Report on the Audit of the Standalone Ind AS Financial StatementsOpinion
We have audited the accompanying standalone Ind AS financial statements of Vedanta Limited ("the Company"), which comprise the Balance sheet as at 31 March 2023, the Statement of Profit and Loss, including the statement of Other Comprehensive Income, the Cash Flow Statement and the Statement of Changes in Equity for the year then ended, and notes to the standalone Ind AS financial statements, including a summary of significant accounting policies and other explanatory information.
In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone Ind AS financial statements give the information required by the Companies Act, 2013, as amended ("the Act") in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at 31 March 2023, its profit including other comprehensive income, its cash flows and the changes in equity for the year ended on that date.
Basis for Opinion
We conducted our audit of the standalone Ind AS financial statements in accordance with the Standards on Auditing (SAs), as specified under section 143(10) of the Act.
Our responsibilities under those Standards are further described in the ‘Auditor's Responsibilities for the Audit of the Standalone Ind AS Financial Statements' section of our report. We are independent of the Company in accordance with the ‘Code of Ethics' issued by the Institute of Chartered Accountants of India together with the ethical requirements that are relevant to our audit of the financial statements under the provisions of the Act and the Rules thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the standalone Ind AS financial statements.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the standalone Ind AS financial statements for the financial year ended 31 March 2023. These matters were addressed in the context of our audit of the standalone Ind AS financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context.
We have determined the matters described below to be the key audit matters to be communicated in our report. We have fulfilled the responsibilities described in the Auditor's responsibilities for the audit of the standalone Ind AS financial statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the standalone Ind AS financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying standalone Ind AS financial statements.
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Key audit matters
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How our audit addressed the key audit matter
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Accounting and disclosure of related party transactions (as described in note 39 of the Standalone Ind AS financial statements)
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The Company has undertaken transactions with related party, Vedanta Resources Limited (‘VRL'), its intermediated holding company and its affiliates including among others payment of brand and strategic management fee, agency commission, obtaining guarantees and payment of consideration thereof.
Accounting and disclosure of such related party transactions has been identified as a key audit matter due to a) Significance of such related party transactions; b) Risk of such transactions being executed without proper authorizations; and c)
Risk of material information relating to aforesaid transactions not getting disclosed in the financial statements.
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Our procedures included the following:
• Obtained and read the Company's policies, processes and procedures in respect of identification of such related parties in accordance with relevant laws and standards, obtaining approval, recording and disclosure of related party transactions and identified key controls. For selected controls we have performed tests of controls.
• Tested such related party transactions and balances with the underlying contracts, confirmation letters and other supporting documents provided by the Company.
• Examined the approvals of the board and/or audit committee of these transactions.
• Obtained and assessed the legal and accounting opinion issued by experts engaged by the management for the accounting of agency commission with the parent company.
• Obtained and assessed the benchmarking report issued by the experts engaged by the management for the brand and strategic management fee.
• Assessed the competence and objectivity of the external experts
• Engaged transfer pricing experts to assist us in corroborating the arms-length assessment carried out by the management for brand and strategic fee.
• Held discussions and obtained representations from the management in relation to such transactions.
• Read the disclosures made in this regard in the financial statements and assessed whether relevant and material information have been disclosed.
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Key audit matters
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How our audit addressed the key audit matter
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Recoverability of carrying value of property plant and equipment capital work in progress and exploration intangible assets under development and Non-current Investments (as described in note 3(a)(F), 3(a)(G)(iii), 3(c)(A)(i), 3(c)(A)(iii), 3(c)(A)(v), 5 and 34 of the
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Standalone Ind AS financial statements)
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As at 31 March 2023, the Company had significant
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Our audit procedures included the following:
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amounts of property, plant and equipment, capital
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• Obtained and read the Company’s policies, processes and procedures in respect
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work in progress and exploration intangible assets
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of identification of impairment indicators, recording and disclosure of impairment
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under development which were carried at historical
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charge / (reversal) and identified key controls. For selected controls we have
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cost less depreciation.
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performed tests of controls.
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We focused our efforts on the Cash Generating
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• Assessed through an analysis of internal and external factors impacting the
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Unit (“CGU") at (a) Tuticorin within the copper segment; (b) Rajasthan block within the oil & gas segment; (c) Investments made in Western Cluster Limited (WCL) in Liberia within the Iron
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Company, whether there were any indicators of impairment in line with Ind AS 36 and Ind AS 109.
