To The Members of The Waterbase Limited
Report on the Audit of the Standalone Financial StatementsOpinion
We have audited the accompanying standalone financial statements of The Waterbase Limited ("the Company”), which comprise the Balance Sheet as at March 31, 2024, and the Statement of Profit and Loss (including Other Comprehensive Income), the Statement of Cash Flows and the Statement of Changes in Equity for the year ended on that date, and notes to the financial statements, including a summary of material 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 ("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, ("Ind AS”) and other accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2024, and its loss, total comprehensive loss, its cash flows and the changes in equity for the year ended on that date.
Basis for Opinion
We conducted our audit of the standalone financial statements in accordance with the Standards on Auditing ("SAs”) specified under section 143(10) of the Act. Our responsibilities under those Standards are further described in the Auditor's Responsibility 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 ethical requirements that are relevant to our audit of the standalone financial statements under the provisions of the Act and the Rules made thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the ICAI's Code of Ethics. We believe that the audit evidence obtained by us is sufficient and appropriate to provide a basis for our 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 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. We have determined the matters described below to be the key audit matters to be communicated in our report.
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Sr.
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Key Audit Matter
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Auditor’s Response
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1.
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Recoverability of trade receivables and allowance for credit loss on overdue trade receivables (including dues from customers under legal proceedings)
The Company has total outstanding trade receivable of Rs. 6,194.61 Lakhs (corresponding allowance for expected credit loss amounts to Rs. 1,939.48 Lakhs) as of March 31, 2024. Gross trade receivables include Rs. 2,174.26 Lakhs of secured receivables as at March 31, 2024. Net trade receivables balance of Rs. 4,255.13 Lakhs is significant to the total assets of the Company (18% of total assets as at March 31, 2024).
The gross trade receivables include balance of Rs. 4,696.07 Lakhs lying overdue above the normal credit days allowed to the customers, which in turn includes Rs. 3,708.32 lakhs in respect of which the Company has initiated legal/arbitration proceedings for recovery the amounts due, which proceedings are ongoing.
Significant amount of trade receivables has exceeded the stipulated credit period given to the debtors increasing the chance of bad debts and blockage of working capital.
The appropriate valuation of trade receivables is dependent on a number of factors such as age, credit worthiness, intent, ability of counter parties to make payment, the timing/outcome of the legal proceedings and the value of the underlying security received in the form of mortgage of properties from the customers and the ability of the Company to liquidate the same.
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Principal Audit Procedures:
Our audit approach was a combination of test of internal controls
and substantive procedures including:
• Understanding the Company's process of assessing the recoverability, review of the customers onboarding and credit monitoring process, monitoring of the legal proceedings and determination of the provisioning for such overdue receivables.
• Evaluating the design and implementation and testing the operating effectiveness of the controls relating to management's assessment of recoverability, determination of expected credit loss of overdue trade receivables and monitoring of the legal proceedings, where applicable.
• Assessing the profile of trade receivables as at March 31, 2024 including test of the key registration / customer onboarding documents on a sample basis and the economic environment applicable to these trade receivables.
• Evaluating the simplified approach applied by the Company to identify lifetime expected credit losses. In doing so, tested the historical provision rates and an evaluation was carried out for the need for it to be adjusted to reflect relevant, reasonable and supportable information about expected recoveries in the future.
• Evaluating reasonableness of the method, assumptions and judgements used by the management with respect to recoverability of the customer balances, having regards to nature of the customers, based on information available with the Company and assessment of the intent of the counterparty to make payment based on passage of time, legal proceedings
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Key Audit Matter
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Auditor’s Response
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The carrying value is adjusted with the allowance for credit loss amount calculated based on the above-mentioned factors, wherein estimates and judgements are involved considering the delay and default risk and hence it has been considered as a key audit matter.
Refer to the accounting policies para 2.19 and Note 13 of the Standalone Financial Statement.
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underway, expected valuation and liquidation plan of the security held by the Company and confirmation obtained by the management and determination of expected credit loss of overdue trade receivables, as applicable.
• Obtaining balance confirmation for samples of overdue receivables which are not under legal proceedings covering significant population of such receivables and verifying the reasonableness of the source of such confirmation responses as well and testing reconciliation for differences, if any for the confirmations received. Performing alternative procedures to test occurrence and existence of the receivables as at March 31, 2024 for cases where confirmations where not received.
• For receivables where legal/arbitration proceedings have been initiated, testing the movement in such proceedings during the year, understanding and evaluating the steps taken by the management to track and expedite the receipt of such dues, considering the awards received in favour or against the Company on such proceedings, where applicable and testing the assessment of the management regarding the recoverability of such dues.
• Where securities are available and considered by the management for the purposes of the credit evaluation, testing the underlying mortgage documents including registration thereof, the original title deeds available with the company, copies of the encumbrance certificate, guideline value of such security etc. to ascertain the charge in favour of the Company, on a sample basis.
• Testing the valuation of the underlying security with the valuation reports obtained from the registered valuer, where applicable, and assess reasonableness of the same with reference to the publicly available information in respect of such security and inputs from our internal fair valuation specialists on a sample basis.
• Evaluating disclosures made in the Standalone financial statements.
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Existence and valuation of Inventory of Processing Plant:
Inventory of the Company consists primarily of variety of feeds, farm care products, processed shrimps and their raw materials.
As on March 31, 2024, the Company has inventory of processed shrimp at its processing plant which had a carrying value of Rs. 4,01779 Lakhs that forms a major part of the total assets of the Company (17% of total assets as on March 31, 2024). The inventory of processed shrimp is valued at the lower of cost and net realizable value.
