Adani Enterprises Limited
Report on the audit of the Standalone Financial StatementsQualified Opinion
We have audited the Standalone Financial Statements of Adani Enterprises Limited ("the Company”), which comprise the Standalone Balance Sheet as at 31st March, 2023, the Standalone Statement of Profit and Loss (including other comprehensive income), the Standalone Statement of Cash Flows and the Standalone Statement of Changes in Equity for the year then ended, and a summary of significant accounting policies, notes forming part of financial statements and other explanatory information (herein after referred to as "Standalone Financial Statements"),
In our opinion and to the best of our information and
according to the explanations given to us, except for the effects of the matters described in the 'Basis for Qualified Opinion' section of our report, 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 prescribed under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended, ("Ind AS") and other accounting principles generally accepted in India, of the state of affairs of the Company as at 31st March, 2023, the Profit and other comprehensive Income, changes in equity and its cash flows for the year ended on that date,
Basis for Qualified Opinion
As described in Note 59 of the accompanying
Statements, management has represented to us that the Adani group has performed an internal assessment and has obtained an independent
assessment from a law firm. However, pending the completion of proceedings before the Hon'ble Supreme Court and investigations by Regulators, we are unable to comment on the possible consequential effects thereof, if any, on this Statement,
We conducted our audit of the standalone financial
statements in accordance with the Standards on Auditing specified under section 143(10) of the Act (SAs). 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 independence requirements that are relevant to our audit of the standalone financial statements under the provisions of the Act and the Rules made there under, 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 qualified audit 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 year, 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,
In addition to the matter described in the Basis for Qualified Opinion section 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 Matters
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Auditor's Response
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1
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Contingencies relating to taxation, litigations and arbitrations
The provisions and contingent liabilities relate
to ongoing litigations and claims with various authorities and third parties. These relate to direct tax, indirect tax, claims and other general legal proceedings arising in the ordinary course of business. As at the year ended 31 March 2023, the amounts involved were significant. The assessment of a provision or a contingent liability requires significant judgement by the management of the Company because of the inherent complexity in estimating future costs. The amount recognized as a provision is the best estimate of the expenditure. The provisions and contingent liabilities are subject to changes in the outcomes of litigations and claims and the positions taken by the management of the Company. It involves significant judgement and estimation to determine the likelihood and timing of the cash outflows and interpretations of the legal aspects, tax legislations and judgements previously made by authorities.
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Principal Audit Procedures
We have obtained an understanding of the process followed by the management of the Company for assessment and determination of the amounts of provisions and contingent liabilities relating to taxation, litigations and claims.
We have made inquiries about the status in respect of significant provisions and contingent liabilities
with the Company's internal tax and legal team, including challenging the assumptions and critical judgements made by the Company which impacted the computation of the provisions and inspecting the computation.
We assessed management's conclusions through discussions held with their in-house legal counsel and understanding precedents in similar cases. We communicated with the company's external legal counsel on the certain material litigations to establish the likelihood of outflow of economic resources being probable, possible or remote in respect of the litigations.
We have involved subject matter experts with specialized skills and knowledge to assist in the
assessment of the value of significant provisions and contingent liabilities relating to the pending litigations, on sample basis, in light of the nature of the exposures, applicable regulations and related correspondence with the authorities.
We also assessed and validated the adequacy and appropriateness of the disclosures made
by the management in the standalone financial statements.
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2
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Timing of Revenue recognition and adjustments for coal quality variances involving critical estimates
Material estimation by the Company is involved in recognition and measurement of its revenue. The value and timing of revenue recognition for sale
of goods varies from contract to contract, and the activity can span beyond the year end.
Revenue from sale of goods is recognised when control is transferred to the customers and when there are no other unfulfilled obligations. This
requires detailed analysis of each sale agreement/ contract /customer purchase order regarding timing of revenue recognition.
