AVENDUS_CAPITAL_ASSET_MAN - Accounts

The directors present the strategic report for the year ended 31 March 2023.

The principal activity of the company is that of a holding company.

Key performance indicators

The company has generated investment income of £252 (2022 - £nil), and has made a loss of £1,271,239 (2022 - £18,150,588) for the year to 31 March 2023.

The company has cash resources of £746,731 (2022 - £875,555) in the bank as at 31 March 2023.

Principal risks and uncertainties

The principal risks and uncertainties facing the company arise from its dependence on income earned through distributions from the subsidiary, Ocean Dial Asset Management Limited ("ODAM"). The performance of the subsidiary is based on the management of a small number of funds, which are largely dependant upon the fortunes of the Indian economy and whose investor base is relatively small, both by number and type. Over the years, the funds have seen depletion in the AUM due to underperformance and redemption, resulting in reduced profitability at ODAM level. The company has reduced the carrying value of the investment to £4,103,000 in the year, taking an impairment of £897,000 (2022 - £17,784,551).

Post year end the Company has entered in to a definitive agreement to sell the investment in ODAML.

Capital and financial risk management

The company and its subsidiary operate a simple business model and do not actively use financial instruments as part of its financial risk management. They are exposed to concentration risk, as described above, and the usual credit, liquidity, foreign exchange, interest and cash flow risks associated with providing its services to its clients. These risks are managed in the subsidiary through appropriate credit control procedures and the regular translation of foreign currency transactions and balances into GBP Sterling. The nature of the company's and its subsidiary's financial instruments is such that they are not subject to price constraints.

On behalf of the board

The directors present their annual report and financial statements for the year ended 31 March 2023.

The results for the year are set out on page 7.

No ordinary dividends were paid. The directors do not recommend payment of a final dividend.

The directors who held office during the year and up to the date of signature of the financial statements were as follows:

The directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with UK adopted international accounting standards (IFRSs). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing these financial statements, International Accounting Standard 1 requires that directors:

•     properly select and apply accounting policies;

•     present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

•     provide additional disclosures when compliance with the specific requirements in IFRSs are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance; and

•     make an assessment of the company's ability to continue as a going concern.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Each director in office at the date of approval of this annual report confirms that:

•     so far as each director is aware, there is no relevant audit information of which the company's auditor is unaware, and

•     the directors have taken all the steps that they ought to have taken as a director in order to make themselves aware of any relevant audit information and to establish that the company's auditor is aware of that information.

This confirmation is given and should be interpreted in accordance with the provisions of section 418 of the Companies Act 2006.

We have audited the financial statements of Avendus Capital Asset Management (UK) Limited (the 'company') for the year ended 31 March 2023 which comprise the income statement, the statement of financial position, the statement of changes in equity, the statement of cash flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and UK adopted international accounting standards.

In our opinion the financial statements:

•     give a true and fair view of the state of the company's affairs as at 31 March 2023 and of its loss for the year then ended;

•     have been properly prepared in accordance with UK adopted international accounting standards; and

•     have been prepared in accordance with the requirements of the Companies Act 2006.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern

In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.

Other information

The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. 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.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of our audit:

• the information given in the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and

• the directors' report has been prepared in accordance with applicable legal requirements.

In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the directors' report.

We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:

• adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or

• the financial statements are not in agreement with the accounting records and returns; or

• certain disclosures of directors' remuneration specified by law are not made; or

• we have not received all the information and explanations we require for our audit.

As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are 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 the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.

Our objectives are to obtain reasonable assurance about whether the 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 ISAs (UK) 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 financial statements.

The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.

Discussions with and enquiries of management and those charged with governance were held with a view to identifying those laws and regulations that could be expected to have a material impact on the financial statements. During the engagement team briefing, the outcomes of these discussions and enquiries were shared with the team, as well as consideration as to where and how fraud may occur in the entity.

The following laws and regulations were identified as being of significance to the entity:

• Those laws and regulations considered to have a direct effect on the financial statements including UK financial reporting standards, Company Law, Tax and Pensions legislation, and distributable profits legislation.

Audit procedures undertaken in response to the potential risks relating to irregularities (which include fraud and non-compliance with laws and regulations) comprised of: inquiries of management and those charged with governance as to whether the entity complies with such laws and regulations; enquiries with the same concerning any actual or potential litigation or claims; inspection of relevant legal correspondence; review of board minutes; testing the appropriateness of journal entries; and the performance of analytical review to identify unexpected movements in account balances which may be indicative of fraud.

No instances of material non-compliance were identified. However, the likelihood of detecting irregularities, including fraud, is limited by the inherent difficulty in detecting irregularities, the effectiveness of the entity's controls, and the nature, timing and extent of the audit procedures performed. Irregularities that result from fraud might be inherently more difficult to detect than irregularities that result from error. As explained above, there is an unavoidable risk that material misstatements may not be detected, even though the audit has been planned and performed in accordance with ISAs (UK).

