Praxis Home Retail Limited
1. QUALIFIED OPINION
We have audited the accompanying financial statements of Praxis Home Retail Limited (the "Company"), which comprise the Balance Sheet as at March 31, 2023, the Statement of Profit and Loss (including Other Comprehensive Income), the Statement of Cash Flows and Statement of Changes in Equity for the year then ended, and 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, except for the possible effects of the matter described in the Basis for Qualified Opinion section of our report, the aforesaid financial statements give the information required by the Companies Act, 2013 (the "Act") in the manner so required and give a true and fair view in conformity with the Indian Accounting Standards prescribed under Section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended, ("Ind AS") and other accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2023, and its loss, total comprehensive loss, its cash flows and the changes in equity for the year ended on that date.
2. BASIS FOR QUALIFIED OPINION
As stated in note no. 41 of the financial statements, the Company has "Deposit receivables towards matured lease agreement (which were given in the nature of security deposit)" from a related party of an amount of Rs. 10,100 lakhs. The Company has not identified & recognized loss allowance for expected credit losses (ECL) on such other receivables, which is not in conformity with the requirements of Ind AS 109 "Financial Instruments". Considering the available financial position / statement of such related party where there is an indication about material uncertainty towards its ability to continue as going concern and where an Interim Resolution Professional
has been appointed by Hon'ble National Company Law Tribunal under the Insolvency and Bankruptcy Code, 2016 and other relevant surrounding circumstances, we are unable to determine and quantify whether this amount will be fully recoverable and it requires any provision of ECL. Further, as stated in note no. 49, the balances of payables and receivables are subject to confirmation and reconciliation, if any. Pursuant to the non-determination of the ECL provision & complete availability of balance confirmations, its impact on the losses, net worth and EPS of the Company for the year ended March 31, 2023 and as on the balance sheet date, is not ascertainable.
We conducted our audit of the financial statements in accordance with the Standards on Auditing specified under Section 143(10) of the Act (SAs). 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 Code of Ethics issued by the Institute of Chartered Accountants of India ('ICAI') together with the ethical requirements that are relevant to our audit of the 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 ICAI's Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified opinion on the financial statements.
3. MATERIAL UNCERTAINTY RELATED TO GOING CONCERN
Attention is invited to note no. 44 of the financial statements which states that the Company has incurred net loss of ' 2,101.39 lakhs during the year ended March 31, 2023 and, as of that date, the Company's current liabilities exceed its current assets which indicate a material uncertainty that may cast a significant doubt on the Company's ability to continue as a going concern. However, the financial statements are prepared on a going concern basis for the reasons stated in the aforesaid note.
Our conclusion is not modified in respect of this matter.
4. EMPHASIS OF MATTER
Attention is invited to note no. 18 of the financial statements which states that the Company could not redeem the 9% Non-Cumulative Redeemable Preference Shares of g 100/- each ("NCRPs") aggregating to ' 630.00 lakhs held by
Future Enterprises Limited ("FEL") which were due for redemption on December 08, 2022, for the reasons stated therein.
Our conclusion is not modified in respect of this matter.
5. KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current year. These matters were addressed in
the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have determined the matters described below to be the key audit matters to be communicated in our report.
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Key audit matters
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How our audit addressed the key audit matters
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i) Inventories
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Our audit procedures included but were not limited to
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As of March 31, 2023, the total inventory
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the following:
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aggregates to ' 6,633.64 lakhs in the
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- We have obtained list of inventories lying at
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financial statements of the Company
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various stores / warehouses along with the details
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which represents 21% of the total assets of
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of it's carrying value from the management as at
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the Company. Refer note 9 of the financial
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March 31, 2023;
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statements.
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- Assessed the appropriateness of the Company's
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For accounting principles and relevant
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accounting policy for valuation of inventories.
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accounting policy on inventory refer note 2.12 to the financial statements.
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- We have verified the valuation of different
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categories of inventories on test check basis;
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The Company is exposed to risk of slow-moving and/or obsolete inventory as a result of seasonal/festival demand for products and shrinkages in the inventory.
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- We evaluated the appropriateness of the basis and processes used by management in determining the net realisable value of inventories.
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Significant judgment is required for the estimation of the net realisable value and allowance for slow-moving and obsolete inventories. Such estimation is made after
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- We have obtained the Physical Verification report, for the physical verification carried out during
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the year by the stock auditor of the Company for different locations and relied upon their reports.;
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taking into consideration factors such as
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- We obtained inventory reports for calculation of
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movement in price, current and expected
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the shrinkage value of inventories lying at various
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future market demand and pricing
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stores /warehouse from the management, which
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competition.
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has been performed by the stock auditor.
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As such, we determined that this is a key
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- We reviewed the Company's disclosures towards
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audit matter.
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inventories which is as mentioned in note 9 of the financial statements.
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Key audit matters
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How our audit addressed the key audit matters
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ii) Accounting for Leases under Ind AS 116
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Our audit procedures included but were not limited to
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As at March 31, 2023, the Company has
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the following:
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Right of Use (RoU) assets (net value) of
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• Assessed the design and implementation of the
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Rs.10,364.48 lakhs and Lease liabilities (non-
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key controls relating to the determination of the
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current and current) of Rs.10,402.01 lakhs
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Ind AS 116 impact disclosure.
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recognized under Ind AS 116 pertaining to the premises leased by the Company, which represents 33% of the total assets and total equity & liabilities of the Company. Ind AS 116 has a significant impact on the reported assets, liabilities and the statement of profit
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• We have read a sample of contracts to assess whether leases have been appropriately identified, agreed the inputs used in the quantification to the lease agreements the discount rate applied and performed computation checks.
