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Cholamandalam Investment and Finance Company Ltd.

BSE: 511243 | NSE: CHOLAFIN |

Represents Equity.Intra - day transactions are permissible and normal trading is done in this category
Series: EQ | ISIN: INE121A01024 | SECTOR: Finance - Leasing & Hire Purchase

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Annual Report

For Year :
2021 2019 2017 2016 2015 2014 2013 2012 2011

Auditor's Report

Report on the Audit of the Standalone Ind AS Financial Statements Opinion

We have audited the accompanying Standalone Ind AS financial statements of Cholamandalam Investment and Finance Company Limited (the Company), which comprise the Balance sheet as at March 31 2021, 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 Ind AS financial statements, including a summary of significant 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 Ind AS 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 31,2021, 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 Ind AS 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 Ind AS 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 Ind AS financial statements.

Emphasis of Matter

We draw attention to Note 2.2 of the Standalone Ind AS financial statements, which describes the impact of COVID-19 pandemic, and its possible consequential implications on the Company''s operations and financial metrics, including the Company''s estimates of impairment of loans and that such estimates may be affected by the severity and duration of the pandemic. Our opinion is not modified in respect of this matter.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the Standalone Ind AS financial statements for the financial year ended March 31, 2021. 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 Auditor''s 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 our audit procedures, including the 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

Impairment of Financial Assets based on Expected Credit Loss (''ECL'') (as described in Note 3.5 of the Standalone Ind AS Financial

Statements)

As at March 31, 2021, the Company has made a provision for impairment loss aggregating '' 2,44,441 Lakhs against the loans outstanding. Due to the significance of the judgments used in both classification of loans into various stages as well as the computation of expected credit losses on such financial assets as per Ind AS 109, this has been considered as a key audit matter.

• R ead and assessed the Company''s impairment provision policy and their compliance with Ind AS 109 and the governance framework approved by the Board of Directors pursuant to Reserve Bank of India guidelines issued on 13 March 2020.

Key audit matters

How our audit addressed the key audit matter

Financial instruments, which include loans to customers,

• Read and assessed the Company''s policy with respect to

represent a significant portion of the total assets of the Company.

moratorium and one-time restructuring pursuant to the RBI

The Company has loans aggregating '' 68,28,375 lakhs as at March

circular and tested the implementation of such policy on a

31,2021.

sample basis.

• Understood the Company''s key credit processes comprising

Estimates regarding the impairment provision against loans

granting, recording and monitoring of loans as well as

are based on the expected credit loss model developed by the

impairment provisioning.

Company based on the guiding principles prescribed under Ind

• Read and assessed the Company''s impairment provisioning

AS 109. As stated, in the notes to the financial statements for the

policy as per Ind AS 109;

year ended March 31, 2021, the impairment provision is based

• Obtained an understanding of the Company''s Expected Credit

on the expected credit loss model requires the management of

Loss (''ECL'') methodology, the underlying assumptions and

the Company to make significant judgments in connection with

performed sample tests to assess the staging of outstanding

related computation. These include:

exposures;

(a) Segmentation of the loan portfolio into homogenous pool of

• Tested the ECL model, including assumptions and underlying

borrowers;

computation.

• Assessed the Exposure at Default used in the impairment

(b) Identification of exposures where there is a significant increase

calculations on a test basis;

in credit risk and those that are credit impaired;

• Obtained an understanding of the basis and methodology

(c) Determination of the 12 month and life-time probability of

adopted by management to determine 12 month and life-time

default for each of the segments identified; and

probability of defaults for various homogenous segments and performed test checks;

(d) Loss given default for various exposures based on past trends

• Obtained an understanding of the basis and methodology

/ experience, management estimates etc.,

adopted by management to determine Loss Given Defaults

Additionally, the economic and business consequences of the

for various homogenous segments based on past recovery

COVID 19 pandemic as described in Note 2.2 to the Standalone

experience, qualitative factors etc., and performed test checks;

Ind AS financial statements, slowdown of economic activity,

• Assessed the items of loans, credit related contingent items as

moratoriums granted to borrowers, the related regulatory directives and also the applicable accounting directions, further

at the reporting date which are considered in the impairment computation as at the reporting date;

affect provisioning under the ECL approach.

• Assessed and tested the inputs used in the impairment computation (including the data integrity of information

Note 3.5 to the Standalone Ind AS Financial Statements explains

extracted from the Company''s IT systems);

the various matters that the management has considered for

• Enquired with the management regarding significant

developing this expected credit loss model.

judgments and estimates involved in the impairment computation and additional management overlay provision arising from the effects of the COVID-19 pandemic, and evaluated the reasonableness thereof;

• Performed analytical reviews of disaggregated data to observe any unusual trends warranting additional audit procedures; and

• Read the financial statement disclosures in respect of impairment losses on financial assets, including the specific disclosures made with regard to the impact of COVID-19 on the ECL estimation.

