The India Cements Limited
Report on the Audit of the Standalone Ind AS Financial Statements Opinion
We have audited the accompanying Standalone Ind AS Financial Statements of The India Cements Limited (“the Company”), which comprise the Balance sheet as at 31st March 2023, the statement of Profit and Loss (Including Other Comprehensive Income), the Cash Flow Statements and the Statement of Changes in Equity for the year then ended, and notes to the financial statements, including a summary of significant accounting policies and other explanatory information.
In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone Ind AS financial statements give the information required by the Companies Act, 2013, as amended (“the Act”) in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at March 31,2023, its loss including other comprehensive income, its cash flows and the changes in equity for the year ended on that date.
Basis for Opinion
We conducted our audit of standalone Ind AS financial statements in accordance with the Standards on Auditing (SAs), as specified under section 143(10) of the Act. Our responsibilities under those Standards are further described in the ‘Auditor’s Responsibilities for the Audit of the Standalone Ind AS Financial Statements’ section of our report. We are independent of the Company in accordance with the ‘Code of Ethics’ issued by the Institute of Chartered Accountants of India together with the ethical requirements that are relevant to our audit of the standalone Ind AS financial statements under the provisions of the Companies Act, 2013 and the Rules thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the standalone Ind AS financial statements.
Emphasis of Matter
Without qualifying our report, we draw attention to
(a) Note No.41.4 of the Standalone Ind AS Financial Statements, regarding the order of attachment issued by the authorities through which certain assets of the company amounting to Rs.120.34 Crores have been attached vide provisional attachment Order dated 25th February 2015 which the company is disputing before legal forums. The company has been legally advised that it has strong grounds to defend its position, pending the outcome of the proceedings the impact if any is not ascertainable at this stage accordingly no adjustments have been made in the standalone Ind AS financial statements.
(b) Note No.41.2(f) of the Standalone Ind AS Financial Statements relating to the order of the Competition Commission of India (CCI), alleging contravention of the provisions of Competition Act, 2002 and imposing a penalty of Rs.187.48 Crores on the Company. On Company’s appeal, National Company Law Appellate Tribunal (NCLAT), in the interim order directed the company to pay 10% of the Penalty amount (Rs. 18.75 Crores) before getting stay which has been deposited by the company. Subsequently, in its final order passed on 25th July, 2018, NCLAT has reportedly upheld the CCI’s Order. The company appealed against the order before Supreme Court and the Supreme Court vide its Order dated 05th October, 2018 admitted the Company’s appeal and directed that the interim order passed by the NCLAT in the matter, shall continue setting aside the final orders passed by NCLAT on 25th July, 2018. Pending the outcome, no adjustments have been made in the Standalone Ind AS Financial Statements.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the standalone Ind AS financial statements for the financial year ended March 31, 2023. These matters were addressed in the context of our audit of the standalone Ind AS 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. For each matter below, our description of how our audit addressed the matter is provided in that context.
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1.
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Revenue recognition:
Discounts, Incentives and Rebates etc.:
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Reasons why the matter was determined to be a key audit matter
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Auditor's Response
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l(i) Revenue is measured net of discounts, incentives and rebates on the Company’s sales.
(ii) The Company has its presence across different marketing regions within the country and operates in competitive business environment. The company recognises discounts, incentives and rebates at the time of sale either on provisional basis or on contracted terms. The assessment of entitlement of discounts, incentives and rebates recognised on sales made during the year is material and considered to be complex and dependent on various performance obligations of customers and market conditions. There is a risk of revenue being affected as a result of variations in assessment of discounts, incentives and rebates recognised on sales.
Given the complexity involved in the assessment of provisions required for discounts, incentives and rebates the same is considered as key audit matter.
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Our procedures included:
• Assessing the appropriateness of the Company’s revenue recognition accounting policies, including those relating to discounts, incentives and rebates as required under the applicable accounting standards.
• Testing the effectiveness of the Company’s controls over the determination of discounts, incentives and rebates based on commitments made either contracted or determined by the market forces.
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• Obtaining management’s assessment of its obligations towards discounts, incentives and rebates including accruals under applicable schemes and compare the overall assessment of the obligations with the approved schemes on sample basis.
• Examined on a sample basis, all the supporting documentation required for computing the company’s obligation towards discounts, incentives and rebates recorded and disbursed during the year including credit notes issued after the year end date to determine whether these were recorded appropriately covering the stated obligations.
• The management’s assessment of discounts, incentives and rebates recorded for the current year have been compared on an overall basis with the past practices to assess the adequacy of provisions made during the current year read with the changing competitive market dynamics as explained by the management.
