLeness of revenues discLosed by type, geography and industry verticaLs.
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Sr. No. Key Audit Matter
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Auditor’s Response
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Refer Note 2.10 - “Revenue recognition policy” to the Standalone Financial Statements.
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For
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testing the Company’s computation of the estimation of contract costs and onerous obligations, if any. We:
assessed that the estimates of costs to compLete were reviewed and approved by appropriate designated management personnel.
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•
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Compare recent gross margins on contracts to historical trends and industry benchmarks. A significant decline in margins might indicate potential onerous situations.
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If a contract appears potentially onerous, assess the likelihood of incurring a loss. This may involve:
- Estimating additional costs to fulfill the contract.
- Evaluating the potential for renegotiation or termination.
- Considering the recoverability of any contract assets
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•
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Ensure management has adequately assessed the presence of onerous contracts and considered potential Provisioning.
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2 Particulars
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Amount % of Total Assets
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Our
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audit procedures included and were not limited to the following:
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Investment in Subsidiaries
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16,935.13
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2.27%
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•
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We have understood and evaluated the process of the management to identify impairment indicators (if any) and valuation of Company’s Non-Current investments.
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Investment in Associates
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20,700.81
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2.77%
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•
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We have evaluated the fair value of investments adopted by the management and assessed the parameters of the fair valuation reports obtained by the management from external experts (Registered Valuer)
We also evaluated the assumptions around the key drivers Investment valuation as mentioned in the independent registered Valuer report which included assumptions w.r.t discount rates, expected growth rates, projections, Valuation methodology adopted by Registered Independent Valuer.
On a test check basis, we have verified appropriate evidence with regard to assertions of existence and rights to the investments.
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Other Investments at Fair Value through Profit and Loss A/c
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67,066.05
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8.98%
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•
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Other Investment at Fair Value through OCI
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5,45,257.26
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72.99%
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•
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Valuation of Investments:
Assessment of carrying value of equity investments in subsidiaries, Associate and fair vaLue of other investments
At the balance sheet date, the value of investments amounted to ' 6,49,959.25 (‘000) representing 87.01% of the total assets.
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• Investment in mutual funds are valued at NAV prevailing as on the date of the financial statements and verified by us with the statements of account.
We have verified principles for recognition, subsequent measurement and adequacy of disclosures as specified in the accounting policy adopted by the Company based on the Indian Accounting Standards.
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Sr. No.
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Key Audit Matter
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Auditor’s Response
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Investments have been considered as key audit matter due to the size of the Account Balance and aLso it involves significant management judgement and estimates such as future expected LeveL of operations and related forecast of cash flows, market conditions, discount rates, terminal growth rate etc.
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Refer to the Note No. 2.9 of the Standalone Financial Statements for its accounting policy.
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3
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Trade Receivables and Expected Credit Losses(ECL):
As outlined in Note No. 13, there were trade receivables as at 31 march 2024 more than 180 days past due.
The coLLectabiLity of the Company’s trade receivabLes and the valuation of the aLLowance for ECL of the trade receivabLes is a key audit matter due to the judgement invoLved.
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Our audit procedures incLuded and were not Limited to the foLLowing:
• We have evaLuated and tested the Company’s process for trade receivabLes incLuding the provisioning and coLLection process.
• We tested on sampLe basis that trade receivabLes were subsequentLy coLLected.
• Where there were indicators that the trade receivabLes were unLikeLy to be coLLected within contracted payment terms, we assessed the adequacy of the aLLowance for impairment of trade receivabLes.
To do this:
• We assessed the aging of trade receivabLes quantum of cLaims with and from the customers.
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• We have evaLuated the independent confirmations from customers and performed aLternate audit procedures on sampLe basis.
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4
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Writeoff of unbiLLed revenue of ' 14,860.55 (in 000’)
If there’s doubt about the coLLectibiLity of unbiLLed revenue due to factors Like customer financiaL difficuLties or disputes over the contract, Ind AS 115 requires an assessment for impairment.
An impairment Loss is recognized to reduce the carrying amount of the receivabLe to its estimated recoverabLe amount. This effectiveLy writes down the unbiLLed revenue portion that is deemed uncoLLectabLe.
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Our audit procedures incLuded and were not Limited to the foLLowing:
• Obtain a detaiLed Listing of the unbiLLed revenue proposed for writeoff.
• AnaLyze the reasons for the proposed writeoff for each item. Common reasons might incLude:
- CLient bankruptcy
- Extended project deLays
- Contract canceLLation
- Disputes with cLients
- Poor cLient payment history
• AnaLyze the terms of the contracts associated with the unbiLLed revenue.
