To the Members of Radico Khaitan Limited Basis for Opinion
Report on the Audit of the Standalone Financial
Statements
Opinion
1. We have audited the accompanying standalone financial statements of Radico Khaitan 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 standalone financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
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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Revenue recognition and trade receivables
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Our audit procedures related to revenue recognition included, but were not limited, to the following:
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Refer to note 1.05 to the accompanying standalone financial statements for the Company's significant
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Understood the nature of revenue transactions and
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accounting policies relating to revenue recognition
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evaluated the appropriateness of the accounting
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and note 28 for the details of revenue recognized
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policy adopted by the management in accordance
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during the year.
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with Ind AS 115;
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The Company derives its revenue from sale of liquor
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Evaluated the design and tested the operating
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products to a wide range of customers through
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effectiveness of Company's internal controls
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a network of distributors and state government
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around revenue recognition including relating
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corporations. Owing to the multiplicity of the
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to determination of variable consideration and
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Company's products, volume of sales transactions, size of distribution network, nature of customers and
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satisfaction of performance obligations;
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varied terms of contracts with different customers,
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On a sample basis, tested revenue transactions
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revenue is determined to be an area involving
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recorded during the year, and transactions recorded
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significant risk in line with the requirements of
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before and after year end basis inspection of
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the Standards on Auditing and hence required
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supporting documents such as customer contracts,
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significant auditor attention.
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purchase orders, price lists, proof of dispatch and
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Key audit matter
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How our audit addressed the key audit matter
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Further, Ind AS 115, "Revenue from Contracts with
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delivery including regulatory documents used for
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Customers” ('Ind AS 115'), requires management to
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movement of liquor as per applicable regulations,
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make certain key judgements, such as, identification
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invoices, etc. For such samples tested, reviewed the
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of performance obligations in contracts with
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terms of the contracts with customers to assess
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customers, determination of transaction price for
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the appropriateness of Company's identification
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the contract including variable consideration in
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of performance obligations, its determination of
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the form of rebates, discounts and pay-outs to
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transaction price, including allocation thereof to
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distributors under various promotional schemes
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performance obligations and identification of the
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of the Company, and assessment of satisfaction
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point of revenue recognition, in order to ensure
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of the performance obligations under each
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revenue is recorded with the correct amount and
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contract representing the transfer of control of
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in the correct period;
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the products sold to the customers including state government corporations.
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Tested the adequacy of accruals made for
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Evaluation is also required to be made in respect of
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various rebates and discounts committed to the distributors of the company basis the promotion
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principal versus agent relationship of the Company
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schemes active as at the year-end;
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with its 'tie-up units' and 'royalty units' as explained in the significant accounting policy disclosures
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Performed substantive analytical procedures
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referred above.
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including review of price, quantity and product mix
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Further, the Company has significant balance of trade receivables amounting to ' 82,405.59 Lacs
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variances and analysis of discounts; and Evaluated adequacy of the disclosures made in the
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as at 31 March 2023 as disclosed under note 8 to
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accompanying financial statements in respect of
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the accompanying standalone financial statements.
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revenue recognition in accordance with financial
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These receivables include dues from state
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reporting framework.
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government corporations and private distributors. The Company provides for expected credit loss on
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Further, our audit procedures pertaining to related
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such trade receivables based on past experience
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trade receivables included, but were not limited, to
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which is adjusted to reflect current and estimated
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the following:
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future economic conditions.
Due to the extent of industry knowledge and skills
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Circularised requests for direct balance confirmations to a sample of customers for
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needed to design and execute audit procedures
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outstanding balances as at year-end and evaluated
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to address the risks of material misstatements in
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the responses received;
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revenue recognition and related trade receivables, significance of the amounts and judgments involved
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Performed other alternate procedures which
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in assessing appropriate revenue recognition, and
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included testing of invoices, proof of supply
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existence and recoverability of trade receivables,
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and subsequent collection of invoices for the
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these matters are considered key audit matters in
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confirmations not received;
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the current year audit.