• In relation to the CGU at (a) Tuticorin within the copper segment; (b) Rajasthan
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Ore segment through the wholly owned subsidiary
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block within the oil & gas segment; (c) Investment made in WCL through wholly
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Bloom Fountain Limited and d) Investments made
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owned subsidiary Bloom Fountain Limited within the Iron Ore segment and d)
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in Optionally Convertible Redeemable Preference
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Investments made in Optionally Convertible Redeemable Preference Shares
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Shares (OCRPS) of THL Zinc Ventures Limited
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(OCRPS) of THL Zinc Ventures Limited (THLZVL), a wholly owned subsidiary within
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(THLZVL), a wholly owned subsidiary within the
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the Zinc International segment where impairment (charge) / reversal indicators
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Zinc International segment; as it had identified
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were identified, obtained and evaluated the valuation models used to determine
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impairment (charge) / reversal indicators.
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the recoverable amount by assessing the key assumptions used by management, which included:
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Recoverability of property plant and equipment, capital work in progress and exploration intangible assets being carried at cost has been identified as
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- Assessed the implications of withdrawal of Company’s license to operate the copper plant at Tuticorin. Read the external legal opinions in respect of the
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a key audit matter due to:
• The significance of the carrying value of assets being assessed.
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merits of the case and assessed management’s position through discussions with the legal counsel to determine the basis of their conclusion and its consequential impact on the reopening of the plant.
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- Evaluated the valuation methodology adopted by the management i.e.
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• The fact that the assessment of the recoverable
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determination of Value In Use in light of the facts and circumstances of the
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amount of the Company’s CGU involves significant judgements about the future cash flow forecasts, start date of the plant and the
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matter.
- Assessed management’s forecasting accuracy by comparing prior year
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discount rate that is applied.
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forecasts to actual results and assessed the potential impact of any variances.
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• The withdrawal of the Company’s licenses to
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- Corroborated the sales price assumptions used in the models against analyst
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operate the copper plant.
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consensus and assessing the reasonableness of costs.
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• The revision to brent oil assumptions up to 2040
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- Compared the production forecasts used in the impairment tests with
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due to increased demand.
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management’s approved reserves and resources estimates,
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• Changes in production forecasts due to adjustments in the future reserve estimates
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- Compared the SAED forecast used in the impairment tests with actual levy of current year and obtained external legal opinion for the interpretations made over the determination of amount due to the levy of SAED.
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• Levy of Special Additional Excise Duty (‘SAED’) on oil producers due to significant increase in crude prices resulting windfall gains to domestic
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- Tested the weighted average cost of capital used to discount the impairment models.
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crude producers.
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- Tested the integrity of the models together with their clerical accuracy.
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• The fact that the Company’s subsidiary WCL
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- Tested the classification of expenses incurred in respect of the Bomi mines in
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obtained the mining license and has started the
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Liberia to evaluate whether these are eligible for reversal.
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mining activity at Bomi mine in Liberia, which
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- Tested arithmetical accuracy of bifurcation of expenses between the 3 mines in
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were suspended since 2015 due to outbreak of
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Western cluster.
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Ebola.
• The fact that THLZVL has generated profitability owing to increase in reserves and production at Zinc International.
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- Compared assumptions used by management in respect of price forecast and ore grade against the consensus report and reserve and resource report.
- Assessed the production and profitability trend in the Zinc International segment
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and compared the same with the projected cash flows for reasonableness.
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The key judgements and estimates centered on the likely outcome of the litigations with respect to withdrawal of license to operate the Copper plant, cash flow forecasts, likelihood of license extension, interpretations on mechanism of levy of SAED, discount rate assumptions and related disclosures
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- Assessed reserves and resources estimation methods and policies and reading reports provided by management’s external reserves experts for the oil and gas assets of the Company and the assets located in the subsidiary companies i.e. WCL and THLZBVL and assessed the scope of work and findings of these third parties;
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as given in note 5 (Property, plant and equipment)
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- Assessed the competence, capability and objectivity of experts engaged by
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/ 34 (Exceptional items) of the accompanying
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management; through understanding their relevant professional qualifications
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financial statements.
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and experience.
- Engaged valuation experts to assist in performance of the above procedures.
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• Assessed the disclosures made by the Company in this regard and evaluated the considerations leading to disclosure of above impairment (charge) / reversal as exceptional items.
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Key audit matters
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How our audit addressed the key audit matter
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Recoverability of disputed trade receivables in Power segment (as described in note 3(c)(B)(ii) and 7 of the Standalone Ind AS financial statements)
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As of 31 March 2023 the value of disputed receivables in the power segment aggregated to ' 878 crore.
