Puppala Chandra Prabhas

MIS (Mangement Information Statement) of From Puppala Prabhas Financial Due Diligence of Isprout April 2022 Dear Sirs, This report was prepared on the specific instructions of the Board for the sole benefit of the company for its upcoming Due Diligence that would be done by the prospective investors. We have reported broadly on matters, which we have noted, and which appeared significant to us but our work may not have revealed matters, which could have been identified by a detailed investigation. All the information we have received is the responsibility of the management. We have not sought to establish the accuracy and reliability of the information given to us except as specifically stated in the report. Consequently, we give no assurance on such information. We have limited our comments to issues and risks arising only out of financial matters. We have not examined the implication of the business issues that may have arisen out of commercial transactions entered into by the entity. Further, we have not independently validated the information provided to us with the actual records maintained by any regulatory authorities or any other external source. Should you require any clarifications, please do let us know. We thank ISprout for giving us this opportunity and hope to be of continuous assistance to ISprout in future. Yours faithfully, Puppala Prabhas April 2022 | Financial Due Diligence of 'Isprout' 2 Table of Contents • Snapshot of Entity • Tax Audit • Company Overview • Income Tax Filing • Work Culture • MCA filings • KMP and Share holding pattern • MCA Records • Company Journey • Books of Accounts • Executive Summary • TDS • Customer and Service Agreements • GST • Receivables • Lease agreements with vendors • Maintenance Vendors • Fixed Asset • Project Cost • Valuation • Borrowings • Related Party Transactions • Financial Audit April 2022 | Financial Due Diligence of 'Isprout' • Service Tax • VAT • Professional Tax • Employee Provident fund • Notices from Department • Isprout Serviced Offices Private Limited • Merger • Shops and Establishment • Competitors of Isprout • Cash Flow Management 3 Snapshot of Entity Name ISPROUT BUSINESS CENTRE PRIVATE LIMITED Date of Incorporation 05/09/2016 Constitution Private Limited Company Nature of Business Providing Co-Working Spaces Registered Office Modern Profound Techpark, Survey No:12, Office No. 201, 2nd Floor, Kondapur Hyderabad Rangareddi TG 500032 IN Name of the Auditor CA S Rathnakar April 2022 | Financial Due Diligence of 'Isprout' 4 Name of the share holder No.of Shares % in Holding Sneha Boyalla 1,77,552 25% Kondapalli Ramanuja Sriharsha 1,48,362 21% Alluri Narayanaraju 70,930 10% KMP / Directors Sreenivasa Rao Tirdhala 66,761 9% VIJAY KUMAR ODDIRAJU 52,173 7% • SESHARANGA SEETA RAMACHANDRA PRASAD KONDAPALLI • SREENIVASA RAO TIRDHALA • SUNDARAMMA PATIBANDLA • SNEHA BOYALLA R Padma Kumari 31,913 4% Lokesh Reddy 31,210 4% Phanidhar Paturi 29,650 4% Sundaramma Patibandla 22,362 3% Ekambar Reddy Gunampally 17,767 3% K L Narasimha Rao 15,957 2% Sesha R S R Prasad Kondapalli 13,110 2% Aleti Kiran 7,842 1% N Purna Chandra Rao 6,243 1% Sridevi Gunampally 5,710 1% Sarada 5,500 1% Srikanth Koripella 3,136 0.4% Madhusudhana Rao Mamidi 3,121 0.4% April 2022 | Financial Due Diligence of 'Isprout' 5 Company Journey April 2022 | Financial Due Diligence of 'Isprout' 6 Growth in No. of seats SEATS 9000 - 5000 2200 - 2018 2019 2020 April 2022 | Financial Due Diligence of 'Isprout' 2021 2022 7 Customers and Service Agreements April 2022 | Financial Due Diligence of 'Isprout' 8 Growth in Customers 70 60 Axis Title - Purva Summit Modern Profound Vijayawada Sohini SMT Jade Pune 2016 2017 2018 2019 2020 2021 2022 - - - - - - - April 2022 | Financial Due Diligence of 'Isprout' 9 Purva Summit Modern Profound 84% 88% 71% 60% 53% 44% 0% 2016 0% 2017 2018 43% 2019 2020 52% 47% 2021 0% 2016 April 2022 | Financial Due Diligence of 'Isprout' 2017 2018 2019 2020 2021 10 Vijayawada Sohini 42% 60% 25% 23% 0% 2016 0% 2017 0% 2018 2019 2020 14% 21% 2021 0% 2016 April 2022 | Financial Due Diligence of 'Isprout' 0% 2017 0% 2018 2019 2020 2021 11 SMT Jade 31% 34% 100% 80% 48% 0% 2016 0% 2017 0% 2018 0% 2019 2020 2021 0% 2016 April 2022 | Financial Due Diligence of 'Isprout' 0% 2017 0% 2018 2019 2020 2021 12 Pune 80% 0% 2016 0% 2017 0% 2018 0% 2019 0% 2020 2021 April 2022 | Financial Due Diligence of 'Isprout' 13 Receivables April 2022 | Financial Due Diligence of 'Isprout' 14 Receivables (1/3) Turnover / Receivables F.Y 2017-18 • Turnover for the F.Y 2017-18 is Rs. 90,78,608 • The Company was able to recover up to 91.27% of receivables • Total Receivables as on 31st March, 2018 is Rs. 14,13,635.53 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Turnover Receivables Turnover / Receivables Apr-18 May-18 Jun-18 Jul-18 F.Y 2018-19 • Turnover for the F.Y 2018-19 is Rs. 1,76,78,947 • The Company was able to recover up to 90.91% of receivables • Total Receivables as on 31st March, 2019 is Rs. 5,05,274 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Turnover Receivables April 2022 | Financial Due Diligence of 'Isprout' 15 Receivables (2/3) Turnover / Receivables F.Y 2019-20 • Turnover for the F.Y 2019-20 is Rs. 6,44,50,471 • The Company was able to recover up to 86.41% of receivables • Total Receivables as on 31st March, 2020 is Rs. 15,74,524 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Turnover