To the Members of Devyani International Limited
Basis for Opinion
REPORT ON THE AUDIT OF THE STANDALONE FINANCIAL STATEMENTS
Opinion
1. We have audited the accompanying standalone financial statements of Devyani International Limited (the Company'), which comprise the Balance Sheet as at 31 March 2023, the Statement of Profit and Loss (including Other Comprehensive Income), the Statement of Cash Flow and the Statement of Changes in Equity for the year then ended, and notes to the standalone financial statements, including a summary of the significant accounting policies and other explanatory information.
2. In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone financial statements give the information required by the Companies Act, 2013 ('the Act') in the manner so required and give a true and fair view in conformity with the Indian Accounting Standards ('Ind AS') specified under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015 and other accounting principles generally accepted in India, of the state of affairs of the Company as at 31 March 2023, and its profit (including other comprehensive income), its cash flows and the changes in equity for the year ended on that date.
3. We conducted our audit in accordance with the Standards on Auditing specified under section 143(10) of the Act. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Standalone Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India ('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 Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
4. Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the standalone financial statements of the current period. 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.
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5. 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 matter
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How our audit addressed the key audit matter
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Impairment of investments (including loans) in subsidiary
Refer note 2(q) of Summary of significant accounting policies and other explanatory information and the note 48 of the standalone financial statements of the Company for the year ended 31 March 2023.
The Company has investments (including loans) in subsidiary company amounting to INR 1,123.16 million as at 31 March 2023.
The recoverability of the aforesaid amount is dependent on the operational performance of aforesaid subsidiary company including its step down subsidiary. The actual business performance of the step-down subsidiary has been lower than anticipated performance which has been identified by the management as possible impairment indicators under the principles of Ind AS 36, Impairment of Assets ("Ind AS 36').
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Our audit procedures to test impairment of loans given to and investment in subsidiary companies included, but were not limited to, the following procedures:
a) Obtained an understanding from the management with respect to process and controls implemented by the Company to determine recoverability of the amounts from its subsidiary company including testing of such controls;
b) Assessed the professional competence, objectivity and capabilities of the external valuation expert engaged by the management for performing the required valuations to estimate the recoverable value of the amounts receivable from the subsidiary company;
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Key audit matter
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How our audit addressed the key audit matter
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Management has assessed the recoverability of the
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c)
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Involved our valuation experts for review of the
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aforesaid amounts by carrying out a valuation of the
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valuation methodology including appropriateness of
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step-down subsidiary's business with the help of an
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valuation assumptions used by the management's
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external valuation expert using the discounted cashflow method, which requires management to make significant
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expert;
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estimates and assumptions related to forecast of future
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d)
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Traced the future cash flow projections to approved
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revenue, operating margins, growth rate, expansion plans
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business plans of the step down subsidiary by their
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and selection of the discount rates to determine the
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management and evaluates the reasonableness of
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recoverable value to be considered for impairment testing
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the inputs used in the projections by comparing past
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of the carrying value of the aforesaid balances.
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projections with actual results, and considering our understanding of the business and market conditions,
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Considering the materiality of the above matter to the standalone financial statements, complexities and
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as relevant;
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judgement involved, and the significant auditor attention
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e)
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Evaluated sensitivity analysis performed by the
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required to test such management's judgement, we have
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management and further performed independent
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identified this as a key audit matter for current year audit.
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sensitivity analysis on these key assumptions to determination estimation uncertainty involved and impact on conclusions drawn basis headroom available; and
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f)
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Evaluated the appropriateness and adequacy of disclosures made in the standalone financial statements in accordance with the applicable accounting standards.
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Impairment assessment of goodwill and non-financial
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Our
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audit procedures for impairment assessment of
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assets
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goodwill and non-current assets included but were not
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Refer note 2(f) of Summary of significant accounting
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limited to the following:
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policies and other explanatory information and the note 30
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a)
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Obtained an understanding of impairment of goodwill
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of the standalone financial statements of the Company for
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and non-financial assets process, evaluated the
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the year ended 31 March 2023.
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design, implementation and tested the operative effectiveness of key internal financial controls
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As at 31 March 2023 the Company is carrying Goodwill
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followed by the management to determine indicators
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amounting to INR 504.57 million and Non-current assets aggregating to INR 21,536.98 million in its standalone
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of impairment and the recoverable amounts of CGUs;
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financial statements.
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b)
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Evaluated appropriateness of identification of CGUs basis our understanding of the business and the
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In accordance with the requirements of Ind AS 36
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model used in determining the value-in-use of the
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Impairment of Assets, the Company performs an annual
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CGUs involving our valuation experts for assessment
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impairment assessment of goodwill associated with the cash generating units (CGUs) identified in the Company,
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of valuation assumptions for discount rates;
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and of other non-current assets of CGUs where impairment
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c)
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Analyzed the performance of the CGUs and evaluated
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indicators have been identified, in order to determine
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the reasonableness of the assumptions used in
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whether the recoverable value is below the carrying amount
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computation of business projections and value-in-use
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as at 31 March 2023.
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as at 31 March 2023 basis our understanding of the business including current and expected market and
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The management has determined that each store
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economic conditions, and benchmarked growth rates
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constitutes a separate CGU which is tested for impairment as above. For the purpose the Company determines
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for projections used to approved business plans;
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recoverable value of CGUs using Discounted Cash Flow
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d)
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Performed sensitivity analysis in respect of the key
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Model (DCF Model) which require determination of certain
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assumptions used including revenue growth rates
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assumptions and estimates of future trading performance,
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and discount rate to verify appropriateness of such
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operating margins, future growth rates and discount rates.