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& loss of the Company.
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• Assessed the accuracy of the lease data by
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Accounting under Ind AS 116, requires significant judgement and estimate in identification of lease arrangement and
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testing the lease data captured by Management for a sample of leases through the inspection of lease documentations.
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lease period, determining the RoU assets
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• Tested the completeness of the lease data
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and lease liabilities using the appropriate
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by reconciling the Company's existing lease
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discount rate, appropriate recognition of
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commitments to the lease data used in the Ind AS
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rent concession and modification to terms
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116.
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of the underlying agreements. Accordingly, the same is considered a key audit matter in our audit of the financial statements.
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• Verification of the data for recognition of lease liability, right of use assets, depreciation and interest.
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• Assessed the Company's accounting policy, as
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stated in the note 2.24 of the financial statement, with respect to recognition of leases to ensure they are in accordance with requirements of Ind AS 116.
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• Assessed whether the disclosures included in the
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notes 3(b) and 33 of the financial statements are in conformity with the applicable standard.
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6. INFORMATION OTHER THAN THE FINANCIAL STATEMENTS AND AUDITOR'S REPORT THEREON
The Company's Board of Directors is responsible for the preparation of the other information. The other information comprises the information included in the Management Discussion & Analysis, Board's Report and Corporate Governance Report (but does not include the financial statements and our auditor's report thereon) which are expected to be made available to us after the date of this auditor's report.
Our opinion on the 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 financial statements, our responsibility is to read the other information identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
When we read the other information, if we conclude that there is material misstatement therein, we are required to communicate the matter to those charged with governance and determine the actions under the applicable laws and regulations.
7. RESPONSIBILITIES OF MANAGEMENT AND THOSE CHARGED WITH GOVERNANCE FOR THE 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 financial statements that give a true and fair view of the financial position, financial performance, total comprehensive income, changes in equity and cash flows of the Company in accordance with the Ind AS and other accounting principles generally accepted in India, including the accounting standards specified under section 133 of the Act. 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 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 financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
The Board of Directors are also responsible for overseeing the Company's financial reporting process.
8. AUDITOR'S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS
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 Standards on Auditing 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.
As part of an audit in accordance with Standards on auditing, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
i. Identify and assess the risks of material misstatement of the 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.
ii. Obtain an understanding of internal financial controls relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Act, we are also responsible for expressing our opinion on whether the Company has adequate internal financial controls system in place and the operating effectiveness of such controls.
iii. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
iv. 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 ability of the Company to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern.
v. Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Materiality is the magnitude of the misstatement in the statement that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the statement may be influenced. We consider quantitative materiality and qualitative factors in; (i) planning the scope of our audit work and evaluating the results of our work; and (ii) to evaluate the effects of any identified misstatements in the financial statements.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
9. OTHER MATTER
The comparative financial statements of the Company, as stated in the financial statements, for the year ended March 31, 2022, were audited by the predecessor auditor who expressed an unmodified opinion on those financial statement on May 14, 2022. Accordingly, we do not express any opinion on the figures reported in the financial statements for the year ended March 31, 2022.
Our opinion is not modified in respect of this matter.
10. REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS
i. 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 A" a statement on the matters specified in paragraphs 3 and 4 of the Order.
ii. As required by section 143 (3) of the Act, based on our audit we report that:
a. Except as stated in the paragraph on Basis for Qualified Opinion, we have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit;
b. Except for the possible effects of the matters described in the paragraph on Basis for Qualified Opinion above, 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. Except as stated in the paragraph on Basis for Qualified Opinion, the Balance Sheet, Statement of Profit and Loss including Other Comprehensive Income, the Statement of Cash Flow and Statement of Changes in Equity dealt with by this report are in agreement with the relevant books of account;
d. Except for the possible effects of the matters described in the paragraph on Basis for Qualified Opinion above, in our opinion, the aforesaid financial statements comply with the Ind AS specified under section 133 of the Act, read with Companies (Indian Accounting Standards) Rules, 2015, as amended;
e. On the basis of 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 the financial statements of the Company and the operating effectiveness of such controls, refer to our separate Report in "Annexure B". Our report expresses a modified opinion on the adequacy and operating effectiveness of the Company's internal financial controls with reference to financial statements;
g. With respect to the requirements of section 197(16) of the Act, as amended, in our opinion and to the best of our information and according to the explanations given to us the managerial remuneration paid by the Company to its director during the year is in accordance with the provisions of section 197 of the Act;
h. With respect to the other matters to be included in the Auditor's Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules,
2014, as amended in our opinion and to the best of our information and according to the explanations given to us;
i. The Company has disclosed the impact of pending litigations on the financial position in its financial statements - Refer note 40 to the financial statements;
ii. The Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses;
iii. There were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company;
iv. (a) The Management has
represented that to the best of its knowledge and belief, no funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the Company to or in any other person(s) or entity(ies), 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, no funds have been received by the Company from any person(s) or entity(ies), 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.
(c) Based on audit procedures that have been considered reasonable and appropriate in the circumstances; nothing has come to our notice that has caused us to believe that
the representations under sub-clause (i) and (ii) of Rule 11(e), as provided under (a) and (b) above, contain any material misstatement.
v. The Company has not declared or paid any dividend during the year.
For Singhi & Co.
Chartered Accountants Firm Registration No. 302049E
Amit Hundia
Partner
Membership No. 120761 UDIN: 23120761BGYVUC9956
Place: Mumbai Date: May 27, 2023
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