Receivables Turnover / Receivables F.Y 2020-21 • Turnover for the F.Y 2020-21 is Rs. 26,51,03,389 • The Company was able to recover up to 55.66% of receivables • Total Receivables as on 31st March, 2021 is Rs. 46,11,262 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 Turnover Receivables April 2022 | Financial Due Diligence of 'Isprout' 16 Receivables (3/3) F.Y 2021-22 • Turnover for the F.Y 2021-22 is Rs. 90,78,608 • The Company was able to recover up to 89.51% of receivables • Total Receivables as on 31st March, 2022 is Rs. 14,13,635.53 Turnover / Receivables Apr-21 May-21 Jun-21 Jul-21 Aug-21 Sep-21 Oct-21 Nov-21 Dec-21 Jan-22 Feb-22 Mar-22 Turnover Receivables Ø Observations v The company has been rightly recovering security deposits and receivables from its customers. No major observations found. April 2022 | Financial Due Diligence of 'Isprout' 17 Maintenance Vendors April 2022 | Financial Due Diligence of 'Isprout' 18 v The Major Expenses to the company are office rent, Maintenance, Electricity, cafeteria Consumables and Secuity charges v All the landlord of the building shall provide Water, Electricity, DG set, air Conditioning, Common area, Lift and Parking space as per lease agreement v The Company pays office rent and maintenances to the respective Building landlord v Every Month based on the unit consumed respective building landlord sends the electricity bill to the company v RCM on security charges was mentioned in GST tab Maintenance Bar graph 2016-17 2017-18 Building Maintenance 2018-19 CAM Electricity Bill Cafeteria Consumables 2019-20 Housekeeping Charges April 2022 | Financial Due Diligence of 'Isprout' 2020-21 Rent Expense 2021-22 security services 19 Fixed Assets April 2022 | Financial Due Diligence of 'Isprout' 20 Ø Fixed Assets: v There is no Fixed Asset register maintained in the company. v There is no depreciation for the F.Y 2016-17 as assets are purchased after Jan’2017 and assets are put to use in the F.Y 2017-18 v In the F.Y 2017-18 Assets have been Apportioned to the advance received from Volante, 18% GST will be levied on transfer of asset as per Section 18(6) and Rule 44(1) v In the F.Y 2017-18 Labour Expenses has been Capitalized. v Fixed assets in books of accounts are properly segregated branch wise v The company has not taken any GST input on immovable goods v The company is in compliance with reversal of Input GST on Lease hold improvments April 2022 | Financial Due Diligence of 'Isprout' 21 Project Cost April 2022 | Financial Due Diligence of 'Isprout' 22 v The company has many contractors lke carpenter, electrian there are no agreements wth them v The company is in regular in deduction of TDS with Contractors v In the F.Y 2021-22 the company has incurred Rs. 1,12,95,948 on Divya Sree Trinity ( Lease Hold Improvement ) Project Cost State Vise 25,00,00,000 20,00,00,000 15,00,00,000 10,00,00,000 5,00,00,000 - Hyderabad Chennai Vijayawada Pune 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 1,15,56,047 - 1,11,16,515 48,27,356 - 1,21,68,056 1,88,41,916 2,14,18,262 - 15,18,91,300 1,88,41,916 2,14,18,262 - 15,37,31,936 2,50,02,035 2,16,97,369 3,78,68,946 22,79,63,290 2,50,15,499 2,16,78,729 5,09,97,211 April 2022 | Financial Due Diligence of 'Isprout' 23 Valuation April 2022 | Financial Due Diligence of 'Isprout' 24 April 2022 | Financial Due Diligence of 'Isprout' 25 Ø Valuation (1/2) : Allotment and Share values 2,500 1,912 2,000 1,912 1,601 1,410 1,500 926 1,000 734 833 - 90 Au g -1 7 Oc t-1 7 De c17 Fe b18 Ap r-1 8 Ju n18 Au g18 Oc t-1 8 De c18 Fe b19 Ap r-1 9 Ju n19 Au g19 Oc t-1 9 De c19 Fe b20 Ap r-2 0 Ju n20 Au g20 Oc t-2 0 De c20 Fe b21 Ap r-2 1 Ju n21 - v During the period the company has done their Share valuation 11 times. v Valuation report dated 12th Aug 2017 value as per Valuation is 39 given by CA Sreelata • Purpose of the valuation to get a fair value for Conversion of unsecured to Equity of Sneha, Sri harsha and Vijay Oddiraju v Valuation report dated 15th Dec 2017 value as per valuation is 90 given by CA Sreelata • Purpose of the valuation to get a fair value for Conversion of unsecured to Equity of Sneha and Sri harsha v Valuation report dated 5th May 2018 value as per valuation is 209 given by CA Sreelata • Purpose of the valuation to get a fair value for conversion of unsecured loan to Equity of Sreenivas rao and hima bindu April 2022 | Financial Due Diligence of 'Isprout' 26 Ø Valuation (2/2) : v Valuation report dated 15th Dec 2018 value as per valuation is 594 given by CKP Financial services Pvt Ltd • Purpose of the valuation to get a fair value for Conversion of unsecured to Equity of Phanidhar Paturi v Valuation report dated 05th Feb 2019 value as per valuation is 734 given by CKP Financial services Pvt Ltd • Purpose of the valuation to get a fair value for Conversion of unsecured to Equity of Himabindu and Sreenivasa Rao v Valuation report dated 03rd Mar 2019 value as per valuation is 833 given by CKP Financial services Pvt Ltd • Purpose of the valuation to get a fair value for Conversion of unsecured to Equity of Lokesh Reddi v Valuation report dated 26th March 2019 value as per valuation is 926 given by CKP Financial services Pvt Ltd • Purpose of the valuation to get a fair value for Conversion of unsecured to Equity of G Ekamber and G Sridevi v After verifying all available valuation report we have obsevered that the company has acquired valuation certificate from Merchant banker and