• Our examination includes procedures to identify any unusual or irregular items.
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2.
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Litigations and Contingencies:
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Reasons why the matter was determined to be a key audit matter
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Auditor's Response
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The Company is engaged in large number of legal and tax related litigations which have been disclosed / provided for in the financial statements based on the facts and circumstances of each case considering its operations spread across various regions within India involving the company to deal with different regulatory frameworks.
Taxation and other litigation exposures have been identified as a key audit matter due to the, timescales involved for resolution and the potential financial impact arising out of these on the financial statements given the inherent complexity and magnitude of potential exposures across the Company and the judgement necessary to estimate the amount of provision required or to determine required disclosures. Further significant management judgement is involved in assessing the exposure of each case and eventual obligation on the company and thus there is a risk that such cases may not be adequately provided for or disclosed.
These estimates could change substantially over time as new facts emerge and each legal case progress and subsequent judicial guidance emerges or statutory amendments if any with retrospective effects are enacted having a bearing on the ongoing litigation.
(Refer note 41.2 & 41.4 to the standalone Ind AS financial statements).
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Our audit procedures included the following:
• Gained an understanding of the process of identification of claims, litigations and contingent liabilities and identified key controls in the process. For selected controls we have performed relevant control tests.
• Obtained the summary of Company’s legal and tax cases and critically assessed management’s position through discussions with the Legal Counsel and operational management, on both the probability of success in significant cases, and the magnitude of any potential loss.
• Obtained and reviewed external legal opinions (where considered necessary and made available) and other evidence to corroborate management’s assessment of the risks in respect of pending litigations.
• Engaged with legal experts to evaluate the appropriateness of the legal positions taken by the management with respect to different tax issues.
• Assessed whether management assessment of similar cases is consistent across the plants/divisions or that differences in positions are adequately justified.
• Assessed the appropriateness of disclosures made in the financial statements to examine whether they reflect the facts and circumstances of the respective litigations and the requirements of relevant accounting standards.
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3.
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Allowance for Receivables:
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Reasons why the matter was determined to be a key audit matter
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Auditor's Response
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Trade receivables of the company comprise mainly receivables from its customers towards sale of cement both in domestic and export markets and other cement related products and shipping and infrastructure development business. The operating environment in the cement industry and other businesses the company operates has the inherent risks of default on receivables from the company’s customers. In particular, in the event of financial stress at the customers end the company is exposed to potential risk of financial loss when the customers fail to meet their payment obligations in accordance with the agreed credit terms.
The recoverable amount was estimated by management based on their specific recoverability assessment on individual debtor with reference to the ageing profile, historical payment pattern and the past record of default of the customer including assessment of ongoing litigations against the defaulting customers. In addition, the management would also make specific provision against individual balances with reference to the recoverability evaluation. For the purpose of determination of provision requirement, significant judgements and assumptions, including the credit risk assessment of customers, the timing and amount of realisation of these receivables, are required for the identification of impairment events and the determination of the provision to be made towards the receivables.
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We have performed the following procedures in relation to
the recoverability of trade receivables:
• Tested the aging of trade receivables at year end on a sample basis;
• Obtained a list of outstanding receivables along with confirmation of balances on a sample basis as per the auditing standards and identified the relevant receivables due beyond the credit terms and discussed the current status with the management.
• Assessed the recoverability of the unsettled receivables on a sample basis through our evaluation of management’s assessment with reference to the credit profile of the customers, historical payment pattern of customers, publicly available information if any and latest correspondence with customers and further assessed the adequacy of provisions made for any possible non recoveries; and
• Tested subsequent settlement of trade receivables after the balance sheet date on a sample basis.
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Deferred Tax Liabilities (“DTL”) / Deferred Tax Assets (“DTA”):
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Reasons why the matter was determined to be a key audit matter
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Auditor's Response
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(a) As referred to note no. 41.16(D), The Company during the year, has realigned its carrying value of deferred tax liabilities as per the reduced rate of income tax under the provisions of Section 115BAA though the company has opted to file its return of income applying the reduced tax rate for the year ending 31st March
2022 itself.
(b) Further, the company recognised DTA on the current year losses in the form of unabsorbed depreciation and business losses as available upto March 31,
2023 and it is probable that the future taxable profits will be available against which such unabsorbed losses can be utilised (before the expiry period thereof for its utilisation).
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Our audit procedures included the following:
• Considered the Company’s accounting policies with respect to recognition of tax credits in accordance with Ind AS 12 on “Income Taxes”.
