Report on the Audit of the Standalone Financial Statements Opinion
We have audited the standalone financial statements of Wockhardt Limited ("the Company"), which comprise the standalone balance sheet as at 31 March 2022, and the standalone statement of profit and loss (including other comprehensive income), standalone statement of changes in equity and standalone statement of cash flows for the year then ended, and notes to the standalone financial statements, including a summary of the 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 financial statements give the information required by the Companies Act, 2013 ("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 31 March 2022, and its loss and other comprehensive income, changes in equity and its cash flows for the year ended on that date.
Basis for Opinion
We conducted our audit in accordance with the Standards on Auditing (SAs) specified under section 143(10) of the Act. Our responsibilities under those SAs 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 opinion on the standalone financial statements.
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 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.
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Revenue recognition
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The Key Audit Matter
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How the matter was addressed in our audit
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The Company recognises revenue from sale of goods when control over the goods is transferred to the customer. The actual point in time when revenue is recognised varies depending on the specific terms and conditions of the sale contracts entered into with customers.
Revenue is a key performance indicator of the Company and there is risk of overstatement of revenue due to fraud resulting from pressure to achieve targets, earning expectations or incentive schemes linked to performance.
Given the risk of overstatement of revenue due to fraud, this is a key audit matter.
Refer note 3(j) of accounting policy and note 39 in standalone financial statements.
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Our audit procedures included the following:
• We have assessed the Company's accounting policies relating to revenue recognition by comparing with applicable accounting standards.
• We have evaluated the design, implementation and operating effectiveness of the Company's key internal control over revenue recognition.
• We have examined the samples, selected using statistical sampling, of revenue recorded during the year with the underlying documentation.
• We have performed cut off procedures by selecting samples, using statistical sampling, of revenue recorded as at the period end.
• We have examined the manual journals posted to revenue during the year to identify unusual or irregular items.
• We have assessed the adequacy of the disclosures made in respect of revenue from sale of goods.
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Assessment of recoverability of carrying value of certain Property, Plant and Equipment and Capital Work in progress
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The Key Audit Matter
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How the matter was addressed in our audit
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Certain property, plant and equipment of the Company is affected by lower capacity utilization.
Further, the Company has made investments in certain projects which has been deferred. These are lying in capital work in progress.
The Company's investment in these facilities was made considering market feasibility and potential of existing / future products.
As at 31 March 2022, carrying value of such Property, Plant and Equipment and Capital Work in Progress amounts to ' 455 crores and ' 58 crore respectively
Given the significance of carrying value and judgement involved in assessing the recoverability of such facilities this is considered to be a key audit matter.
Refer note 3(d) and 3(q) of accounting policy and note 4, 40 and 48(a) in standalone financial statements
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Our audit procedures included the following:
• We have assessed the Company's accounting policies relating to impairment by comparing with applicable accounting standards.
• We have inquired the progress made on remediation work for facilities impacted due to regulatory approvals with key managerial personnel.
• We have verified the reports of physical verification of property, plant and equipment and capital work in progress by the Company.
• We have assessed the capabilities and objectivity of the experts (internal and external) used by the Company in the process of verification of assets, assessing the usability of assets and determining recoverable amounts, where required.
• We have evaluated the basis applied by the Company in determining cash generating unit for impairment testing purpose.
• We have challenged the significant assumptions considered by the Company while making impairment assessment with respect to revenue forecast, margin and discount rate.
• We have involved our valuation specialists to assess the valuation methodologies applied by the Company to determine the recoverable amount for certain assets.
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Recoverability of carrying value of Intangible assets under development
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The Key Audit Matter
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How the matter was addressed in our audit
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The Company has intangible under development amounting ' 756 Crore as at 31 March 2022.
These acquired intangible under development is in relation to the New Chemical Entities (NCE).
Company has acquired NCE amounting to ' 336 Crore during the current year.
The carrying value of such intangible under development is tested for recoverability, based on the estimates future cash flows, market conditions, etc.