CA Sreelata v As per companies Act 2013 the company should acquire valuation certificate from Registered Valuer and As per Income Tax Act 1961 the company should acquire valuation certificate from CA or Merchant banker v DCF method is universally accepted method all the value of share are araised through DCF method v The company shall acquire valuation certificate from register Valuer too April 2022 | Financial Due Diligence of 'Isprout' 27 Borrowings April 2022 | Financial Due Diligence of 'Isprout' 28 Borrowings (1/3) 16-17 17-18 Sneha Director Loan Account 1,20,000 -2,60,000 Sundari Current Account 52,40,000 - Sri Harsha Director Loan Account 18,29,959 16,76,655 Sesha Prasad Current Account 24,82,000 - Vijay Kumar Oddiraju Loan Account 20,00,000 10,00,000 Sreenivasa Rao Tiradhala - 75,00,000 Jhansi -1,00,000 - Hima Bindu - 60,00,000 1,15,71,959 1,59,16,655 Unsecured Loan from Director Unsecured Loan from Other Total Ø F.Y 16-17 v Up to Rs. 5,65,000 Cash was brought into the company as Unsecured Loan from Director Sneha v Sri Harsha has brought Rs. 1,27,000 cash as unsecured loan v There is a debit balance in Jhansi Loan account v Unsecured Loan agreements with directors are not shared with us Ø F.Y 17-18 v There is a conversion of Unsecured loan from Directors ( Kondapalli Ramanuja Sriharsha, Sneha Boyalla and Vijay Kumar Oddiraju ) to Equity and it is in compliance with MCA filings v There is a Negative balance in Sneha Director Loan account v Up to Rs. 4,03,000 Cash was brought into the Company as unsecured loan from Sneha v Unsecured Loan agreements with directors are not shared with us April 2022 | Financial Due Diligence of 'Isprout' 29 Borrowings (2/3) 18-19 19-20 Sneha Director Loan Account - 5,00,000 Sundari Current Account 10,00,199 1,83,00,199 Sri Harsha Director Loan Account - - Sesha Prasad Current Account - 1,40,00,000 Vijay Kumar Oddiraju Loan Account - - Sreenivasa Rao Tiradhala - 10,00,000 Jhansi - - G Pulla Reddy Sweets Loan Account 1,00,00,000 50,00,000 Paturi Phanidhar Loan Account 99,230 3,49,230 SAS Infra Loan Account 1,50,00,000 50,00,000 Sridevi & Ekambar Reddy Loan Account 99,97,800 49,97,800 Sri Rama Construction Loan - 30,00,000 Hima bindu - - 3,60,97,229 5,21,47,229 Unsecured Loan from Director Unsecured Loan from Other Total Ø F.Y 18-19 v Sri Harsha Loan was transferred to Sesha Prasad Loan Rs. 16,76,655 from there it is converted to Equity v Loan from Director Sneha is transferred to Sundaramma Loan account Rs. 21,90,000 v There is a conversion of Unsecured Loans from Directors to Equity and it is in compliance with MCA filings v Up to Rs. 2,98,000 Cash was brought in to the company from director Sundaramma v Conversion from loan to equity was happened before getting loan from Paturi Phanidhar and Sridevi & Ekambar v Unsecured Loan agreements with directors are not shared with us Ø F.Y 19-20 v Security Deposit from Sri Rama Constructions was considered as Loan v Unsecured Loan agreements with directors are not shared with us April 2022 | Financial Due Diligence of 'Isprout' 30 Borrowings (3/3) 20-21 21-22 Sneha Director Loan Account 10,00,000 2,53,000 Sundari Current Account 5,25,27,239 3,71,84,339 Sri Harsha Director Loan Account 9,47,000 9,47,000 Sesha Prasad Current Account 1,69,60,000 1,69,60,000 Vijay Kumar Oddiraju Loan Account - - Sreenivasa Rao Tiradhala 25,20,000 1,34,20,000 Jhansi - - G Pulla Reddy Sweets Loan Account - - Paturi Phanidhar Loan Account - - SAS Infra Loan Account 50,00,000 - Sridevi & Ekambar Reddy Loan Account 1,00,00,000 - Sri Rama Construction Loan - - Billa Thejaswi Reddy Loan 75,00,000 Chandana Sathish Kumar Loan 15,00,000 YVN Builders LLP 10,00,000 Hima bindu - - Bajaj Finance LTD 29,98,651 15,30,068 RBL 20,12,135 13,98,488 Unsecured Loan from Director Unsecured Loan from Other Ø F.Y 20-21 v Up to Rs. 5,72,190 Remuneration payments are adjusted to Sundaramma loan account v Unsecured Loan agreement with directors are not shared with us Ø F.Y 21-22 v Unsecured Loan agreements with directors are not shared with us Loan from Financial Institution Srividya Infrastructures Private Limited 9,46,38,221 Neo Growth Credit Private Limited 8,12,950 Total 10,39,65,025 16,71,44,066 April 2022 | Financial Due Diligence of 'Isprout' 31 Ø Observation v A company can take unsecured loan from the directors and there relatives too with zero rate of interest. But while accepting deposit from directors, they must give a declaration to the company that the amount is their own money and not borrowed v As Per Sec 269SS of Income Tax Act, 1961: A Loan or Deposit up to Rs.20000/- can be accepted from one person in cash v The Company has accepted loan from Directors in cash during F.Y 2016-17 and 2017-18 which is exceeding 20,000 April 2022 | Financial Due Diligence of 'Isprout' 32 Related Party Transactions April 2022 | Financial Due Diligence of 'Isprout' 33 Ø • • • • • List of related party VIJAY KUMAR ODDIRAJU KONDAPALLI RAMANUJA SRIHARSHA SESHARANGA SEETA RAMACHANDRA PRASAD KONDAPALLI SREENIVASA RAO TIRDHALA SUNDARAMMA PATIBANDLA SNEHA BOYALLA SRIVATSAVA RANGA PRASAD KONDAPALLI RAMANUJA SRIKARA KONDAPALLI HIMA BINDU MANGAVALLI Ø F.Y 2016 - 17 v There are no related party transaction for the F.Y 201617 F.Y 2017-18 Director Remuneration Sneha Boyalla • • • • 2,40,000 Office Rent Sneha Boyalla 14,40,000 Sri Harsha 9,50,000 Vijay Kumar Oddiraju 7,66,000 Ø F.Y 2017-18 v During the year the company has paid director