EKI ENERGY SERVICES LIMITED.
Report on Audit of the Standalone Financial Statements
QUALIFIED OPINION
1. We have audited the accompanying Standalone Financial Statements of EKI Energy Services Limited ('the Company'), which comprise the Balance Sheet as at 31 March 2023, the Statement of Profit and Loss (including Other Comprehensive Income), Statement of Changes in Equity and the Cash Flow Statement for the year then ended and notes to Standalone Financial Statements, including a summary of significant accounting policies and other explanatory information (hereinafter referred to as " Standalone financial statements”)
2. In our opinion and to the best of our information and according to the explanations given to us, the Standalone financial statements, except for the possible effects of the matter described in the Basis for Qualified Opinion section below, gives 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 recognition and measurement principles laid down in the Indian Accounting Standards ('Ind AS') as prescribed under section 133 of the Companies Act, 2013 ('Act'), read together with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 ( as amended from time to time) and other accounting principles generally accepted in India of the net profit/ (loss) and total comprehensive income / (loss) and other financial information of the Company for the year ended March 31, 2023.
BASIS FOR QUALIFIED OPINION
3. Joint Statutory Auditor, M/s. Walker Chandiok & Co.
LLP, of the company has found certain observations and qualifications in the financial transactions of the Company. The same was communicated to the Audit Committee ("AC”) and the Board of Directors ("BOD”) of the Company u/s 143(12) of the Companies Act, 2013 on July 10, 2023. Based on the evaluation and after consideration of a memorandum prepared by legal counsels and qualified professionals, the AC of the company has responded to the Joint Statutory Auditor on August 24, 2023. The Company has represented to us that there are no non-compliance of the Companies Act, 2013 and other applicable laws / regulations and the same shall have no material impact on the standalone financial statements. The matter is under litigation and sub-judice. Due to uncertainty relating to the future outcome, we are unable to quantify
the impact of these transactions which may result in possible adjustments and/or disclosures in the standalone financial statements.
4. We conducted our audit in accordance with the Standards of Auditing ("SAs”) specified under section 143(10) of Companies Act, 2013 ("the Act”). Our responsibilities under those standards are further described in the Auditors' 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 ICAI together with the ethical requirements that are relevant to our audit of the Standalone Financial Statements, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the ICAI's Code of Ethics. Except for the matters described in the Basis for Qualified Opinion section above, we believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis of our qualified opinion.
EMPHASIS OF MATTER
5. We draw attention to matters:
a) As per Note No. 39 to the standalone financial statements , during the Financial year, Revenue was recognized upon deployment of carbon credit eligible projects instead of complying with performance obligation as required in the certain contracts. However, after considering the views of experts, the management of the company has consented that the revenue and corresponding cost shall be recognized upon complying with the entire performance obligation of contracts, instead of substantial performance obligation as per the requirement of Ind AS - 115 and accordingly the adjustment in respect of contract assets and contract liability has been accounted for and the figures for financial year ended on 31st March 2023 are in accordance with Ind AS.
b) Note No. 7(g) of the Standalone Financial Statements which describes the significant accounting policies applied in the valuation of inventory including cook stoves and carbon credits. The valuation of inventory is a critical accounting estimate that involves significant judgment by management. Further, the valuation of carbon credits involves complex and specialized factors, including verification of emission reductions, market pricing, regulatory compliance, vintage, technology, the timing of recognized revenues, and other aspects. Our audit procedures related to inventory valuation disclosed a matter that we believe is of importance to the users of the financial statements.
Our opinion is not modified in respect of this matter.
KEY AUDIT MATTERS
6. 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 31st March 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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(a) Transition to IND-AS accounting framework
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For periods up to and including the year ended March 31, 2022, the Company had prepared and presented its financial statements in accordance with the erstwhile generally accepted accounting principles in India (Indian GAAP). In order to give effect of the transition to Ind AS these financial statements for the year ended March 31,2023, together with the comparative financial information for the previous year ended March 31, 2022 and the transition date balance sheet as at April 1, 2021 have been prepared under Ind AS.
The transition has involved significant change in the Company's policies and processes relating to financial reporting, including generation of reliable and supportable information. Further, the management has exercised significant judgement for giving an appropriate effect of principles of First-time Adoption of Indian Accounting Standards (Ind AS 101), as at transition date and to determine the impact of the new accounting framework on certain accounting and disclosure requirements prescribed under companies Act 2013 and other applicable laws.
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Following substantive audit procedures to establish the
effectiveness of transition from IGAAP to Ind AS:
• We read the Ind AS impact assessment performed by the management to identify areas impacted due to Ind AS transition.
• We understood the preparation of financial statement (including disclosures in notes to accounts) and the additional controls established by the Company for transition to Ind AS. We have tested the design and operating effectiveness of key controls for processes identified by the Company for impact assessment.
• We understood the exemption availed by the management in applying the first-time adoption principles of Ind AS 101.
• We understood the changes made by the Company in presentation and disclosures under the new accounting framework.
• We understood the changes made to the accounting policies considering the requirements of the new accounting framework.
• We performed test of details on the accounting adjustments posted as at the transition date and in respect of the previous year to convert the financial information reported under erstwhile Indian GAAP to Ind AS.
