Opinion
We have audited the accompanying standalone financial statements of Brigade Enterprises 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 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 and based on the consideration of reports of other auditors on separate financial statements and on the other financial information of the Limited Liability Partnership Firm (“LLP”), the aforesaid standalone 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 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 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 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 financial statements.
Emphasis of Matter
We draw attention to Note 32(c)(i) to the standalone financial statements in connection with ongoing arbitration proceedings in the Company with respect to loans and advances. Pending resolution of such proceedings, the underlying loans and advances are classified as good and recoverable in the accompanying standalone financial Statements.
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 financial statements for the financial year ended March 31, 2023. 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. 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 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 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 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 for long term projects (Refer Note 21 of the standalone financial statements)
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The Company applies Ind AS 115 for recognition of revenue from real estate projects. The revenue from real estate projects is recognised at a point in time upon the Company satisfying its performance obligation and the customer obtaining control of the underlying asset, which involves significant estimates and judgement.
For revenue contracts forming part of joint development arrangements that are not jointly controlled operations (‘JDA’), the revenue from the development and transfer of constructed area/revenue share with corresponding land/ development rights received by the Company is measured at the fair value of the estimated construction service rendered by the Company to the landowner under JDA. Such revenue is recognised over a period of time in accordance with the requirements of Ind AS 115.
For contracts involving sale of real estate inventory property, the Company receives the consideration in accordance with the terms of the contract based on progress made for completion of such real estate projects.
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Our audit procedures included, among others, the following:
- We have read the accounting policy for revenue recognition and assessed compliance of the policy in terms of principles enunciated under Ind AS 115.
- We assessed management’s evaluation of determining revenue recognition from sale of real estate property at a point in time in accordance with the requirements under Ind AS 115.
- We obtained and understood the revenue recognition process and performed test of controls over revenue recognition including determination of point of transfer of control, completion of performance obligations and fair valuation of estimated construction service revenue under JDA, on a test check basis.
- We performed test of details, on a sample basis, and tested the underlying customer/JDA contracts and sale deed/ handover documents, evidencing the transfer of control of the asset to the customer based on which the revenue is recognized at a point of time.
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Key audit matters
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How our audit addressed the key audit matter
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Application of Ind AS 115 involves significant judgment
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- We obtained the joint development agreements entered
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in determining when ‘control’ of the real estate property
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into by the Company and compared the ratio of constructed
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is transferred to the customer. Further, for revenue
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area/ revenue sharing arrangement between the Company
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contracts forming part of JDA, significant estimate is made
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and the landowner as mentioned in the agreement to the
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by the management in determining the fair value of the
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computation statement prepared by the management.
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underlying revenue.
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- We obtained and tested the computation of the fair value of
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As the revenue recognition involves significant estimates and
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the construction service revenue under JDA, on a sample
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judgement, we regard this as a key audit matter.
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basis.
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- We tested the computation for recognition of revenue over
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a period of time for revenue contracts forming part of JDA and management’s assessment of stage of completion of projects and project cost estimates on test check basis.
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- We assessed the disclosures made by management in
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compliance with the requirements of Ind AS 115.
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Assessing the recoverability of carrying value of Inventory and advances paid towards land procurement (including refundable deposits paid under JDA (Refer Note 7, 9 & 10 of the standalone financial statements)
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As at March 31, 2023, the carrying value of the inventory of
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Our procedures in assessing the carrying value of the
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real estate projects is ?336,258 lakhs and land advances/
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inventories and land advances/deposits included, among
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deposits is ?35,930 lakhs respectively.
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others, the following:
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The inventories are carried at lower of cost and net realisable
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- We read and evaluated the accounting policies with respect
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value (‘NRV’). The determination of the NRV involves
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to inventories and land advances/deposits.
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estimates based on prevailing market conditions and taking
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- We assessed the Company’s methodology applied in
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into account the estimated future selling price, cost to
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assessing the carrying value under the relevant accounting
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complete projects and selling costs.
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standards including current market conditions in
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/Deposits paid under joint development arrangements, in the
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assessing the net realisable value having regard to project
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nature of non-refundable amounts, are recognised as land
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development plan and expected future sales.
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advance under other assets and on the launch of the project, the same is transferred as land cost to work-in-progress.
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- We made inquiries with management with respect to inventory of properties on test check basis to understand
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Further, advances paid by the Company to the seller/ intermediary towards outright purchase of land is recognised as land advance under other assets during the course of
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key assumptions used in determination of the net realisable value/ net recoverable value.
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transferring the legal title to the Company, whereupon it is
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- We enquired from the management regarding the project
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transferred to land stock under inventories.
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status and verified the underlying documents for related
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The aforesaid deposits and advances are carried at the
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developments in respect of the land acquisition, project progress and expected recoverability of advances paid
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lower of the amount paid/payable and net recoverable value,
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towards land procurement (including refundable deposits
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which is based on the management’s assessment including the expected date of commencement and completion of the
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paid under JDA) on test check basis.
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project and the estimate of sale prices and construction costs
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- We obtained and tested the computation involved in
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of the project.
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assessment of carrying value and the net realisable value/ net recoverable value on test check basis.
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We identified the assessment of the carrying value of inventory and land advances/deposits as a key audit matter due to the significance of the balance that involves estimates and judgement.
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Assessing the recoverability of carrying value of Investments and loans and advances made by the Company in subsidiaries and associate entities (Refer Note 6 & 7 of the standalone financial statements)
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As at March 31, 2023, the carrying values of Company’s investment in subsidiaries and associate entities amounted to ?229,121 lakhs. Further, the Company has granted loans and advances of ?43,840 lakhs to its subsidiaries. Management reviews on a periodical basis whether there are any indicators of impairment of such investments and loans and advances
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Our procedures in assessing the impairment of the investments included, among others, the following:
- We read and evaluated the accounting policies with respect to investments.