remuneration to Sneha Boyalla Rs. 2,40,000 v The landlords of the Company’s registered office Modern Profound are the directors of the company during the year Rs. 31,56,000 paid to them as office rent TDS Sec 194I has been deducted on the same. v Related Party transactions are disclosed in Audit report April 2022 | Financial Due Diligence of 'Isprout' 34 F.Y 2018-19 Professional Fees Sundaramma 7,00,000 Office Rent Sneha Boyalla 15,19,200 Vijay Kumar Oddiraju 7,63,200 F.Y 2019-20 Professional Fees Sundaramma 25,00,000 Office Rent Sneha Boyalla 16,10,352 Vijay Kumar Oddiraju 8,94,640 Ø F.Y 2018-19 v During the yearcompany has paid Rs. 7,00,000 as Professional fee to Director Sundaramma TDS Sec 194J has been deducted on the same. v The landlords of the Company’s registered office modern profound are the directors of the company during the year Rs. 22,82,400 paid to them as office rent TDS Sec 194I has been deducted on the same. v All the above related party transactions are paid from Isprout Serviced officers LLP v Related Party transactions are disclosed in Auditreport Ø F.Y 2019-20 v During the year company has paid Rs. 7,00,000 as Professional fee to Director Sundaramma TDS has been deducted on the same. v The landlord of the Company’s registered office modern profound is the director of the company during the year Rs. 16,10,352 paid to them as office rent TDS Sec 194I has been deducted on the same. v Related Party transactions are disclosed in Audit report April 2022 | Financial Due Diligence of 'Isprout' 35 F.Y 2020-21 Professional Fees Sundaramma 36,91,667 Srinivas Rao Tirdhala 2,18,817 Office Rent Sneha Boyalla 16,67,400 Vijay Kumar Oddiraju 8,33,700 F.Y 2021-22 Professional Fees Sundaramma 48,00,000 Srinivas Rao Tirdhala 36,00,000 Office Rent Sneha Boyalla 15,05,422 Vijay Kumar Oddiraju 10,05,209 Ø F.Y 2020-21 v During the year company has paid Rs. 36,91,667 as Professional fee to Director Sundaramma and RS. 2,18,817 to director Srinivas rao tridhala, TDS has been deducted on the same. v The landlord of the Company’s registered office Modern Profound is the director of the company during the year Rs. 25,01,100 paid to them as office rent TDS Sec 194I has been deducted on the same. v Related Party transactions are disclosed in Audit report Ø F.Y 2021-22 v During the year company has paid Rs. 48,00,000 as Professional fee to Director Sundaramma and Rs. 36,00,000 to director Srinivas rao tridhala, TDS has been deducted on the same. v The landlord of the Company’s registered office Modern Profound is the director of the company during the year Rs. 25,10,631 paid to them as office rent TDS Sec 194I has been deducted on the same. April 2022 | Financial Due Diligence of 'Isprout' 36 Financial Audit April 2022 | Financial Due Diligence of 'Isprout' 37 Auditor during the year Financial Year Name of the Auditor Date of Signing 16-17 CA Sreelata 30/08/2017 17-18 CA Sreelata 30/08/2018 18-19 CA Sreelata 28/05/2019 19-20 CA Sreelata 10/11/2020 20-21 CA Rathnakar 01/11/2021 21-22 CA Rathnakar Yet to Sign Ø Key Observation (1/2) v F.Y 2016-17 • Loan and advance ( Asset ) in the books is not matching with the Audited Financials v F.Y 2017-18 • cash transactions with director Sneha are not disclosed in the Audit report • Short term borrowings in the books is not matching with the Audited Financials • Fixed Assets Totals are not matching with Audited Financials • Investment in Isprout Serviced Offices LLP entry is missing in books of accounts April 2022 | Financial Due Diligence of 'Isprout' 38 Key Observation (2/2) v F.Y 2018-19 • Investment in Isprout Serviced Offices LLP numbers are not matching with Audited fiancials • Investment in Isprout Serviced offices LLP was not mentioned as Subsidiary in Audit report • Related Party Transactions are not disclosed in audit report v F.Y 2019-20 • Audit fee entry is missing in the books and in audited financials v F.Y 2020-21 • Everything is in compliance Ø Significant Accounting Policies which can be added in Audit report • Use of Estimates • Property, Plant and Equipment • Depreciation on Property, Plant and Equipment • Intangible Assets • Investments • Revenue Recongnition • Employee benefits • Income Taxes • Leases • Cash and cash equivalents April 2022 | Financial Due Diligence of 'Isprout' 39 Tax Audit April 2022 | Financial Due Diligence of 'Isprout' 40 Tax Audit Applicability: v Tax Audit is applicable to all Tax Payers whose Sales or Turnover or Gross Receipt Exceeds Rs. 1 Crore • • • • Tax Audit is not applicable for the F.Y 16-17 and 17-18 to the company as it’s Turnover did not exceed Rs. 1 Crore Tax Audit is applicable for the F.Y 18-19, 19-20, 20-21 and 21-22 to the company as Turnover exceeded Rs. 1 Crore All the Tax audits are filed on time All the details mentioned in Tax audit are in compliance and matching with the Audited Financials Financial Year Tax Audit Due Date Tax Audit Filed Date 2018-19 30th Nov 2020 19th Sep 2019 2019-20 10th Jan 2021 08th Jan 2021 2020-21 15th Feb 2022 27th Dec 2021 2021-22 3oth Sep 2022 Yet to file April 2022 | Financial Due Diligence of 'Isprout' 41 Income Tax Filing April 2022 | Financial Due Diligence of 'Isprout' 42 Financial Year Due date Actual Filed Date 16-17 31-Oct-17 27-Oct-17 17-18 31-Oct-18 31-Oct-18 18-19 30-Nov-20 19-Sep-19 19-20 10-Jan-21 05-Jan-21 20-21 15-Mar-22 06-Jan-22 21-22 31-Oct-22 Yet to file v Income Tax refund for the F.Y 2017-18 Rs. 5,08,740 the company