Changes in these assumptions could lead to an impairment to the carrying value of these intangible under development
Given the significance of the amount involved and the estimates and judgement involved in assessment of their recoverability, this is considered to be a key audit matter.
Refer note 3(b) of accounting policy and note 5 in standalone financial statements.
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Our audit procedures included the following:
• We have assessed the Company's accounting policies relating to intangible under development by comparing with applicable accounting standards.
• We have inquired the progress made on NCE development with the key managerial personnel.
• We have inspected the correspondences with regulatory authorities, third parties, scientific documentation and the market release made by the Company.
• We have evaluated the Company's assessment of estimated future cash flows relating to the NCE project and their recoverability plans.
• We have obtained and verified the purchase agreement for NCE acquired during the year.
• We have assessed the capabilities and objectivity of the external expert used by the Company in determining the fair value of the NCE purchased during the year.
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Other Information
The Company's management and Board of Directors are responsible for the other information. The other information comprises the information included in the Company's annual report, but does not include the financial statements and our auditors' 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 financial statements, our responsibility is to read the other information 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. 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.
Management's and Board of Directors' Responsibility for the Standalone Financial Statements
The Company's Management and Board of Directors are 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 state of affairs, profit/ loss and other comprehensive income, changes in equity and cash flows 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. 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 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, the Management and 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 intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
The Board of Directors is 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:
• I dentify 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 the Management and Board of Directors.
• Conclude on the appropriateness of the Management and 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.
• 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 of the current period and are therefore the key audit matters. We describe these matters in our auditors' 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 (Auditors' Report) Order, 2020 ("the Order") issued by the Central Government 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.
2. (A) 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 standalone balance sheet, the standalone statement of profit and loss (including other comprehensive income), the standalone statement of changes in equity and the standalone statement of cash flows dealt with by this Report are in agreement with the books of account.
d) I n our opinion, the aforesaid standalone financial statements comply with the Ind AS specified under section 133 of the Act.
e) On the basis of the written representations received from the directors as on 31 March 2022 taken on record by the Board of Directors, none of the directors is disqualified as on 31 March 2022 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 and the operating effectiveness of such controls, refer to our separate Report in "Annexure B".
(B) With respect to the other matters to be included in the Auditors' Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:
a) The Company has disclosed the impact of pending litigations as at 31 March 2022 on its financial position in its standalone financial statements - Refer Note 45 to the standalone financial statements;
b) The Company does not have any long-term contracts including derivative contracts for which there were any material foreseeable losses.
c) There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.
d) (i) 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 persons or entities, including foreign entities ("Intermediaries"), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall:
• directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever ("Ultimate Beneficiaries") by or on behalf of the Company or
• provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries.
(ii) The management has represented, that, to the best of its knowledge and belief, no funds have been received by the Company from any persons or entities, including foreign entities ("Funding Parties"), with the understanding, whether recorded in writing or otherwise, that the Company shall:
• directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever ("Ultimate Beneficiaries") by or on behalf of the Funding Party or
• provide any guarantee, security or the like from or on behalf of the Ultimate Beneficiaries.
Based on such audit procedures as 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 (d)(i) and (d)(ii) contain any material mis-statement.
e) The Company has neither declared nor paid any dividend during the year.
(C) With respect to the matter to be included in the Auditors' Report under section 197(16):
I n our opinion and according to the information and explanations given to us, the remuneration paid by the company to its directors during the current year is in accordance with the provisions of Section 197 of the Act. The remuneration paid to any director is not in excess of the limit laid down under Section 197 of the Act. The Ministry of Corporate Affairs has not prescribed other details under Section 197(16) which are required to be commented upon by us.
For B S R & Co. LLP
Chartered Accountants
Firm's Registration No. 101248W/W-100022
Koosai Lehery
Partner
Membership No.: 112399
ICAI UDIN: 22112399AJWETT7833
Place : Mumbai Date : 30 May 2022
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