- We examined the management assessment in determining whether any impairment indicators exist.
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For cases where impairment indicators exist, management
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estimates the recoverable amounts of the investments, being
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- We assessed the Company’s methodology applied in
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higher of fair value less costs of disposal and value in use.
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assessing the carrying value under the relevant accounting
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Significant judgements are required to determine the key
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standards.
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assumptions used in determination of fair value / value in use.
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- We assessed the Company’s valuation methodology and
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assumptions based on current economic and market
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Key audit matters
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How our audit addressed the key audit matter
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As the impairment assessment involves significant
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conditions in determining the recoverable amount of
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assumptions and judgement, we regard this as a key audit
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investments and loans/advances.
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matter.
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- We compared the recoverable amount of the investment to the carrying value in books.
- We assessed the financial condition of entities to whom loans and advances were granted by obtaining the most recent audited financial statements of such entities.
- We performed inquiries with management on the project status and future business plan of entities to whom loans and advances were granted to evaluate their recoverability.
- We assessed the disclosures made in the standalone financial statements regarding such investments and loans and advances.
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Assessing the recoverability of the carrying value of Investment property including investment properties under construction
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(Refer Note 3.2 & 4 of the standalone financial statements)
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As at March 31, 2023, the carrying value of the Investment
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Our procedures in assessing the recoverability of the carrying
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property is ?135,730 lakhs (including properties under
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value of the investment properties included, among others,
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construction ?1,618 lakhs). The carrying value of the investment
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the following:
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property is calculated using land costs, construction costs,
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- We read and evaluated the accounting policies with respect
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interest costs and other related costs. Management reviews
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to investment properties.
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on a periodical basis whether there are any indicators of
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impairment.
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- We evaluated management’s identification of CGU’s and the methodology applied in assessing the carrying value
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For assets where impairment indicators exist, management
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of each CGU in compliance with the applicable accounting
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estimates the recoverable amounts, being higher of fair
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standards.
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value less costs of disposal and value in use. Significant
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judgements are required to determine the key assumptions
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- We examined the management assessment in determining
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used in determination of fair value / value in use.
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whether any impairment indicators exist.
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We considered the assessment of the carrying value of
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- We assessed the Company’s valuation methodology and
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investment property as a key audit matter due to the
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assumptions based on current economic and market
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significance of the balance and significant estimates and
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conditions applied in determining the recoverable amount,
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judgement involved in impairment assessment.
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including valuation report in certain cases used by the Company’s management for determining the fair value (‘recoverable amount’) of the investment property.
- We considered the independence, competence and objectivity of the external specialist involved by the management, if any, in determination of valuation.
- We assessed the Company’s valuation methodology applied and compared key property related data used as input with historical actual data
- We compared the recoverable amount of the investment property to the carrying value in books.
- We assessed the disclosures made in the standalone financial statements regarding such investment property.
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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 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 and, in doing so, consider whether such other information is materially inconsistent with the standalone financial
statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.
Responsibilities of Management for the Standalone 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 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 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 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 Charged with Governance are also responsible for overseeing the Company’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Standalone Financial Statements
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 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 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 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 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.
• Evaluate the overall presentation, structure and content of the standalone financial statements, including the disclosures, and whether the standalone 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 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.
Other Matter
We did not audit the financial statements and other financial information as regards Company’s net share in loss of limited liability partnership investment (post tax) amounting to ?53 lakhs as at March 31, 2023. These financial statements and other financial information of the said limited liability partnership investment have been audited by other auditor, whose financial statements, other financial information and auditor’s report have been furnished to us by the management. Our opinion on the standalone financial statements, in so far as it relates to the amounts and disclosures included in respect of these limited liability partnership investment and our report in terms of sub-sections (3) of Section 143 of the Act, in so far as it relates to the aforesaid limited liability partnership, is based solely on the report of such other auditor.
Our opinion is not modified in respect of this matter.
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, based on our audit, 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 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) 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;
(f) With respect to the adequacy of the internal financial controls with reference to standalone financial statements and the operating effectiveness of such controls, refer to our separate Report in “Annexure 2” to this report;
(g) 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;
(h) With respect to the other matters to be included in the Auditor’s Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, as amended in our opinion and to the best of our information and according to the explanations given to us:
i. The Company has disclosed the impact of pending litigations on its financial position in its standalone financial statements - Refer Note 32(b)&(c) to the standalone financial statements;
ii. The Company has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long-term contracts including derivative contracts - Refer Note 17 to the standalone financial statements;
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, other than as disclosed in the note 47 to the standalone financial statements, 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 entities, including foreign entities (“Intermediaries”), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall, whether, directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Company (“Ultimate Beneficiaries”) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries;
b) The management has represented that, to the best of its knowledge and belief, no funds have been received by the Company from any person(s) or entities, including foreign entities (“Funding Parties”), with the understanding, whether recorded in writing or otherwise, that the Company shall, whether, directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (“Ultimate Beneficiaries”) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries; and
c) Based on such audit procedures performed 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 (a) and (b) contain any material misstatement.
v. The final dividend paid by the Company during the year in respect of the dividends declared for the previous year is in accordance with section 123 of the Act to the extent it applies to payment of dividend.
As stated in note 30 to the standalone financial statements, the Board of Directors of the Company has proposed final dividend for the year 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. As proviso to Rule 3(1) of the Companies (Accounts) Rules, 2014 is applicable for the Company only w.e.f. April 1, 2023, reporting under this clause is not applicable.
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