has received the refund on 27th May 2020 v In F.Y 2018-19 the company has filed a rectificion return for Original return on 12th June 2020 and revised return on 21st May 2021 v There is an Income Tax refund for the F.Y 2018-19 Rs. 13,15,130 the Company has received the refund on 27th Aug 2020 along with refund the company has received Interest on refund Rs. 26,310 v There is an Income Tax Refund due for the F.Y 2019-20 Rs. 58,15,240 v Income Tax Refund due for the F.Y 2020-21 Rs. 2,01,17,770 Ø Obervations v All Income Tax returns are filed on time v We have verified all Income Tax return and compared with Audited financials all the numbers are matching April 2022 | Financial Due Diligence of 'Isprout' 43 F.Y 2016-17 Balance sheet as on 31st March 2017 Particular Amount I. Equity Particular Amount I. Non current Assets Share Capital 1,00,000 Reserve & Surplus -3,95,513 1,18,63,047 Fixed Assets -2,95,513 II. Long term borrowings Unsecured Loans II. Current Assets 1,15,71,959 Loan and advances 4,64,096 Cash and cash equivalents 6,27,341 Other Current ASsets 11,600 III. Current Liabilites 11,03,037 Sundry Creditors 16,15,817 Provision 73,821 16,89,638 Total 1,29,66,084 Total 1,29,66,084 April 2022 | Financial Due Diligence of 'Isprout' 44 F.Y 2016-17 Profit and Loss A/C from 01/04/2016 to 31/03/2017 Particular Amount Particular Employee Benefit Cost 40,000 Net Loss Office & Administrative Expenses 2,25,840 Other Expenses 1,29,673 Total 3,95,513 Total Amount 3,95,513 3,95,513 April 2022 | Financial Due Diligence of 'Isprout' 45 F.Y 2017-18 Balance sheet as on 31st March 2018 Particular Amount I. Equity Particular Amount I. Non current Assets Share Capital 40,00,000 Tangible assets 84,13,135 Security Premium 1,39,33,334 Capital Work in Progress 55,71,842 Reserve & Surplus -26,41,833 Long Term Investment 1,05,02,240 1,52,91,501 II. Long term borrowings Unsecured Loans 2,44,87,217 II. Current Assets 1,59,16,655 III. Current Liabilites Sundry Creditors 32,14,740 Customer Security Deposits 26,11,500 Provision 1,06,346 Other Current Liabilites 15,63,300 Trade Receivables 14,13,635 Loan and advances 47,53,920 Cash and cash equivalents 70,22,137 TDS Receivable 5,08,489 Other Current ASsets 77,414 1,37,75,595 74,95,887 IV. Non Current Liabilites Deferred Tax Liability Total -4,41,231 3,82,62,812 Total 3,82,62,812 April 2022 | Financial Due Diligence of 'Isprout' 46 F.Y 2017-18 Profit and Loss A/C from 01/04/2017 to 31/03/2018 Particular Amount Direct Expenses Particular Amount Direct Income Office Rent 36,36,000 Electricity Charges 7,91,552 Maintenances Charges 8,79,759 Service Income Net Loss Employee Benefit Cost 8,73,197 Office & Administrative Expenses 10,15,521 Other Expenses 14,38,466 Depreciation 31,31,664 Total 1,17,66,159 Total 90,78,608 26,87,551 1,17,66,159 April 2022 | Financial Due Diligence of 'Isprout' 47 F.Y 2018-19 Balance sheet as on 31st March 2019 Particular Amount I. Equity Particular Amount I. Non current Assets Share Capital 62,42,700 Tangible assets 2,54,08,645 Security Premium 12,48,14,023 Capital Work in Progress 1,94,29,621 Reserve & Surplus 53,78,848 Long Term Investment 11,73,30,013 13,64,35,571 II. Long term borrowings Unsecured Loans 16,21,68,279 II. Current Assets 3,60,97,230 III. Current Liabilites Sundry Creditors 92,30,382 Customer Security Deposits 33,05,535 Provision 50,000 Other Current Liabilites 14,46,586 Trade Receivables 9,77,245 Loan and advances 1,35,02,178 Cash and cash equivalents 12,57,701 TDS Receivable 13,47,639 Other Current ASsets 62,10,663 2,32,95,426 1,40,32,503 IV. Non Current Liabilites Deferred Tax Liability Total -11,01,599 18,54,63,705 Total 18,54,63,705 April 2022 | Financial Due Diligence of 'Isprout' 48 F.Y 2018-19 Profit and Loss A/C from 01/04/2018 to 31/03/2019 Particular Amount Direct Expenses Particular Amount Direct Income Office Rent 54,12,880 Service Income Electricity Charges 18,74,251 Other Income Maintenances Charges 12,91,599 Deffered tax Liability House Keeping Charges 8,64,073 Internet Charges 6,82,345 Security charges 5,09,720 Telephone Charges 32,883 Office Maintenance 5,43,762 Office Supplies 5,04,035 Employee Benefit Cost 11,35,627 Other Expenses 35,28,251 Depreciation 51,74,493 Net Profit 80,20,680 Total 2,95,74,599 Total 1,73,27,118 1,15,87,113 6,60,368 2,95,74,599 April 2022 | Financial Due Diligence of 'Isprout' 49 F.Y 2019-20 Balance sheet as on 31st March 2020 Particular Amount I. Equity Particular Amount I. Non current Assets Share Capital 63,83,690 Tangible assets 22,93,49,696 Security Premium 15,06,69,869 Capital Work in Progress - Capital Reserve 2,39,09,938 Long Term Loan and advances 8,59,91,601 Reserve & Surplus -2,25,92,690 31,53,41,297 15,83,70,807 II. Current Assets II. Long term borrowings Unsecured Loans Trade Receivables 3,91,67,229 III. Current Liabilites 37,09,335 Short term Loan and advances 97,582 Cash and cash equivalents 15,38,470 TDS Receivable 2,48,46,775 Other Current ASsets 3,47,24,206 6,49,16,368 Sundry Creditors 5,73,88,285 Customer Security Deposits 10,99,87,642 Provision 1,57,37,662 III. Non Current Asset Other Current Liabilites 1,09,92,697 Deffered Tax Asset 1,13,86,657 19,41,06,286 Total 39,16,44,322 Total 39,16,44,322 April 2022 | Financial Due Diligence of 'Isprout' 50 F.Y 2019-20 Profit and Loss A/C from 01/04/2019 to 31/03/2020 Particular Amount Direct Expenses Particular Amount Direct Income Office Rent 6,20,36,791 Service Income Electricity Charges 