• Evaluated the Company’s tax positions by comparing it with prior years and past precedents; Obtained the projected profitability statements along with expected tax rate that would apply as to the recoverability of tax losses;
• Evaluated the estimates of profitability made by the management on the basis of which it is considered probable that the Company will have sufficient taxable income against which the unused tax losses will be utilised and also within the expected timing of utilisation;
• Assessed the disclosures in accordance with the requirements of Ind AS 12.
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Other Information
The Company’s Board of Directors is responsible for the preparation of the other information. The other information comprises the information included in the Company’s Annual Report, but does not include the Financial Statements and our auditor’s report thereon. The above reports are expected to be made available to us after the date of the auditor’s report.
Our opinion on the standalone Ind AS 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 Ind AS 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 Ind AS financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.
When we read the above reports, 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 Financial Statements
The Company’s Board of Directors is responsible for the matters stated in section 134(5) of the Act with respect to the preparation of these Standalone Ind AS Financial Statements that give a true and fair view of the financial position, financial performance including Other Comprehensive Income, cash flows and changes in equity of the Company in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards (IND AS) specified under section 133 of the Act read with relevant rules issued thereunder. 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 the estimates that are reasonable and prudent; and the design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the Standalone Ind AS financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
In preparing the standalone Ind AS 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.
Auditor's Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the standalone Ind AS financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an Auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these standalone Ind AS financial statements.
As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the standalone Ind AS 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 system in place and the operating effectiveness of such controls.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the standalone Ind AS financial statements, including the disclosures, and whether the standalone Ind AS financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Materiality is the magnitude of misstatements in the standalone financial statements that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the standalone financial statements may be influenced. We consider quantitative materiality and qualitative factors in (i) planning the scope of our audit work and in evaluating the results of our work; and (ii) to evaluate the effect of any identified misstatements in the standalone 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 the standalone Ind AS financial statements of the financial year ended March 31,2023 and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
Other Matters
The comparative financial information of the Company for the year ended March 31, 2023 prepared in accordance with Indian Accounting Standards, included in these Standalone Ind AS Financial Statements, have been audited by the predecessor Auditors. The report of the predecessor Auditors on the comparative financial information dated May 27, 2022 expressed an unmodified opinion.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditor’s Report) Order, 2020 (“the Order’), issued by the Central Government of India in terms of subsection (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.
2. As required by Section 143(3) of the Act, we report that:
a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit.
b) In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books.
c) The Balance Sheet, the Statement of Profit and Loss including other comprehensive income, the Cash Flow Statement and the Statement of Changes in Equity dealt with by this Report are in agreement with the books of accounts.
d) In our opinion, the aforesaid standalone Ind AS financial statements comply with the Ind AS specified under Section 133 of the Act, read with Companies (Indian Accounting Standard) Rules, 2015, as amended.
e) On the basis of the written representations received from the directors as on 31st March, 2023 taken on record by the Board of Directors, none of the directors is disqualified as on 31st 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 over financial reporting of the Company with reference to these standalone Ind AS financial statements and the operating effectiveness of such controls, refer to our separate Report in “Annexure B” to this report.
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 has disclosed the impact of pending litigations on its financial position in its standalone Ind AS financial statements - Refer Note 41.2 & 41.4 to standalone Ind AS 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 has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.
iv. (a) The Management has represented that, to the best of its knowledge and belief, during the year no funds (which are material
either individually or in the aggregate) other than those disclosed in the notes to accounts, 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 or entity, including foreign entity (“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, during the year no funds (which are material either individually or in the aggregate) have been received by the Company from any person or entity, including foreign entity (“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 the 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. As stated in Note 41.16 (B) to the standalone financial statements
(a) The dividend proposed for the previous financial year, declared, and paid by the Company during the year is in accordance with Section 123 of the Act, as applicable.
(b) The company has not declared any dividend for the current financial year.
vi. As proviso to rule 3(1) of the Companies (Accounts) Rules, 2014 is applicable for the Company with effect from 1 April 2023, reporting under Rule 11(g) of the Companies (Audit and Auditors) Rules, 2014 is not applicable.
3. In our opinion and according to the information and explanations given to us, the remuneration provided by the Company to its directors during the current year as adjusted for the refund of remuneration paid, is in accordance with the provisions of section 197 read with Schedule V of the Act.
For Brahmayya & Co., For S. VISWANATHAN LLP.,
Chartered Accountants Chartered Accountants
Firm Regn No: 000511S Firm Regn No: 004770S/S200025
N. SRI KRISHNA CHELLA K. SRINIVASAN
Partner Partner
Membership No.026575 Membership No.023305
UDIN: 23026575BGRIDD5023 UDIN: 23023305BGWNHG1875
Place : Chennai Date : 24th May, 2023
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