To the Members of J.K. Cement Limited
Report on the Audit of the Standalone Ind AS Financial StatementsOpinion
We have audited the accompanying standalone Ind AS financial statement of J.K. Cement Limited ("the Company"), which comprise the Balance sheet as at March 31 2023, the Statement of Profit and Loss, including the statement of Other Comprehensive Income, the Cash Flow Statement and the Statement of Changes in Equity for the year then ended, and notes to the standalone Ind AS 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 profit 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 the 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 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 audit opinion on the standalone Ind AS financial statements.
Emphasis of Matter on CCI Case ('EOM')
We draw attention to Note 36A to the standalone Ind AS financial statements wherein it has been stated that the Competition Commission of India ('CCI') has imposed penalty of H12,854 lacs ('first matter') and H928 lacs ('second matter') in two separate orders dated August 31, 2016 and January 19, 2017 respectively for alleged
contravention of provisions of Competition Act 2002 by the Company. The Company has filed appeals against the above orders.
The National Company Law Appellate Tribunal ('NCLAT'), on hearing the appeal in the first matter, upheld the decision of CCI for levying the penalty vide its order dated July 25, 2018. Post order of the NCLAT, CCI issued a revised demand notice dated August 7, 2018 of H15,492 lacs consisting of penalty of H12,854 lacs and interest of H2,638 lacs. The Company has filed appeal with Hon'ble Supreme Court against the above order. Hon'ble Supreme Court has stayed the NCLAT order. While the appeal of the Company is pending for hearing, the Company backed by a legal opinion, believes that it has a good case and accordingly no provision has been considered in the books of accounts.
In the second matter, demand had been stayed and the matter is pending for the hearing before NCLAT. While the appeal of the Company is pending for hearing, the Company backed by a legal opinion, believes that it has a good case and accordingly no provision has been considered in the books of accounts.
Our opinion is not modified in respect of this matter.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, 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. For each matter below, our description of how our audit addressed the matter is provided in that context.
We have determined the matters described below to be the key audit matters to be communicated in our report. We have fulfilled the responsibilities described in the Auditor's responsibilities for the audit of the standalone Ind AS financial statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the standalone Ind AS financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying standalone Ind AS financial statements.
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Key audit matters How our audit addressed the key audit matter
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Impairment assessment of Investments in J.K. Cement (Fujairah) FZC, a wholly owned subsidiary
(as described in note 4A and 45 of the standalone Ind AS financial statements)
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As at March 31,2023 the Company has an investment in J. K. Cement Our audit procedures included the following:
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(Fujairah) FZC, a wholly owned subsidiary of H1,09,615.21 lacs. •
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Gained an understanding of the impairment assessment
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J. K. Cement Works (Fujairah) FZC (step down subsidiary) is incurring
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process and evaluated the design and tested the operating
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losses and its entire net worth is eroded. As a result, an impairment
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effectiveness of controls.
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assessment was required to be performed by the Company by •
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Assessed the Company's valuation methodology applied in
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comparing the carrying value of these investments to their recoverable amount to determine whether an impairment was required to be
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determining the recoverable amount.
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recognised. •
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Assessed the assumptions of the cash flow forecasts including weighted average cost of capital, expected growth
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During the current year, based on business valuation of J.K. Cement Works (Fujairah) FZC by an independent external valuer, no provision
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rates and terminal growth rates used.
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has recognized by the Company considering recoverable amount of •
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Discussed potential changes inputs as compared to
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these investments exceeds its carrying amount. The Total amount of
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previous year / actual performance with management in
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provision for diminution in value of investment amounts to H45,837.92
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order to evaluate whether the inputs and assumptions used
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lacs as at March 31,2023.
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in the cash flow forecasts were appropriate.
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For the purposes of the above impairment testing, value in use has •
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Involved specialists to assist us in evaluating the valuation
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been determined by forecasting and discounting future cash flows.
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methodologies and sensitivity testing of key assumptions
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Furthermore, the value in use is highly sensitive to changes in some of the inputs used for forecasting the future cash flows.
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used by management in determining the recoverable value headroom.
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Further, the determination of the recoverable amount of the •
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Tested the arithmetical accuracy of the valuation model.
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investments in J. K. Cement (Fujairah) FZC involved judgments due to •
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Assessed the relevant disclosures made within the
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inherent uncertainty in the assumptions supporting the recoverable amount of these investments.
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standalone Ind AS financial statements.
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Accordingly, the impairment assessment of investments in J. K. Cement (Fujairah) FZC, was determined to be a key audit matter in our audit of the standalone Ind AS financial statements.
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Claims, litigations and contingent liabilities
(as described in note 36A of the standalone Ind AS financial statements)
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As of March 31,2023, the Company has disclosed contingent liabilities Our audit procedures included the following:
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of H26,112.48 lacs (excluding amount of H13,782 lacs and interest of •
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Gained an understanding of the process of identification of
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H2,638 lacs related to CCI case covered in EOM para above) relating to
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claims, litigations and contingent liabilities, and evaluated
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tax and legal claims.
