To the Members of Zensar Technologies Limited
Report on the Audit of the Standalone Financial Statements
Opinion
We have audited the accompanying standalone financial statements of Zensar Technologies Limited ("the Company"), which comprise the Balance sheet as at March 31,2023, the Statement of Profit and Loss, including the statement of Other Comprehensive Income, the Cash Flow Statement and the Statement of Changes in Equity for the year then ended, and notes to the standalone 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 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, 2023, 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, 2023. 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.
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Key audit matters
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How our audit addressed the key audit matter
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Revenue recognition (as described in Notes 2 (a) and 3(a) to the standalone financial statements)
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The Company engages into various contracts for software
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Our
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Ý audit procedures include the following:
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development, and maintenance of software/hardware
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1.
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O btained the understanding of the processes,
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and related services. The contracts with ultimate
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systems and the controls implemented by the
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customers have defined delivery milestones with agreed
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Company for recording and computing revenue
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scope of work and pricing for each milestone based on
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and the associated contract assets and unearned
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the nature of service. On the basis of scope of work and
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revenue;and assessed appropriateness of
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terms, the pricing arrangement of these contracts is time
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accounting policy with Ind AS 115.
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and material and/or fixed price.
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2.
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Oested the design and operating effectiveness of
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Revenue from fixed price contracts, where the
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management's key internal financial controls around
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performance obligation is satisfied over a period of time
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revenue recognition;
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has been recognised using the percentage of completion computed as per the input method based on estimate
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3.
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Oested sample revenue contracts and performed the
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of total contract costs. Use of percentage -of-completion method requires the determination of the actual efforts or costs expended to date as proportion of estimated total efforts or costs to be incurred.
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following procedures to assess whether revenue is appropriately recognised as per principles of Ind AS 115 :
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Key audit matters
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How our audit addressed the key audit matter
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Revenue from time and material contracts is recognised
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a)
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Evaluated management's assessment with respect
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basis the time spent by employee/vendors on a contract
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to identification of performance obligation;
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as approved by the project manager. Such services are
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b)
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Agreed the transaction price to the underlying
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recognised as and when the services are rendered and
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contracts;
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necessary approvals are obtained.
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c)
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In case of time and material type contract, tested
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We identified revenue recognition as a key audit matter
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samples to verify whether revenue has been correctly
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since :
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recorded based on approved effort estimate by
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• There is an inherent and presumed fraud risk around
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project manager and where applicable, is backed by
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the revenue recognition considering application
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customer acceptances wherever revenue is invoiced
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of revenue recognition standard is complex and
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to the customer;
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involves number of key judgements and estimates
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d)
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In respect of fixed price type contracts, tested
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mainly in identifying performance obligations,
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samples to verify whether management has
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related transaction price (including estimates of
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appropriately accrued revenue as per milestones
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variable consideration) and estimating the future
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defined in the contract with necessary approvals and
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cost to completion of the fixed price contracts, which
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that the estimated cost to complete the contract is
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is used to determine the percentage of completion
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appropriate;
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of the relevant performance obligation;
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e)
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Assessed aging of unbilled revenue as on the balance
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• Time and material contracts are billed basis approval
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sheet date and in case of aged items obtained
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of effort estimate by project manager and also
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reasons for delays if any and expected timelines for
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through customer acceptances in certain cases; and
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invoicing of the same.
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• At year end, significant amount of unbilled revenue
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f)
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Performed analytical procedures on unbilled revenue
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related to these contracts are recognised on the
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and customer margin's and obtained reasons for
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balance sheet.
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significant unexpected variations.
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g)
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Obtained and read the disclosures made in the
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standalone financial statements.
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Impairment assessment of Goodwill (as described in Notes 2 (f) and 33 to the standalone financial statements)
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As at March 31, 2023, the Company has a goodwill of INR
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Our audit procedures include the following:
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956 million pertaining to various business combinations
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1.
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Assessed Company's evaluation of identification
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which took place in the past. The carrying value of goodwill
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of cash-generating unit's (CGU) and allocation of
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is tested annually for impairment using discounted cash
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goodwill to the respective CGU.
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flow models of recoverable value compared to the
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o
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carrying value of assets. A deficit between recoverable
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Tested design and operating effectiveness of
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value and carrying value would result in impairment.
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Determination of recoverable amount is complex and
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impairment assessment process.
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typically requires a high level of judgment.
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3.
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Involved our specialists evaluated the
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appropriateness of the model used and assessed the
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The key assumptions to the impairment testing model includes:
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key assumptions of the cash flow forecasts including
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discount rates, expected growth rates and terminal
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• Projected revenue growth, operating margins and
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growth rates used; in consideration of current and
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operating cash flows during the forecasted period,
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estimated future economic conditions.
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• Long-term growth rate beyond explicit forecast
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4.
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Compared previous forecasts to actual results for
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period and in perpetuity; and
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the past two financial years to assess the historical
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• Discount rate used
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accuracy of the forecasting process.
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Due to the inherent uncertainty associated with these
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5.
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Analyzed the consistency of cash flow forecasts
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assumptions and because of the materiality of the
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with estimates presented to the Board as part of the
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balance to the standalone financial statements of the
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Budgeting process.
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Company, the matter is considered a key audit matter.
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6.
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Assessed recoverable value headroom by performing
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sensitivity analysis of key assumptions.
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7.
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Tested the arithmetic accuracy of the models
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8.
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Obtained and read the disclosures made in the
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standalone financial statements.
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Other Information
The Company's Board of Directors is responsible for the other information. The other information comprises the information included in the information included in the Directors' Report, 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 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 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
i. The Company has disclosed the impact of pending litigations on its financial position in its standalone financial statements -Refer Note 29 to the standalone financial statements;
ii. The Company did not have any longterm 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 37 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 37 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
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.
• Obtain sufficient appropriate audit evidence regarding the financial statements/financial information of the branches to express an opinion on the standalone financial statements. We are responsible for the direction, supervision and performance of the audit of the financial statements/ financial information of the components which have been audited by us. We remain solely responsible for our audit opinion.
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, 2023 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.
Other Matter
The financial statements of the Company for the year ended March 31, 2022, included in these standalone financial statements, have been audited by the predecessor auditor who expressed an unmodified opinion on those statements on May 10, 2022.
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 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 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, 2023 taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2023 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 these standalone 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, 2023 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:
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 final dividend paid by the Company during the year in respect of the same declared for the previous year is in accordance with section 123 of the Act to the extent it applies to payment of dividend.
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 10 (a) (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. As proviso to Rule 3(1) of the Companies (Accounts) Rules, 2014 is applicable for the Company only w.e.f. April 1, 2023, reporting under this clause is not applicable.
For S R B C & CO LLP
Chartered Accountants ICAI Firm Registration Number: 324982E/E300003
per Tridevlal Khandelwal
Partner
Membership Number: 501160 UDIN: 23501160BGYHCO9737
Place of Signature: Mumbai Date: May 11, 2023
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