Audit in an Information Technology (IT) enabled environment - including considerations on exceptions identified in IT environment

The Company has information technology applications which are used across various class of transactions in its operations including automated and IT dependent manual controls that are embedded in them.

In assessing the reliability of electronic data processing, we involved our specialized IT auditors in our audit team. Our audit procedures focused on the IT infrastructure and applications relevant to financial reporting:

Key audit matters

How our audit addressed the key audit matter

Due to the pervasive nature and complexity of the Company''s IT environment, we place significant emphasis on the information systems, the controls, and process around such information systems and the usage of information from such systems for the purpose of financial reporting by the management for our audit. Accordingly, this has been considered as a key audit matter.

• Assessing the information systems and the applications that is available in the Company in two phases: (i) IT General Controls and (ii) Application level embedded controls;

• The aspects covered in the IT systems General Control audit were (i) User Access Management (ii) Change Management (iii) Other related ITGCs; - to understand the design and the operating effectiveness of such controls in the system;

• Understanding of the changes that were made to the IT landscape during the audit period and assessing changes that have impact on financial reporting;

• Performed tests of controls (including over compensatory controls wherever applicable) on the IT Application controls and IT dependent manual controls in the system.

• Wherever applicable, we also assessed through direct sample tests, the information produced from these systems which were relied upon for our audit.

Pending litigations with tax authorities (as described in Note 38(a) of the Standalone Ind /AS Financial Statements)

The Company operates in a complex tax environment and is

In assessing the exposure of the Company for the tax litigations,

required to discharge direct and indirect tax obligations under

we have performed the following procedures:

various legislations such as Income Tax Act, 1961, the Finance Act,

• Obtained an understanding of the process laid down by the

1994 Goods and Services Tax Acts and VAT Acts of various states,

management for performing their assessment taking into

as may be applicable.

consideration past legal precedents, changes in laws and

The tax authorities under these legislations have raised certain

regulations, expert opinions obtained from external tax / legal

tax demands on the Company in respect of the past periods. The

experts (as applicable);

Company has disputed such demands and has appealed against

• Assessed the processes and entity level controls established

them at appropriate forums. As at March 31, 2021 the Company

by the Company to ensure completeness of information with

has an amount of '' 66,928 Lakhs pertaining to various pending

respect to tax litigations;

tax litigations.

Ind AS 37 requires the Company to perform an assessment of the

• Along with our tax experts, we undertook the following procedures:

probability of economic outflow on account of such disputed tax

• Reading communications with relevant tax authorities

matters and determine whether any particular obligation needs

including notices, demands, orders, etc., relevant to

to be recorded as a provision in the books of account or to be disclosed as a contingent liability. Considering the significant

the pending litigations, as made available to us by the management;

degree of judgement applied by the management in making such

• Testing the accuracy of disputed amounts from the

assessments and the resultant impact on the financial statements,

underlying communications received from tax authorities

we have considered it to be a key audit matter.

and responses filed by the Company;

• Considered the submissions made to appellate authorities and expert opinions obtained by the Company from external tax / legal experts (wherever applicable) which form the basis for management''s assessment;

• Assessed the positions taken by the management in the light of the aforesaid information and based on the examination of the matters by our tax experts.

Read the disclosures included in the Standalone Ind AS Financial Statements in this regard.

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 Ind AS financial statements and our auditor''s 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 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 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 Ind AS 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 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, 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 Ind AS Financial Statements

Our objectives are 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 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 Ind AS 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 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, 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 Ind AS financial 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 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 Ind AS financial statements for the financial year ended March 31,2021 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, 2016 (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 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 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 Ind AS 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, 2021 taken on record by the Board of Directors, none of the directors is disqualified as on March 31,2021 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 with reference to Standalone Ind AS financial statements and the operating effectiveness of such controls, refer to our separate Report in Annexure 2 to this report;

(g) In our opinion, the managerial remuneration for the year ended March 31,2021 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;

(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 has disclosed the impact of pending litigations on its financial position in its Standalone Ind AS financial statements - Refer Note 38(a) to the Standalone Ind AS financial statements;

ii. The Company has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long-term contracts including derivative contracts - Refer Note 7 and 9 to the Standalone Ind AS financial statements;

iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company

For S.R. BATLIBOI & ASSOCIATES LLP

Chartered Accountants

ICAI Firm Registration Number: 101049W/E300004

per Aravind K

Partner

Membership Number: 221268 UDIN: 21221268AAAACQ3684 Place of Signature: Chennai Date: May 7, 2021