Inappropriate assessment could lead to a risk of revenue being recognized on sale of goods before the control in the goods is transferred to the
customer.
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Principal Audit Procedures
We have assessed the Company's accounting
policies for revenue recognition in accordance with the applicable accounting standards i.e Ind AS 115;
We have conducted testing of design, implementation and operating effectiveness of key internal financial controls over timing of recognition
of revenue from sale of goods and subsequent adjustments made to the transaction price;
We have also performed substantive audit procedures on selected statistical samples of customer contracts. Verified terms and condition related to acceptance of goods, acknowledgement on delivery receipts and tested the transit time to deliver the goods and its revenue recognition. Our tests of details focused on period end samples to
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Key Audit Matters
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Auditor's Response
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Subsequent adjustments are made to the transaction price due to grade mismatch/slippage of the transferred goods (coal). The variation in the contract price if not settled mutually between
the parties to the contract is referred to third party testing and the Company estimates the adjustments required for revenue recognition
pending settlement of such dispute. Such adjustments in revenue are made on estimated basis following historical trend.
Inappropriate estimation could lead to a risk of revenue being overvalued or undervalued. Accordingly, timing of recognition of revenue and adjustments for coal quality variances involving critical estimates is a key audit matter.
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verify only revenue pertaining to current year is
recognized based on terms and conditions set out in sale agreements/ contracts and delivery documents. We have assessed the appropriateness of the estimated adjustments in the process. We also performed tests to establish the basis of estimation of the consideration and whether such estimates are commensurate with the accounting policy of the Company.
We have assessed the adequacy of disclosure in the standalone financial statements.
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3
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Measurement of inventory quantities of coal
As at 31st March, 2023 the Company has coal inventory of H4,068.16 Crores. This was determined a key audit matter, as the measurement of these inventory quantities lying at the ports/ yards involves significant judgement and estimate resulting from measuring the surface area. The Company uses internal and external experts, to perform volumetric assessments, basis which the quantity for these inventories is estimated.
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Principal Audit Procedures
We have obtained an understanding and have evaluated the design and operating effectiveness of controls over physical count and measurement of such inventory;
We have evaluated the competency and capabilities of management's experts for quantification of the inventories on sample basis.
We have physically observed inventory measurement and count procedures carried out by management
using experts, to ensure its appropriateness and completeness; and
Our audit procedures also included obtaining and
inspecting, inventory measurement and physical count results for such inventories, including assessing and evaluating the results of analysis performed by management in respect of differences between book and physical quantities. We have also verified that the physical verification differences are appropriately accounted for in the books of accounts.
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4
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Significant judgement relating to impairment of investments in subsidiaries, associates and jointly controlled entities
The Company has major investments in subsidiaries, associates and jointly controlled
entities aggregating to H9,947.92 Crores as at 31 March 2023. The Management assesses at least annually the existence of impairment indicators of
each shareholding in such subsidiaries, associate and jointly controlled entities.
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Principal Audit Procedures
We obtained understanding of the Company's policy on assessment of impairment of investment in subsidiaries, associates and jointly controlled entities and assumptions used by the Management including design and implementation of controls. We have tested operating effectiveness of those controls.
We have assessed the methodology used by the Management of the company to estimate
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Key Audit Matters
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Auditor's Response
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The process and methodologies for assessing and determining the recoverable amount of each investments are based on the complex assumptions, that by their nature imply the use of Management's judgement, in particular with reference to identification of impairment indicators, forecasting future cashflow relating to period covered by the Company's strategic business plan, normalized cashflow assumed as a basis for terminal values, as well as the long term growth rates and discount rates applied to such forecasted cash flow.
Considering the judgement required for estimating
the cash flows and complexity of the assumptions used, this is considered as a Key Audit Matter.
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recoverable value of each investment and consistency with the relevant Ind AS.