A further description of our responsibilities is available on the Financial Reporting Council's website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.

This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

The income statement has been prepared on the basis that all operations are continuing operations.

Avendus Capital Asset Management (UK) Limited is a private company limited by shares incorporated in England and Wales. The registered office is C/O RMT Accountants & Business Advisors Ltd, Gosforth Park Avenue, Newcastle upon Tyne, United Kingdom, NE12 8EG. The company's principal activities and nature of its operations are disclosed in the strategic report.

The financial statements have been prepared in accordance with UK adopted international accounting standards (IFRS) and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS, except as otherwise stated.

The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.

The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.

Group accounts exemption

The company has taken advantage of the exemption under section 401 of the Companies Act 2006 not to prepare consolidated accounts. The financial statements present information about the company as an individual entity and not about its group.

Avendus Capital Asset Management (UK) Limited is a wholly owned subsidiary of Avendus Capital Private Limited and the results of Avendus Capital Asset Management (UK) Limited are included in the consolidated financial statements of Avendus Capital Private Limited, a company incorporated in India, which are available from 901, Platina, 9th Floor, C-59, Bandra-Kurla Complex, Bandra (E), Mumbai-400 051, India.

Atruet the time of approving the financial statements, the directors have a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. Thus the directors continue to adopt the going concern basis of accounting in preparing the financial statements. Additionally, the liabilities of the Company are secured by a guarantee from the immediate parent company, Avendus Capital Private Limited.

Dividend income from investments is recognised when the shareholder's right to receive payment has been established.

Interests in subsidiaries are initially measured at cost and subsequently measured at cost less any accumulated impairment losses. The investments are assessed for impairment at each reporting date and any impairment losses or reversals of impairment losses are recognised immediately in the income statement.

Interests in listed investments are initially measured at cost and subsequently measured at fair value through profit and loss.

A subsidiary is an entity controlled by the company. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.

Cash and cash equivalents include cash in hand and deposits held at call with banks.

Financial assets are recognised in the company's statement of financial position when the company becomes party to the contractual provisions of the instrument. Financial assets are classified into specified categories, depending on the nature and purpose of the financial assets.

At initial recognition, financial assets classified as fair value through profit and loss are measured at fair value and any transaction costs are recognised in profit or loss. Financial assets not classified as fair value through profit and loss are initially measured at fair value plus transaction costs.

Financial assets are classified as at FVTPL when the financial asset is held for trading. This is the case if:

•     the asset has been acquired principally for the purpose of selling in the near term, or

•     on initial recognition it is part of a portfolio of identified financial instruments that the manages together and has a recent actual pattern of short-term profit taking, or

•     it is a derivative that is not designated and effective as a hedging instrument.

Financial assets at FVTPL are stated at fair value with any gains or losses arising on remeasurement recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any dividend or interest earned on the financial asset. Interest and dividends are included in 'Investment income' and gains and losses on remeasurement included in 'other gains and losses' in the statement of comprehensive income.

Trade Receivables, loans and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. Loans and receivables are measured at amortised cost using the effective interest method, less any impairment.

Interest is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial. The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating the interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the debt instrument to the net carrying amount on initial recognition.

Financial assets, other than those at fair value through profit or loss, are assessed for indicators of impairment at each reporting end date.

Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected.

Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership to another entity.

Financial liabilities are classified as either financial liabilities at fair value through profit or loss or other financial liabilities.

Trade payables

Trade payables are initially measured at fair value and subsequently measured at amortised cost, using the effective interest method. Any interest is recognised in the income statement.

Financial liabilities are derecognised when, and only when, the company’s obligations are discharged, cancelled, or they expire.

Equity instruments issued by the company are recorded at the proceeds received, net of direct issue costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company.

The tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.

The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when the company has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.

Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation are included in the income statement for the period.

The Company considered the implications, if any, of the following amendments to IFRSs during the year ended 31 March 2023.

New and amended standards and interpretations effective from 1 April 2022 adopted by the company

During the year ended 31 March 2023, the Company has not adopted any new IFRS, IAS or amendments issued by the IASB, and interpretations by the IFRS Interpretations Committee, which have had a material impact on the Company’s financial statements.

New and amended standards and interpretations effective from 1 April 2023 not yet adopted by the company

The company currently adopts all relevant accounting standards that have been endorsed by and adopted in the United Kingdom. There are various standards that are expected to be endorsed in FY2024. The company does not believe that any of the new standards will have a significant impact on the company's financial position or results in subsequent periods.

In the application of the company’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised, if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Critical judgements

The following judgements have had the most significant effect on amounts recognised in the financial statements:

In assessing whether there have been any indicators of impairment to investments, the directors have considered both external and internal sources of information such as levels of growth and investment, market conditions, counterparty credit ratings and experience of recoverability. The company has reduced the carrying value of the investment in subsidiary to £4,103,000 taking an impairment provision of £897,000 (2022 - £17,784,551) in the year.