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the design and tested the operating effectiveness of key
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There are several pending legal and regulatory cases against the
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controls.
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Company across various jurisdictions. Accordingly, management •
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Obtained the summary of Company's legal and tax cases
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exercises its judgement in estimation of provision required in respect
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and assessed management's position through discussions
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of such cases. The evaluation of management's judgements, including
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with the legal head, tax head and Company's management,
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those that involve estimations in assessing the likelihood that a
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on both the probability of success in significant cases, and
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pending claim will succeed, or a liability will arise, and the quantification of the ranges of potential financial settlement have been a matter of
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the magnitude of any potential loss.
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most significance during the current year audit. •
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Obtained responses from third-party legal counsel against independent confirmation rolled out by us and conducted
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Furthermore, the Company has operations across many jurisdictions and is subject to taxation related litigations as per local tax regulations.
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discussion with them regarding material cases.
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Evaluation of the outcome of the taxation related matters, and whether •
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Inspected external legal opinions and other evidence to
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the risk of loss is remote, possible or probable, requires judgement by
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corroborate management's assessment of the risk profile in
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management given the complexities involved.
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respect of legal claims.
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Accordingly, due to large number of claims and complexity/judgement •
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Engaged tax specialists to assess management's
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involved in outcome of these litigations. Claims, litigations and
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application and interpretation of tax legislation affecting the
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contingent liabilities was determined to be a key audit matter in our
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Company, and to consider the quantification of exposures
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audit of the standalone Ind AS financial statements
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and settlements arising from disputes with tax authorities in the various tax jurisdictions.
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•
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Assessed the relevant disclosures made within the standalone Ind AS financial statements.
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Key audit matters
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How our audit addressed the key audit matter
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Revenue Recognition - Discounts, incentives, rebates etc.
(as described in note 27 of the standalone Ind AS financial statements)
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For the year ended March 31,2023 the Company has recognized revenue from sale of goods of H8,77,678.06 lacs.
Revenue is measured net of discounts, incentives, rebates etc. earned by customers on the Company's sales.
Due to the Company's presence across different marketing regions within the country and the competitive business environment, the estimation of the various types of discounts, incentives and rebate schemes to be recognised based on sales made during the year is material and considered to be complex and judgmental and dependent on various performance obligations and market conditions.
Therefore, there is a risk of revenue being misstated as a result of faulty estimations over discounts, incentives and rebates.
Accordingly, given the complexity and judgement involved in the assessment of provisions required for discounts, incentives and rebates, Revenue recognition - Discounts, incentives, rebates etc. was determined to be a key audit matter in our audit of the Standalone Ind AS financial statements.
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Our audit procedures included the following:
• Considered Company's revenue recognition policy and its compliance in terms of Ind AS 115 ‘Revenue from contracts with customers'.
• Assessed the design and tested the operating effectiveness of internal controls with regards to approvals, calculation, provision and disbursement of discounts, incentives and rebates.
• Performed sample test of supporting documentation for computation of discounts, incentives and rebates recorded and/or disbursed during the year including credit notes issued after the year end date.
• Performed analytical review and compared the management's assessment of discounts, incentives and rebates recorded for the current year with historical trends of discount given and reversal of such discounts, incentives and rebates to assess the adequacy of provisions made during the current year.
• Performed sample test of manual journals posted to discounts, incentives and rebates to identify unusual or irregular items.
• Assessed the relevant disclosures made within the standalone Ind AS financial statements.
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Other Information
The Company's Board of Directors is responsible for the other information. The other information comprises the information included in the Annual report, but does not include the standalone Ind AS financial statements and our auditor's report thereon.
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 Ind AS financial statements, our responsibility is to read the other information and, in doing so, consider whether such other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of Management for the Standalone Ind AS 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 [the Companies (Indian Accounting Standards) Rules, 2015, as amended].
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 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.
Those Board of Directors are also responsible for overseeing the Company's financial reporting process.
Auditor's Responsibilities for the Audit of the Standalone Ind AS 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 skepticism 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 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 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.
• 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 for 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.
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 sub-section (11) of Section 143 of the Act, we give in the "Annexure 1" 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 the Statement of Other Comprehensive Income, the Cash Flow Statement and Statement of Changes in Equity dealt with by this Report are in agreement with the books of account;
(d) In our opinion, the aforesaid standalone Ind AS financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Companies (Indian Accounting Standards) Rules, 2015, as amended;
(e) The matter described in Emphasis of Matter on CCI case' paragraph above, in our opinion, may have an adverse effect on the functioning of the Company;
(f) On the basis of the 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;
(g) With respect to the adequacy of the internal financial controls with reference to these standalone Ind AS financial statements and the operating effectiveness of such controls, refer to our separate Report in "Annexure 2" to this report;
(h) In our opinion, the managerial remuneration for the year ended March 31, 2023 has been paid
/ provided by the Company to its directors in accordance with the provisions of Section 197 read with Schedule V to the Act;
(i) 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 36A to the 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 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 person(s) or entity(ies) 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
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