Due to short supply or non-supply of power due to transmission line constraints, order received from Orissa State Electricity Regulatory Commission (OERC) and disagreements over the quantification relating to aforementioned disputes or timing of the recovery of receivables, the recovery of said receivables are subject to increased risk. Some of these balances are also subject to litigation.
The risk is specifically related to receivables from GRIDCO. These receivables include long outstanding balances as well and are also subject to counter party credit risk and hence considered as a key audit matter.
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Our audit procedures included the following:
• Examined the underlying power purchase agreements.
• Examined the relevant state regulatory commission, appellate tribunal and court rulings.
• Obtained and assessed the model prepared by the management for computation of Expected credit loss on the disputed receivables, including testing of key assumptions.
• Engaged valuation experts to assist in performing above procedures.
• Tested arithmetical accuracy of the models prepared by the management.
• Obtained independent external lawyer confirmation from Legal Counsel of the Company who is contesting the cases.
• Examined external legal opinions in respect of the merits of the case and assessed management's position through discussions with the management's in-house legal team to determine the basis of their conclusion.
• Assessed the competence and objectivity of the Company's experts.
• Assessed the disclosures made by the Company in this regard.
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Claims and exposures relating to taxation and litigation (as described in note 3(c)(B)(i), 38D and 44 of the Standalone Ind AS financial statements)
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The Company is subject to a large number of tax and legal disputes, including objections raised by auditors appointed by the Director General Hydrocarbons in the oil and gas segment, vendor arbitrations, income tax disallowances and various indirect tax disputes which have been disclosed / provided for in the financial statements based on the facts and circumstances of each case.
Taxation and litigation exposures have been identified as a key audit matter due to the complexities involved in these matters, timescales involved for resolution and the potential financial impact of these on the financial statements.
Further, significant management judgement is involved in assessing the exposure of each case and thus a risk that such cases and thus a higher risk involved on adequacy of provision or disclosure of such cases.
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Our audit procedures included the following:-
• Obtained an understanding of the process of identification of claims, litigations and its classification as probable, possible or remote and identified key controls in the process. For selected controls we have performed tests of controls.
• Obtained the summary of Company's legal and tax cases and critically assessed management's position through discussions with the Legal Counsel, Head of Tax and operational management, on both the probability of success in significant cases, and the magnitude of any potential loss.
• Obtained independent external lawyer confirmation from Legal Counsel of the Company who is contesting the cases.
• Examined external legal opinions (where considered necessary) and other evidence to corroborate management's assessment of the risk profile in respect of legal claims.
• Assessed the competence and objectivity of the Company's experts.
• Engaged tax specialists to technically appraise the tax positions taken by management with respect to local tax issues.
• Assessed whether management assessment of similar cases is consistent across the divisions and subsidiaries or that differences in positions are adequately justified.
• Assessed whether management assessment of similar cases is consistent with the positions taken in earlier periods or that difference in positions are adequately justified.
• Assessed the relevant disclosures made within the financial statements to address accuracy of the amounts and whether they reflect the facts and circumstances of the respective tax and legal exposures and the requirements of relevant accounting standards.
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Recognition and measurement of Deferred Tax Assets including Minimum Alternate Tax (MAT) (as described in note 3(c)(A)(ii) and 35 of the
Standalone Ind AS financial statements)
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Deferred tax assets as at 31 March 2023 includes MAT credits of ' 9,184 crore which is available for utilization against future tax liabilities. Of the aforesaid, we focused our effort on MAT assets of ' 2,689 Crore which is expected to be utilised in the fourteenth year and fifteenth year, fifteen years being the maximum permissible time period to utilize the same.
The analysis of the recoverability of such deferred tax assets has been identified as a key audit matter because the assessment process involves judgement regarding the future profitability, allowability of tax positions / deductions claimed by the management in the tax computations and likelihood of the realization of these assets, in particular whether there will be taxable profits in future periods that support the recognition of these assets. This requires assumptions regarding future profitability, which is inherently uncertain. Accordingly, the same is considered as a key audit matter.
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Our audit procedures included the following:-
• Obtained an understanding of the management's process for estimating the recoverability of the deferred tax assets and identified key controls in the process. For selected controls we have performed tests of controls.
• Obtained and analysed the future projections of taxable profits estimated by management, assessing the key assumptions used, including the analysis of the consistency of the actual results obtained by the various segments with those projected in the previous year. We further obtained evidence of the approval of the budgeted results included in the current year's projections, and the reasonableness of the future cash flow projections.