We compared the carrying value of the Company's investment in these subsidiaries, associates and jointly controlled entities with their respective net
asset values as per the audited financial statements,
With respect to the cases where indicators of impairment were identified by the Management,
we obtained the projected future cash flows along with sensitivity analysis thereof with respect to relevant investments, We evaluated management's methodology, assumptions and estimates used in the calculation and have involved subject matter expert internally to evaluate the appropriateness of the assumptions used.
We evaluated the appropriateness of its accounting and the disclosures, if any, for the impairment of investment.
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Information other than the Financial Statements and Auditor's Report thereon
The Company's management and Board of Directors are responsible for the preparation of the other information, The other information comprises the information included in the Management Discussion and Analysis, Board's Report including Annexure to Board's Report, Business Responsibility and Sustainability Report, Corporate Governance and Shareholder's Information, but does not include the standalone 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 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 during the course of our 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 Director's Responsibility for the Standalone Financial Statements
The Company's Management and the Board of Directors are responsible for the matters stated in Section 134(5) of the Companies Act, 2013 ("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, cash flows and changes in equity of the Company in accordance with the accounting principles generally accepted in India, including the applicable Indian Accounting Standards (Ind AS) prescribed 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 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 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 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 management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
The Board of Directors are also responsible for
overseeing the Company's financial reporting process.
Auditor's Responsibility 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:
Ý 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.
Ý Obtain an understanding of internal financial controls relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the
Act, we are also responsible for expressing our opinion on whether the Company has adequate internal financial controls system in place and the operating effectiveness of such controls.
Ý Evaluate the appropriateness of accounting policies used and the reasonableness of
accounting estimates and related disclosures made by management.
Ý 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.
Ý 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 year 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
A” a statement on the matters specified in the
paragraph 3 and 4 of the Order, to the extent
applicable,
2. As required by section 143(3) of the Act, based on
our audit 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, except for the matters described on the Basis for Qualified Opinion paragraph;
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 Cash Flows and the Standalone 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 Indian Accounting Standards specified under Section 133 of the Act, read with the Companies (Indian Accounting Standards) Rules, 2015, as amended;
e. The matter described in the Basis for Qualified Opinion 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 31st March, 2023 and taken on record by the Board of Directors, none of the directors is disqualified as on 31st March, 2023 from being appointed as a director in terms of Section 164(2) of the Act;
g. The qualification relating to the other matters
connected with the Standalone Financial Statements are as stated in the Basis for Qualified Opinion paragraph above;
h. With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate report in Annexure B”; Our report expresses an unmodified opinion on the adequacy and operating effectiveness of the Company's internal financial controls over financial reporting;
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, 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 on its financial position in its financial statements -Refer Note 44 to the standalone financial
statements;
B. 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;
C. There have been no delays in transferring the 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, other than as disclosed in the note 55 to the 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 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 persons or entities identified in any manner whatsoever by or on behalf of the company ("Ultimate Beneficiaries”) (except for the entities consolidated with the company) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries;
(ii) The management of the company has represented that, 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 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
(iii) Based on such audit procedures that
we have considered reasonable and appropriate in the circumstances; nothing has come to our notice that has caused us to believe that the representations under sub-clause (i) and (ii) above contain any material mis-statement.
E. The final dividend proposed in the preceding year, declared and paid by the Company during the year is in accordance with Section 123 of the Act, as applicable. Further, the Board of Directors of the Company have proposed final dividend for the year which is subject to the approval of the members at the ensuing Annual General Meeting. Such dividend proposed is in accordance with section 123 of the Act, as applicable.
3. With respect to the matters to be included in the Auditor's Report in accordance with the requirements of section 197(16) of the Act, as
amended:
In our opinion and to the best of our information and according to the 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 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, SHAH DHANDHARIA & CO LLP
Chartered Accountants Firm Reg. No: 118707W/W100724
Shubham Rohatgi
Partner
Membership No. 183083 UDIN - 23183083BGVARJ1687
Place: Ahmedabad
Date: 4 May 2023
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