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assumptions;
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Key audit matter
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How our audit addressed the key audit matter
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The assessment of the recoverable amount requires
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e)
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Tested the arithmetical accuracy of the computation
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significant judgment relating to estimates of cash flow
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of recoverable amounts of cash generating units; and
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projections, growth rates and discount rates.
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f)
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Assessed the appropriateness of the disclosures
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Consequent to such impairment assessment, the Company
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included in note 45 in respect of impairment of
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has recorded an impairment charge of INR NIL against
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noncurrent assets including goodwill.
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Goodwill and impairment reversal INR 5.40 million against
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non-current assets.
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Due to the level of judgments and sensitivity of recoverable
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amount being involved and their significance to the
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Company's financial position, this is considered as a key
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audit matter.
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India. 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.
8. In preparing the standalone financial statements, the Board of 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 Board of Directors either intend to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
9. Those Board of Directors are also responsible for overseeing the Company's financial reporting process.
Auditor's Responsibilities for the Audit of the Standalone Financial Statements
10. 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
Information other than the Financial Statements and Auditor's Report thereon
6. The Company's Board of Directors are responsible for the other information. The other information comprises the information included in the Annual Report, but does not include the standalone financial statements and our auditor's report thereon. The Annual Report is expected to be made available to us after the date of this auditor's report.
Our opinion on the standalone financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the standalone financial statements, our responsibility is to read the other information identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the standalone financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.
When we read the Annual Report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance.
Responsibilities of Management and Those Charged with Governance for the Standalone Financial Statements
7. The accompanying standalone financial statements have been approved by the Company's Board of Directors. The Company's Board of Directors are responsible for the matters stated in section 134(5) of the Act with respect to the preparation and presentation of these standalone financial statements that give a true and fair view of the financial position, financial performance including other comprehensive income, changes in equity and cash flows of the Company in accordance with the Ind AS specified under section 133 of the Act and other accounting principles generally accepted in
influence the economic decisions of users taken on the basis of these financial statements.
11. As part of an audit in accordance with Standards on Auditing, specified under section 143(10) of the Act we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
• 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;
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Act we are also responsible for expressing our opinion on whether the Company has adequate internal financial controls with reference to financial statements in place and the operating effectiveness of such controls;
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management;
• Conclude on the appropriateness of Board of Directors' use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern;
• Evaluate the overall presentation, structure and content of the financial statements, including the
disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation; and
• Obtain sufficient appropriate audit evidence regarding the financial statements of the Company to express an opinion on the financial statements.
12. 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.
13. 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.
14. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the 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.
Other Matter
15. The audit of the standalone financial statements of the Company for the year ended 31 March 2022 was carried out and reported jointly by APAS & Co LLP and Walker Chandiok & Co LLP, who have expressed an unmodified opinion vide audit report dated 02 May 2022 which has been furnished to OP Bagla & Co LLP, the incoming joint statutory auditor of the Company and has been relied upon by them for the purpose of their joint audit of the standalone financial statements.
Report on Other Legal and Regulatory Requirements
16. As required by section 197(16) of the Act based on our audit, we report that the Company has paid remuneration to its directors during the year in accordance with the provisions of and limits laid down under section 197 read with Schedule V to the Act.
17. As required by the Companies (Auditor's Report) Order, 2020 ('the Order') issued by the Central Government of India in terms of section 143(11) of the Act we give in the Annexure A, a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.
18. Further to our comments in Annexure A, as required by section 143(3) of the Act based on our audit, we report, to the extent applicable, that:
a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit of the accompanying standalone financial statements;
b) In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books;
c) The standalone financial statements dealt with by this report are in agreement with the books of account;
d) In our opinion, the aforesaid standalone financial statements comply with Ind AS specified under section 133 of the Act;
e) On the basis of the written representations received from the directors and taken on record by the Board of Directors, none of the directors is disqualified as on 31 March 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 standalone financial statements of the Company as at 31 March 2023 and the operating effectiveness of such controls, refer to our separate Report in Annexure B, wherein we have expressed an unmodified opinion; and
g) 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, as detailed in note 39 to the standalone financial statements, has disclosed the impact of pending litigations on its financial position as at 31 March 2023;
ii. The Company did not have any long-term contracts including derivative contracts for
which there were any material foreseeable losses as at 31 March 2023;
iii. There were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company during the year ended 31 March 2023;
iv. a. The management has represented
that, to the best of its knowledge and belief, as disclosed in note 56 (e) to the standalone financial statements, no funds have been advanced or loaned or invested (either from borrowed funds or securities premium or any other sources or kind of funds) by the Company to or in any persons or entities, including foreign entities ('the 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 ('the Ultimate Beneficiaries') or provide any guarantee, security or the like on behalf the Ultimate Beneficiaries;
b. The management has represented that, to the best of its knowledge and belief, as disclosed in note 56 (f) to the standalone financial statements, no funds have been received by the Company from any persons or entities, including foreign entities ('the Funding Parties'), with the understanding, whether recorded in writing or otherwise, that the Company shall, whether directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party ('Ultimate Beneficiaries') or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries; and
c. Based on such audit procedures performed as considered reasonable and appropriate in the circumstances, nothing has come to our notice that has caused us to believe that the management representations under subclauses (a) and (b) above contain any material misstatement.
v. The Company has not declared or paid any dividend during the year ended 31 March 2023; and
vi. Proviso to Rule 3(1) of the Companies (Accounts) Rules, 2014 requires all companies which use accounting software for maintaining their books of account, to
use such an accounting software which has a feature of audit trail, with effect from the financial year beginning on 1 April 2023 and accordingly, reporting under Rule 11(g) of Companies (Audit and Auditors) Rules, 2014 (as amended) is not applicable for the current financial year.
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