1,08,08,944 Other Income Maintenances Charges 1,15,35,208 Deffered Tax Liability House Keeping Charges 80,08,343 Internet Charges 29,19,421 Security charges 19,07,568 Telephone Charges 6,82,437 Office Maintenance 75,763 Cafetaria Consumables 22,31,098 Commision and Brokerage 47,37,644 Advertising/Promotional 27,54,014 Employee Benefit Cost 53,23,447 Other Expenses 1,66,82,272 Depreciation 4,03,93,977 Total 17,00,96,927 Net Loss Total 12,71,24,316 95,944 1,49,05,129 2,79,71,538 17,00,96,927 April 2022 | Financial Due Diligence of 'Isprout' 51 F.Y 2020-21 Balance sheet as on 31st March 2021 Particular Amount I. Equity Particular Amount I. Non current Assets Share Capital 63,83,690 Tangible assets 19,59,87,008 Security Premium 15,06,69,871 Capital Work in Progress - Reserve & Surplus -6,04,34,086 Long Term Loan & Advances 10,13,38,991 9,66,19,475 II. Long term borrowings Unsecured Loans 29,73,25,999 II. Current Assets 10,39,66,025 III. Current Liabilites Trade Receivables 66,68,492 Short Term Loan and advances 94,604 Cash and cash equivalents 45,54,921 TDS Receivable 2,01,48,418 Other Current ASsets 3,07,41,145 Sundry Creditors 6,76,46,120 Customer Security Deposits 9,19,41,504 Provision 50,000 Other Current Liabilites 2,33,31,449 III. Non Current Asset 18,29,69,073 Deffered Tax Asset Total 6,22,07,580 38,35,54,573 Total 2,40,20,994 38,35,54,573 April 2022 | Financial Due Diligence of 'Isprout' 52 F.Y 2020-21 Profit and Loss A/C from 01/04/2020 to 31/03/2021 Particular Amount Direct Expenses Office Rent Particular Amount Direct Income 14,93,01,048 Service Income Electricity Charges 1,92,14,565 Maintenances Charges 2,30,08,161 Deffered Tax Liability House Keeping Charges 42,42,315 Internet Charges 66,99,407 Security charges 28,57,608 Telephone Charges 2,08,895 Office Maintenance 13,66,143 Cafetaria Consumables 6,78,492 Commision and Brokerage 1,07,28,304 Advertising/Promotional 15,99,633 Employee Benefit Cost 67,43,141 Other Expenses 2,98,90,875 Depreciation 8,33,82,092 Total 33,99,20,680 Other Income Net Loss Total 26,48,71,629 2,99,024 1,30,93,912 6,16,56,115 33,99,20,680 April 2022 | Financial Due Diligence of 'Isprout' 53 F.Y 2021-22 Balance sheet as on 31st March 2022 Particular Amount I. Equity Particular Amount I. Non current Assets Share Capital 68,52,991 Tangible assets 36,74,61,195 Security Premium 24,99,60,570 Capital Work in Progress 2,19,43,162 Reserve & Surplus -5,67,85,109 Long Term Loan & Advances 12,33,28,343 20,00,28,451 II. Long term borrowings Unsecured Loans 51,27,32,700 II. Current Assets 16,71,44,066 III. Current Liabilites Trade Receivables 69,04,894 Short Term Loan and advances 94,604 Cash and cash equivalents 32,92,628 TDS Receivable 2,78,73,519 Other Current ASsets 13,47,549 Sundry Creditors 2,04,64,550 Customer Security Deposits 10,04,13,257 Provision - Other Current Liabilites 8,82,16,565 III. Non Current Asset 20,90,94,372 Total 3,95,13,195 Deferred Tax Asset 57,62,66,889 Total 2,40,20,994 57,62,66,889 April 2022 | Financial Due Diligence of 'Isprout' 54 F.Y 2021-22 Profit and Loss A/C from 01/04/2021 to 31/03/2022 Particular Amount Direct Expenses Particular Amount Direct Income Office Rent 17,94,55,827 Service Income 28,84,35,425 Electricity Charges 2,56,10,440 Other Income 1,01,61,008 Maintenances Charges 2,53,12,474 House Keeping Charges 93,48,305 Internet Charges 55,63,456 Security charges 32,90,579 Telephone Charges 1,00,578 Office Maintenance 97,753 Cafetaria Consumables 15,88,352 Commision and Brokerage 24,88,200 Advertising/Promotional 25,66,970 Employee Benefit Cost 1,01,15,582 Other Expenses 2,94,08,941 Depreciation - Net Profit 36,48,977 Total 29,49,47,456 Total 29,85,96,433 v There is a suspense account of 32,74,284/v There are • 626 out of 729 Cash outward transactions where 3 transactions worth 48,837 are more than 10,000 • 103 out of 729 cash inward transaction v Salary payable is showing negative balance in negative balance v There are negative balances in 94 out of 376 Vendor Ledgers v There are Negative balances in 33 out of 146 customer Ledgers v Each and every transaction contains narrations Ø Accounting Software v From 30th Sep 2016 to 31st March 2018 the Company has maintained their accounts in Tally v From 1st April 2018 to 31st March 2022 the Company has maintained their accounts in Quick Books April 2022 | Financial Due Diligence of 'Isprout' 55 Gross Profit Margin and Net Profit Margin Gross Profit / Net Profit 59% 42% 28% 15% 0%- 17% 14% 1% 2017-18 2018-19 2019-20 2020-21 -22% -23% 2021-22 -30% Gross Profit Margin Net Profit Margin April 2022 | Financial Due Diligence of 'Isprout' 56 GST April 2022 | Financial Due Diligence of 'Isprout' 57 GST (2/15) Telangana GST Month GSTR1 Due Date GSTR1 Filed Date GSTR3B Actual GSTR3B Filed Date Apr-18 31-Mar-19 28-Jul-18 22-May-18 29-May-18 May-18 31-Mar-19 28-Jul-18 20-Jun-18 22-Jun-18 Jun-18 31-Mar-19 28-Jul-18 20-Jul-18 24-Jul-18 Jul-18 31-Mar-19 10-Oct-18 24-Aug-18 21-Aug-18 Aug-18 31-Mar-19 10-Oct-18 20-Sep-18 22-Sep-18 Sep-18 31-Mar-19 10-Oct-18 25-Oct-18 22-Oct-18 Oct-18 31-Jan-19 31-Jan-19 20-Nov-18 21-Nov-18 Nov-18 31-Jan-19 31-Jan-19 20-Dec-18 20-Dec-18 Dec-18 31-Jan-19 31-Jan-19 20-Jan-19 19-Jan-19 Jan-19 30-Apr-19 09-May-19 22-Feb-19 25-Feb-19 Feb-19 30-Apr-19 09-May-19 20-Mar-19 21-Mar-19 Mar-19 30-Apr-19 09-May-19 20-Apr-19 23-Apr-18 F.Y 2018-19 • The Company has opted for Quarterly GSTR1 filing • GSTR9C is not applicable as the company turnover