• We assessed the disclosures included in the Ind AS financial statements in accordance with the requirements of Ind AS 101, with respect to the previous periods presented.
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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.
Materiality is the magnitude of misstatements in the Standalone Financial Statements that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the Standalone Financial Statements may be influenced. We consider quantitative materiality and qualitative factors in (i) planning the scope of our audit work and in evaluating the results of our work; and (ii) to evaluate the effect of any identified misstatements in the Standalone Financial Statements.
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 controls 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.
OTHER MATTERS
12. The standalone financial statements of the Company for the year ended 31 March 2022 were audited by the predecessor auditor who had expressed an unmodified opinion on May 17, 2022.
13. The standalone financial statements of the Company for the year ended 31 March 2022 and the transition date opening balance sheet as at 01 April 2021 included in these standalone financial statements, are based on the previously issued statutory financial statements prepared in accordance with the Companies (Accounting Standards) Rules, 2021 and other accounting principles generally accepted in India, which were audited by the predecessor auditor who's report for the years ended March 31, 2022 and March 31, 2021 dated May 17, 2022 and June 16,2021 respectively expressed an unmodified opinion on those standalone
INFORMATION OTHER THAN THE FINANCIAL STATEMENTAND AUDITOR'S REPORT THEREON
7. 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 Standalone Financial Statements, Consolidated 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 in the audit or otherwise appears to be materially misstated. If, based on the work we have performed and based on the work done/ audit report of other auditors, 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 AND THOSECHARGED WITH GOVERNANCE FOR THE STANDALONEFINANCIAL STATEMENTS
8. The Board of Directors of the Company are responsible for the preparation and presentation of the Standalone Financial Statements that gives 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 applicable Ind AS and other accounting principles generally accepted in India. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and 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 gives a true and fair view and are free from material misstatement, whether due to fraud or error.
9. In preparing the Standalone Financial Statements, the
Board of Directors are responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless Board of Directors either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
10. The Board of Directors are also responsible for overseeing the financial reporting process of the Company.
AUDITOR'S RESPONSIBILITIES FOR THE AUDIT OF THE STANDALONE FINANCIAL STATEMENTS
11. 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 controls.
• Obtain an understanding of internal 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 with reference to Standalone 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.
• Conclude on the appropriateness of the 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
financial statements, as adjusted for the differences in the accounting principles adopted by the Company transition to the Ind AS, which have been audited by us. Our opinion is not modified in respect of above matters.
14. The Audit Committee in their meeting held on July 05, 2023 has recommended removal of Company's statutory auditor M/s. Walker Chandiok & Co. LLP and the same was approved by Board of Directors in their meeting on July 13, 2023. The shareholders of the company in the Extra Ordinary General Meeting held on August 14, 2023 approved the removal, subject to approval of Central Government and the same is pending for approval as on the date of this report. In the Extra Ordinary General Meeting held on September 6, 2023, we have been appointed as Joint Auditor of the Company. The report of Joint Auditor M/s. Walker Chandiok & Co. LLP on these standalone financial statements is not available. In view of the above circumstances, we have issued separate audit report.
REPORT ON OTHER LEGAL AND REGULATORYREQUIREMENTS
1. As required by Section 143(3) of the Act, based on our audit we report that:
a) We have sought and except for the matters described in Basis for Qualified Opinion section above, and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose so for audit.
b) Except for the possible effects of the matters described in the Basis for Qualified Opinion section above, 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 Other Comprehensive Income, Statement of Changes in Equity and the Statement of Cash Flows dealt with by this Report are in the agreement with the relevant books of account.
d) Except for the possible effects of the matters described in the Basis for Qualified Opinion section above, in 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 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 over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate Report in "Annexure A”. Our report expresses a qualified opinion on the adequacy and operating effectiveness of the Company's internal financial controls over financial reporting.
g) With respect to the other 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 year is in accordance with the provisions of section 197 of 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.
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;
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 it's knowledge and belief, as disclosed in note 50 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, 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 it's knowledge and belief, as disclosed in the note
50 to the financial statements, 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, 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.
(c) Based on the audit procedures performed that have been considered reasonable and appropriate in the circumstances, Except for the possible effects of the matters described in the Basis for Qualified Opinion section above, nothing has come to our notice that has caused us to believe that the representations under sub-clause (i) and (ii) of Rule 11(e), as provided under (a) and (b) above, contain any material misstatement.
(d) Based on the audit procedure 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 (i) and (ii) of Rule 11(e) of the Companies (Audit & Auditors) Rules, 2014, as provided under (a) and (b) above, contain any material misstatement.
v) The Company has not declared any dividend during the current year.
vi) Proviso to Rule 3(1) of the Companies (Accounts) Rules, 2014 for maintaining books of account using accounting software which has a feature of recording audit trail (edit log) facility is applicable to the Company with effect from April 1, 2023, and accordingly, reporting under Rule 11(g) of Companies (Audit and Auditors) Rules, 2014 is not applicable for the financial year ended March 31, 2023.
2. As required by the Companies (Auditor's Report) Order, 2020 ("the Ordefi') issued by the Central Government in terms of Section 143(11) of the Act, we give in "Annexure B” a statement on the matters specified in paragraphs 3 and 4 of the Order.
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