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Sr. No. Key Audit Matter
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Auditor’s Response
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• Classify the unbilled revenue based on its age. This helps assess the likelihood of collection based on historical payment patterns.
• Review any documentation supporting the reasons for writeoff, such as
- CanceLLation notices
- Legal documents
- CLient communication regarding disputes
• Review the financial statements and related disclosures to ensure the writeoff of unbilled revenue is adequately disclosed. This should include the amount written off and the reasons for the writeoff.
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5. Reversal, of ESOP cost on termination of
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Audit procedure includes:
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employment.
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• Obtain an understanding of reasons for reversing a portion of the ESOP cost
• Request and review documentation supporting the reason for the reversal. This could include:
- Employee termination documentation for forfeiture situations.
- Updated stock price information for measurement error adjustments.
- PLan termination documents and reLated caLcuLations, if any
• Assessing the appropriateness of the reversal by:
- Ensuring the reversal amount aligns with the portion of unvested shares at the time of employee departure. Review the Vesting schedule of ESOP plan.
- Review the calculations used to determine the unallocated ESOP cost to be reversed. Ensure consistency with the plan termination agreement, if any and relevant accounting standards.
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INFORMATION OTHER THAN THE STANDALONE FINANCIAL STATEMENTS AND AUDITOR’S REPORT THEREON
The Company’s Management and Board of Directors is responsible for the preparation of the other information. The other information comprises the information included in the Management Discussion and Analysis, Board’s Report including Annexures to Board’s Report, Corporate Governance and Shareholder’s Information, but does not include the standalone financial statements and our auditor’s report thereon.
Our opinion on the standalone 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 financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the standalone 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’S AND BOARD OF DIRECTOR’S RESPONSIBILITIES 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, changes in equity and cash flows of the Company in accordance with the Ind AS and other accounting principles generally accepted in India. 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 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.
The 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 coUusion, 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. 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 system 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 and Board of Directors.
• Conclude on the appropriateness of management’s use of the going concern basis of accounting in preparation of Standalone financial statements 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 condude that a material, uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the standalone 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.
Materiality is the magnitude of misstatements in the standalone financial statements that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the standalone 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 standalone financial statements.
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 of the current period 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 Section 143(3) of the Act, based on our audit 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 including Other Comprehensive Income, Statement of Changes in Equity and the Statement of Cash Flow 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 Ind AS specified under Section 133 of the Act, read with the 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) 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 A”. Our report expresses an unmodified opinion on the adequacy and operating effectiveness of the Company’s internal financial controls over financial reporting.
g) With respect to the other matters to be included in the Auditor’s Report in accordance with the requirements of Section 197(16) of the Act, as amended, In our opinion and to the best of our information and according to the explanations given to us the remuneration paid by the Company to its directors during the year is in accordance with the provision of Section 197 read with Schedule V of the Act. The Ministry of Corporate Affairs has not prescribed other details under Section 197(16) of the Act which are required to be commented upon by us.
h) 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 did not have any pending litigations as on reporting date;
ii. The Company did not have any long-term contracts including derivatives contract for which there were any materiaL foreseeabLe Losses;
iii. There were no amounts which were 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, no funds (which are material either individuaLLy or in the aggregate) 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 person or entity, including foreign entity (“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, no funds (which are material either individuaLLy or in the aggregate) have been received by the Company from any person or entity, including foreign entity (“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;
c) Based on the audit procedures 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-dause (i) and (ii) of Rule 11(e) of the Companies (Audit and Auditors) RuLes, 2014, as amended, as provided under (a) and (b) above, contain any materiaL misstatement.
v. The Company has not decLared and paid any dividend during the current year.
vi. Based on our examination which included test checks, the Company has used accounting softwares for maintaining its books of account, which have a feature of recording audit traiL (edit Log) faciLity and the same has operated throughout the year for ab relevant transactions recorded in the respective software. Further, we did not come across any instance of the audit trail feature being tampered with.
As proviso to Rule 3(1) of the Companies (Accounts) Rules, 2014 is applicable from April 1, 2023, reporting under Rule 11(g) of the Companies (Audit and Auditors) RuLes, 2014 on preservation of audit traiL as per the statutory requirements for record retention is not applicable for the year ended March 31, 2024.
2) As required by the Companies (Auditor’s Report) Order, 2020 (“the Order”) issued by the CentraL Government in terms of Section 143(11) of the Act, we give in “Annexure B” a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent appLicabLe.
For JHS & Associates LLP
Chartered Accountants
Firm’s Registration No.133288W/W100099
Taher Pepermintwala
Partner
Membership No.135507 UDIN: 24135507BKBNVB1329 PLace: Mumbai Dated: 28 May 2024
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