• Assessed management's forecasting accuracy by comparing prior year forecasts to actual results and assessed the potential impact of any variances.
• Tested the accuracy of the deductions availed under the Income Tax Act included in the tax computation.
• Tested the computation of the amounts recognized as deferred tax assets.
• Engaged valuation experts to assist in performance of the above procedures.
• Assessed the competence and objectivity of the experts engaged by us.
• Assessed the disclosures made by the Company in this regard.
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Information Other than the Financial Statements and Auditor's Report Thereon
The Company's Board of Directors is responsible for the other information. The other information comprises the information included in the Annual report, but does not include the standalone Ind AS financial statements and our auditor's report thereon.
Our opinion on the standalone Ind AS financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the standalone Ind AS financial statements, our responsibility is to read the other information and, in doing so, consider whether such other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of Management for the Standalone Ind AS Financial Statements
The Company's Board of Directors is responsible for the matters stated in section 134(5) of the Act with respect to the preparation of these standalone Ind AS financial statements that give a true and fair view of the financial position, financial performance including other comprehensive income, cash flows and changes in equity of the Company in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards (Ind AS) specified under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and the design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the standalone Ind AS financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
In preparing the standalone Ind AS financial statements, management is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Those Charged with Governance are also responsible for overseeing the Company's financial reporting process.
Auditor's Responsibilities for the Audit of the Standalone Ind AS Financial Statements
Our objectives are to obtain reasonable assurance about whether the standalone Ind AS financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these standalone Ind AS financial statements.
As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the standalone Ind AS financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis
for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)
(i) of the Act, we are also responsible for expressing our opinion on whether the Company has adequate internal financial controls with reference to financial statements in place and the operating effectiveness of such controls.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
• Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability
to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the standalone Ind AS financial statements, including the disclosures, and whether the standalone Ind AS financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the standalone Ind AS financial statements for the financial year ended 31 March 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, in respect of an unincorporated joint venture, whose financial statements include total assets of ' 149 as at 31 March 2023, and total revenues of ' 100 Crore, total net profit after tax of ' 32 Crore, total comprehensive income of ' 32 Crore for the year ended 31 March 2023, and net cash inflows of ' 0 Crore for the year ended 31 March 2023. These financial statements and other financial information of the said unincorporated joint venture have not been audited by other auditors, whose unaudited financial statements and other unaudited financial information have been furnished to us by the management. Our opinion on the standalone Ind AS financial statements, in so far as it relates to the amounts and disclosures included in respect of the said unincorporated joint venture and our report in terms of sub-sections (3) of Section 143 of the Act, in so far as it relates to the aforesaid unincorporated joint venture, is based solely on the unaudited information furnished to us by the management. 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, we give in the "Annexure 1" a statement on the
matters specified in paragraphs 3 and 4 of the Order.
2. As required by Section 143(3) of the Act, we report that:
(a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit;
(b) In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books;
(c) The Balance Sheet, the Statement of Profit and Loss including the Statement of Other Comprehensive Income, the Cash Flow Statement and Statement of Changes in Equity dealt with by this Report are in agreement with the books of account;
(d) In our opinion, the aforesaid standalone Ind AS financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Companies (Indian Accounting Standards) Rules, 2015, as amended;
(e) On the basis of the written representations received from the directors as on 31 March 2023 taken on record by the Board of Directors, none of the directors is disqualified as on 31 March 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 these standalone Ind AS 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 31 March 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 Ind AS financial statements -Refer Note 38 and Note 44 to the standalone Ind AS financial statements;
ii. The Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses;
iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company
iv. a) The management has represented
that, to the best of its knowledge and belief, as disclosed in the note 39 (H) to the standalone Ind AS 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") 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, as disclosed in the note 39(H) to the standalone Ind AS 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, 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 subclause (a) and (b) contain any material misstatement.
v. The interim dividend declared and paid by the Company during the year and until the date of this audit report is in accordance with section 123 of the Act.
vi. As proviso to Rule 3(1) of the Companies (Accounts) Rules, 2014 is applicable only w.e.f. 01 April 2023 for the company, hence the reporting under this clause is not applicable.
For S.R. Batliboi & Co. LLP
Chartered Accountants
ICAI Firm Registration Number: 301003E/E300005
per Vikas Pansari
Partner
Place of Signature: Mumbai Membership Number: 093649 Date: 12 May 2023 UDIN: 23093649BGXPKQ3436
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