is less than 5Cr • As per Section 9(3) of CGST Act 2017 The comany didn’t pay RCM on Director remuneration, Legal services and Security services • The company is prompt in payments of all the late fee accured due to late filing and interest accured due to late payment of GST • We observed that the company is claiming input on cafeteria consumables which should be reversed and debit to P&L April 2022 | Financial Due Diligence of 'Isprout' 58 GST Month GSTR1 Due Date GSTR1 Filed Date GSTR3B Actual GSTR3B Filed Date Apr-21 11-May-21 13-May-21 20-May-21 23-Aug-21 May-21 11-Jun-21 15-Jul-21 20-Jun-21 18-Sep-21 Jun-21 11-Jul-21 14-Aug-21 20-Jul-21 18-Sep-21 Jul-21 11-Aug-21 18-Aug-21 20-Aug-21 18-Sep-21 Aug-21 11-Sep-21 18-Sep-21 20-Sep-21 14-Oct-21 Sep-21 11-Oct-21 11-Oct-21 20-Oct-21 22-Nov-21 Oct-21 11-Nov-21 10-Nov-21 20-Nov-21 24-Nov-21 Nov-21 11-Dec-21 11-Dec-21 20-Dec-21 22-Dec-21 Dec-21 11-Jan-22 08-Jan-22 20-Jan-22 24-Jan-22 Jan-22 11-Feb-22 11-Feb-22 20-Feb-22 16-Feb-22 Feb-22 11-Mar-22 08-Mar-22 20-Mar-22 17-Mar-22 Mar-22 11-Apr-22 10-Apr-22 20-Apr-22 Yet to file F.Y 2021-22 • The Company has opted for Monthly GSTR1 filing • GSTR9C will be applicable to the company as turnover is more than 5Cr • GSTR9 and GSTR9C Yet to file • As per Section 9(3) of CGST Act 2017 The company has paid RCM on director remuneration, Legal services and Security services • The company is prompt in payments of all the late fee accured due to late filing and interest accured due to late payment of GST • We observed that the company is claiming input on cafeteria consumables which should be reversed and debit to P&L April 2022 | Financial Due Diligence of 'Isprout' 59 Additional place of business v Places added in Telangana GST • Modern Profound • Sri Sai Gayatri Towers ( Sohini ) v Places added in Tamil nadu GST • Jade • Saravana Matrix Tower v Places added in Andhra Pradesh GST • Isprout Amaravati v Places added in Maharastra GST • Panchshil Techpark v Observations • We have observed that there are 5 branches in Telangana in which 2 branches are work in progress • Purva summit location is missing in additional place of business in GST April 2022 | Financial Due Diligence of 'Isprout' 60 VAT April 2022 | Financial Due Diligence of 'Isprout' 61 Month VAT input in books VAT input in portal Differences Jan-17 - - - Feb-17 1,905 - 1,905 Mar-17 - 58,925 -58,925 Apr-17 - 20,781 -20,781 May-17 5,321 21,100 -15,779 Jun-17 812 18,277 -17,465 Month Due date Filed Date Jan-17 20-Feb-17 20-Feb-17 Feb-17 20-Mar-17 30-Jun-17 Mar-17 20-Apr-17 30-Jun-17 Apr-17 20-May-17 30-Jun-17 May-17 20-Jun-17 30-Jun-17 Jun-17 20-Jul-17 30-Jun-17 • After verifying the VAT returns from Jan 2017 to July 2017, The company has taken VAT input 1,19,083 but it not matching with books of accounts • Input VAT ( 5% ) entries are posted in books of accounts • Input VAT ( 14.5% ) entries are missing in books of accounts • Under Telanagana VAT ACT 2005 Any dealer registered under sub-section (7) of section 17 who fails to file a return where no tax is due shall be liable to pay a penalty of Rs.500 • Jan’17 and Jun’17 month VAT return was filed on time • Feb’17 to May’17 VAT retuns are not filed on time April 2022 | Financial Due Diligence of 'Isprout' 62 Employee Provident Fund April 2022 | Financial Due Diligence of 'Isprout' 63 In F.Y 2016-17, 2017-18, 2018-19, 2019-20 and 2020-21 the company did not apply for EPF as no.of Employee limit is less than 20 Month Due Date Payment Date Apr-21 15-May-21 14-May-21 May-21 15-Jun-21 Jun-21 Month EPF in Books EPF Paid Differences Apr-21 65,680 68,428 15-Jun-21 -2,748 May-21 65,680 65,303 15-Jul-21 27-Jul-21 377 Jun-21 65,680 65,301 Jul-21 15-Aug-21 10-Aug-21 379 Jul-21 65,680 68,053 Aug-21 15-Sep-21 15-Sep-21 -2,373 Aug-21 70,120 68,053 Sep-21 15-Oct-21 12-Oct-21 2,067 Sep-21 68,920 72,044 Oct-21 15-Nov-21 05-Nov-21 -3,124 Oct-21 86,356 72,044 Nov-21 15-Dec-21 07-Dec-21 14,312 Nov-21 89,966 93,714 Dec-21 15-Jan-22 06-Jan-22 -3,748 Dec-21 90,986 92,716 Jan-22 15-Feb-22 07-Feb-22 -1,730 Jan-22 92,606 96,479 Feb-22 15-Mar-22 04-Mar-22 -3,873 Feb-22 90,380 94,160 Mar-22 15-Apr-22 05-Apr-22 -3,780 Mar-22 - 93,850 -93,850 F.Y 2021-22 • There is a delay in EPF Filing in the month Jun’2021 • There is a difference in payment entries for the month April, Oct, Jan and Feb • March month payable entry is missing • The Company is taking 12% from the basic pay as EPF April 2022 | Financial Due Diligence of 'Isprout' 64 Notices from Department April 2022 | Financial Due Diligence of 'Isprout' 65 v Isprout Serviced Offices private Limited has received a demand notice from Income Tax department dated 04th Jan 2022 • In the F.Y 2019-20 LLP has turned in to Private Limited the company has claimed LLP’S TDS receivable in Private Limited and filed Income Tax return . • We have checked the TDS receivable in LLP which is matching with form 26AS and the same was claimed in Private Limited. v Show case notice from GST department dated 30th mar 2022 • Non - payment of interest on ITC reversal of Rs. 1,68,62,658 • Wrong availment of ITC of Rs. 24,97,366 on construction services • ITC not figuring in GSTR2A but the credit availed in GSTR3B Rs. 2,73,910 • Non - reversal of ITC on the credit notes received from the suppliers • The company have already replied to the above notices and submitted all required documents April 2022 | Financial Due Diligence of 'Isprout' 66 Ø Isprout Servied Offices LLP GST (2/2) Tax period GSTR1 Due Date GSTR1 Date of filing GST 3B Due Date GST 3B Date of filing Apr-19 - - - - May-19 - - - - Jun-19 - - - - Jul-19 - - - - Aug-19 - - - - Sep-19 - - - - Oct-19 - - - - April 2022 | Financial Due Diligence of 'Isprout' Ø F.Y 2019-20 v The company has opted for monthly GST filing v Untill oct’19 the company has filed their GST returns in Isprout Serviced offices LLP v The company has not paid RCM on director remuneration for the month April, May, June, july, Aug and Oct v The Company is regular in payment of Late fee due to delay in filing of GST returns v The Company is regular in payment of Late fee and interest accured due to delay in filing of GST returns 67 Merger April 2022 | Financial Due Diligence of 'Isprout' 68 Ø Merger documents v The has maintained proper record of amalgamation of Isprout Serviced Offices Private Limited • Form CAA 11 • Form RD 1 • Form CAA 9 • Scheme of Amalgamation was filed in the form GNL 1 • Board resolution for Scheme of amalgamation • EGM resolution for Scheme of amalgamation Ø Observations v From 1st Aug 2018 to 1st Nov 2020 the company has paid rent, remuneration to directors, Salaries to Employees, Premises maintenance which are major expenses to the company, The company has deposited applicable TDS with the government. v In the F.Y 2020-21 while filing Isprout Businesss centre Private Limited ITR the company has considered the TDS receivable of Isprout Serviced offices Private Limited April 2022 | Financial Due Diligence of 'Isprout' 69 Competitors of April 2022 | Financial Due Diligence of 'Isprout' 70 v We have Observed Competitors of Isprout based on the location state wise Top Five Coworking places to work in Hyderabad Coworking Place Pricing DevX Starting from 18,000 per month Awfis Starting from 11,000 per month CoKarma Starting from 6,500 per month Hatchstation Starting from 5,000 per month Rent A Desk Starting from 7,500 per month Top Five Coworking places to work in Chennai Coworking Place Pricing The Executive Zone Starting from 9,000 per month Karya Space Starting from 3,000 per month iSprout Business Center SMT - Two Trees Starting from 7,500 per month Cactus Starting from 8,000 per month April 2022 | Financial Due Diligence of 'Isprout' v while we are checking for the Top Co working places in Tamilnadu we have found that Isprout Business centre SMT is in 3rd Place 71 Top Five Coworking places to work in Vijayawada Coworking Place Pricing PCS Business Centre Starting from 7,500 per month The Coworking Spaces Andhra Pradesh Pvt Starting from 6,500 per month The coworking Spaces Plug and Play Offices Starting from 6,500 per month iSprout Business Centre Space Designs Interior Designers v while we are checking for the Top Co working places in Vijayawada we have found that Isprout Business centre is in 4th Place Starting from 7,500 per month Top Five Coworking places to work in Maharastra Coworking Place Pricing DevX Starting from 18,000 per month Trios Starting from 5,000 per month Spacelance Starting from 6,000 per month Starthub Cowork Starting from 7,500 per month Bootstart Cowork Starting from 6,000 per month April 2022 | Financial Due Diligence of 'Isprout' 72 Cash Flow Management April 2022 | Financial Due Diligence of 'Isprout' 73 F.Y 2021-22 Cash Flow Statement Cash at begining of the period 0.45 Net Cash from Operating Activites -8.99 Net Cash from Investing Activites -7.68 Net Cash from Financing Activites 16.51 Cash at end of the period 0.29 v We have obsevered that there is a negative Cash flow from Operating Activites and Investing Activites v The Negative Cash flow from Operating Activites and Investing Activites was recovered from Loan from Financials Institutions and Loan from directors April 2022 | Financial Due Diligence of 'Isprout' 74 F.Y 2021-22 Cash Shortfall Particular Rs. In Cr A Revenue Per Annum 35.03 B = A/12 Revenue Per Month 2.92 C = 90% of B Revenue Per Month After TDS 2.63 D Less: Accounts Receivable 0.67 E=C-D Total Cash Inflow from Revenue Per month 1.96 Cash Flow in Operations Rent 1.37 Building Maintenance 0.53 Electricity 0.21 Professional Charges / Consultancy Charges 0.15 Employee Benefit Expenses 0.10 Statutory Dues 0.60 Net Cashflow from Operations 2.95 Monthly cash short fall -0.99 Yearly cash shortfall -11.91 Cash Flow in Physical Assets ( Considering One Building Per Year ) Average Rental deposits per building Average Cost incurred on building per month Net Cashflow Per project (Avg) Apprx. shortfall per annum -1.50 -5.9 -7.40 -19.31 April 2022 | Financial Due Diligence of 'Isprout' 75 F.Y 2021-22 Recoveries before 10th of every Month (Actuals) Particular Rs. In Cr <10 Days >10 Days Average Actual Receipts Per month 0.97 1.53 Total Cash Inflow from Revenue Per month 0.97 1.53 Rent 1.37 - Building Maintenance 0.53 - Electricity 0.21 - Professional Charges / Consultancy Charges 0.15 - Employee Benefit Expenses 0.10 - Statutory Dues 0.68 - 3.03 - 0.17 0.22 0.17 0.22 1.02 0.20 1.02 0.2 -1.21 1.51 Cash Flow in Operating Activites Net cashflow Cash Flow in Physical Assets ( Considering One Building Per Year ) Average Rental deposits Per month Average Cost incurred on building per month Net Cashflow Per Project (Avg) Loan from Financial Institutions / Directors Net Receipts from Financial Institutions / Directors Net Cashflow during the year April 2022 | Financial Due Diligence of 'Isprout' 76 April 2022 | Financial Due Diligence of 'Isprout' 77