The carrying value of investments is assessed by the directors using the assumptions made at the time of acquisition in the light of current evidence in the market and the estimated future cash flows of each investment.

The average monthly number of persons (including directors) employed by the company during the year was:

The charge for the year can be reconciled to the loss per the income statement as follows:

The directors consider that the carrying amounts of financial assets carried at amortised cost in the financial statements are approximate to their fair values.

The Company acquired UK based, FCA regulated, asset management company Ocean Dial Asset Management Limited (“ODAML”) in November 2017. ODAML manages long-only equity funds that provide access to global investors, to the Indian growth story.

The equity markets in India went through serious downward correction since acquisition which resulted in significant headwinds to the growth plan we had charted for the business post acquisition. The Assets Under Management of ODAML have been seeing a downward trend since its acquisition. Having regard to shrinking AUM and no immediate visibility in terms of improvement in business prospects, the Company has decided to increase provision for impairment on the investment in subsidiary on balance sheet date of 31 March 2023. The resultant provision for impairment booked in this regard for the year is £897,000 (2022 - £17,784,551). This is based on fair market value of ODAML.

Post year end the Company has entered in to a definitive agreement to sell the investment in ODAML.

Details of the company's subsidiaries at 31 March 2023 are as follows:

No significant receivable balances are impaired at the reporting end date.

Borrowings are classified based on the amounts that are expected to be settled within the next 12 months and after more than 12 months from the reporting date as follows:

The bank loans are secured by a guarantee from the parent company, Avendus Capital Private Limited and a debenture, fixed and floating charges and a negative pledge over all present and future assets of the Company.

There were no defaults or breaches of loans payable during the year.

Redeemable preference shares issued in the year carry a 0.01% dividend per annum, on a non-cumulative basis.

The main areas of risk arising from these are:

• Credit risk (note 14);

• Liquidity risk (note 15);

• Interest risk (note 16).

The company's risk management policies are established to identify and analyse the risks faced by the company, to set appropriate risk limits and controls, and to monitor risks adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the company's activities.

Cash deposits and financial transactions give rise to credit risk in the event that the subsidiary is unable to declare dividends. The company regularly monitors the credit ratings of its subsidiary and controls the amount of credit risk by adhering to limits set by the board. As a consequence of these controls, the probability of material loss is considered to be at an acceptable level.

Except as detailed below, the carrying amount of financial assets recorded in the financial statements, which is net of impairment losses, represents the company's maximum exposure to credit risk.

The following table details the remaining contractual maturity for the company's financial liabilities with agreed repayment periods. The contractual maturity is based on the earliest date on which the company may be required to pay.

Responsibility for liquidity risk management rests with the board of directors, which has established an appropriate liquidity risk management framework for the management of the company's funding and liquidity management requirements. The company manages liquidity risk by maintaining adequate reserves and banking facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities.

The carrying amounts of financial liabilities which expose the company to cash flow interest rate risk are as follows:

Whilst the Company takes steps to minimise its exposure to cash flow interest rate risk, changes in interest rates will have an impact on profit.

Trade payables and accruals principally comprise amounts outstanding for trade purchases and ongoing costs.

Fair value of financial liabilities carried at amortised cost

The directors consider that the carrying amounts of financial liabilities carried at amortised cost in the financial statements are approximate to their fair values.

The company uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:

Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities.

Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value that are observable, either directly or indirectly.

Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data.

At the end of the current period, all financial liabilities held at fair value fall within Level 2.

The carrying values of the company's financial instruments are shown on the face of the statement of financial position.

Ordinary shares have a par value of £1 per share and are fully paid. These shares carry no right to fixed income or have any preferences or restrictions attached to them.

During the year the company issued 300,000 additional Ordinary shares with a par value of £1 per share for consideration of £600,000.

The company is managed as a going concern and has sufficient working capital to meet its day-to-day needs and to fulfil any externally imposed capital requirements. The capital of the company consists of equity attributable to the parent company comprising share capital and retained earnings.

During the year the company entered into the following transactions with related parties:

The following amounts were outstanding at the reporting end date:

During the period ended 31 March 2018, the company was provided with an £18.5 million guarantee from the parent company, Avendus Capital Private Limited, in relation to security on the bank loan and deferred consideration. Commission of 0.5% per annum is payable on the guarantee. During the period £78,606 (2022 - £92,499) was payable to the parent company in relation to commission on the loan guarantee and as at the period end £78,606 (2022 - £92,499) is included within current liabilities as owing to the parent company in respect of this.

The immediate and ultimate parent company is Avendus Capital Private Limited, a company incorporated in India, and its registered office is 901, Platina, 9th Floor, C-59, Bandra-Kurla Complex, Bandra (E), Mumbai-400 051, India.

Group accounts

The smallest and largest group into which the entity is consolidated is Avendus Capital Private Limited, a company incorporated in India.