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Evaluated the appropriateness of the model used by the management in determination of expected credit losses, including inputs and assumptions such as classes of customers, past trends of recovery and default rates as adjusted for future expectations, basis our understanding of the business and relevant market conditions;
Recomputed the ageing of trade receivables for a sample of invoices and tested mathematical accuracy of the workings prepared by the management; and
Evaluated the disclosures made in accompanying standalone financial statements in respect of trade receivables in accordance with applicable financial reporting framework.
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Key audit matter
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How our audit addressed the key audit matter
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Additions to property, plant and equipment
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Our audit procedures with respect to additions to
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including capital work in progress
Refer notes 1.09 and 2A to the accompanying
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PPE and CWIP included, but were not limited, to the following:
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standalone financial statements.
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Evaluated the design and implementation and tested the operating effectiveness of key controls
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The Company is in the process of expansion of its existing manufacturing facility at Rampur, UP and
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surrounding the capitaliszation of costs;
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setting up a new manufacturing facility plant at
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Reviewed management's capitalisation policy,
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Sitapur, UP and has incurred ' 66,775.40 Lakh as
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including application of the aforesaid policy,
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capital expenditure in the current year towards such
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in accordance to assess consistency with the
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expansion as further explained in note 2A to the accompanying standalone financial statements.
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requirements set out by under Ind AS 16;
Ensured that the borrowing cost capitaliszed is as
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Determining whether expenditure incurred during the year is operational or capital in nature may
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per the principles of Ind AS 23;
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require judgement and is essential in order to
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Tested the additions made to property, plant
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ensure that the recognition and measurement
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and equipment and capital work-in-progress on
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principles given under Ind AS 16, Property, Plant and
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a sample basis for their nature and purpose to
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Equipment ('Ind AS 16') are met.
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ensure that the capitaliszation is as per Company's accounting policy and is recorded in the correct
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Further, the aforementioned capital expenditure has been partly funded from the specific borrowing
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period and in the correct class of assets;
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raised for such purpose. Accordingly, the borrowing
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For projects completed during the year, reviewed
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costs incurred on such borrowings have been
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the project completion/handover certificate
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included as a capital expenditure in accordance
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provided by the management to determine
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with the provisions of Ind AS 23, Borrowing Costs
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whether the asset is in the location and condition
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('Ind AS 23').
This has been determined as a key audit matter
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necessary for it to be capable of operating in the manner intended by the management; and
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due to the significance of the capital expenditure
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Assessed the appropriateness and adequacy of
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during the year and the risk that the elements of
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the related disclosures in the consolidated financial
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costs (including borrowing costs) that are eligible
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statements in accordance with the applicable
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for capitalization are appropriately capitalised in accordance with the recognition criteria provided under Ind AS 16 and Ind AS 23.
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accounting standards.
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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, such as Management Discussion and Analysis, Report on Corporate Governance, Directors' Report, etc. 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 will 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 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 standalone 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.
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 standalone 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; and
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;
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.
Report on Other Legal and Regulatory Requirements
15. 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.
16. 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.
17. 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 financial statements of the Company as on 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 38(b) to the standalone financial statements, has disclosed the impact of pending litigation(s) 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 has been no delay in transferring amounts, 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 65(h) 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 person(s) or entity(ies), 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 65(i) to the standalone financial statements, no funds have been received by the Company from any person(s) or entity(ies), 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 sub-clauses (a) and (b) above contain any material misstatement.
v. The final dividend paid by the Company during the year ended 31 March 2023 in respect of such dividend declared for the previous year is in accordance with section 123 of the Act to the extent it applies to
payment of dividend. Further, as stated in note 41 to the accompanying standalone financial statements, the Board of Directors of the Company have proposed final dividend for the year ended 31 March 2023 which is subject to the approval of the members at the ensuing Annual General Meeting. The dividend declared is in accordance with section 123 of the Act to the extent it applies to declaration of dividend.
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.
For Walker Chandiok & Co LLP
Chartered Accountants Firm's Registration No.: 001076N/N500013
Ashish Gupta
Partner
Place: New Delhi Membership No.: 504662
Date: 25 May 2023 UDIN: 23504662BGWGFA8188
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