The Physical Verification of inventory on March 31, 2024 could not be completed by the management on a timely basis due to over stocking of the inventory in the cold storages where such processed shrimps are stored and therefore, we could not observe such verification of the physical inventory on or around March 31, 2024. The Management completed the physical verification subsequent to the year end in May 2024 and performed a roll back to reconcile the inventory as at March 31, 2024. We were therefore able to physically observe the complete inventory at the processing plant of the Company subsequent to March 31, 2024 in May 2024.
Further, the valuation process for the processing plant is largely manual, involves estimation, judgements, and assumptions around determination of:
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Principal audit procedures performed:
Our audit approach was a combination of test of internal controls
and substantive procedures including:
• Understanding the process followed by the Company with respect to the physical verification of stock at its processing plant and the valuation of such stock.
• Evaluating the design and implementation and testing the operating effectiveness of key controls surrounding the physical verification of inventories of processed shrimps by the management and valuation of inventory. This included the enquiries and verification of the additional controls deployed by the management in relation to the existence of the inventory as at March 31, 2024.
• Obtaining the report of the physical verification of inventory at the processing plant by the Management and also the report from the third party appointed by the management post year end for processed shrimps available at plant including the reconciliation of the roll back of the stock to the balance as at March 31, 2024 to reconcile if the details as per such reports were matching to the physical stock considered by the Management for valuation as at March 31, 2024.
• For Inventories at third party warehouses, obtaining direct confirmations as at March 31, 2024 and also physically inspected such stock at the third party on a sample basis.
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Key Audit Matter
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Auditor’s Response
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• Yield % after processing of shrimps by performing various activities such as Soaking, glazing, etc.
• Allocable overheads and their absorption rates.
• Net realisable value of the inventories. Accordingly, testing of the existence and valuation of the year-end inventory balance at the processing plant, is considered to be one of the areas which required significant auditor attention owing to the increased efforts, complexity and judgements involved in the process of the valuation of inventory. Refer Note 2.6 in the Summary of material accounting policies and other explanatory notes and Note 12 to the standalone financial statements.
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• Physically observing the inventory at the processing plant post the year end.
• Testing the rollback reconciliation performed by the Management to arrive at the inventories at the year end by verifying on a sample basis, the following:
S Sales documents including the documents related to shipment for export purposes.
S Production records to test the actual production during the period.
S Purchase records and stock transfer to track the inward movement of inventory to the processing plant and to ascertain if the quantities considered by the management for the roll back reconciliation were appropriate.
S An analysis of the monthly stock levels at the processing plant, the capacity of the cold storage, the stock levels, production and sales during the periods of April and May 2024 to ascertain if the inventory quantities considered in the roll back analysis were reasonable taking into account the normal trends.
• Evaluating reasonableness of the valuation method used and mathematical accuracy.
• Testing the significant assumptions made in the valuation viz., yield rate, overhead allocation and verifying the same against available information with reference to data inputs used by the company to assess the accuracy, reliability, and completeness thereof.
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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 Board's Report including Annexures to Board's Report and Management Discussion and Analysis Report, but does not include the consolidated financial statements, 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.
Responsibilities of Management and Those Charged with Governance for the Standalone Financial Statements
The Company's Board of Directors is responsible for the matters stated in section 134(5) of the Act with respect to the preparation of these standalone financial statements that give a true and fair view of the financial position, financial performance including other comprehensive income, cash flows and changes in equity of the Company in accordance with the accounting principles generally accepted in India, including 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 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 financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
In preparing the standalone financial statements, management and Board of Directors 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 the Board of Directors either intend to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
The Company's 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:
• Identify and assess the risks of material misstatement of the standalone financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal 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 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 management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the standalone financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the standalone financial statements, including the disclosures, and whether the standalone financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
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 financial 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 period 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 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.
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, except for not complying with the requirement of audit trail as stated in (i)(vi) below.
c) The Balance Sheet, the Statement of Profit and Loss including Other Comprehensive Income, the Statement of Cash Flows and Statement of Changes in Equity dealt with by this Report are in agreement with the books of account.
d) In our opinion, the aforesaid standalone financial statements comply with the 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, 2024 taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2024 from being appointed as a director in terms of Section 164(2) of the Act.
f) The modification relating to the maintenance of accounts and other matters connected therewith, is as stated in paragraph (b) above.
g) With respect to the adequacy of the internal financial controls with reference to standalone financial statements of the Company and the operating effectiveness of such controls, refer to our separate Report in "Annexure A”. Our report expresses an unmodified opinion on the adequacy and operating effectiveness of the Company's internal financial controls with reference to standalone financial statements.
h) 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.
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, as amended in our opinion and to the best of our information and according to the explanations given to us:
i. The Company has disclosed the impact of pending litigations on its financial position in its standalone financial statements-Refer Note 34 to the standalone 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 45(v) 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 its knowledge and belief, as disclosed in the note 45(v) 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, 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.
v. The company has not declared or paid any dividend during the year and has not proposed final dividend for the year.
vi. Based on our examination, which included test checks, the Company has used accounting software for maintaining its books of account for the year ended March 31, 2024 which has a feature of recording audit trail (edit log) facility and the same has operated throughout the year for all relevant transactions recorded in the software except that audit trail feature was not enabled for transaction and master tablesto logany direct data changes for the year ended March 31, 2024. Refer note 47 to the standalone financial statements.
Further, during the course of our audit, we did not come across any instance of the audit trail feature being tampered with, in respect of the accounting software for the period for which the audit trail feature was operating.
As proviso to Rule 3(1) of the Companies (Accounts) Rules, 2014 is applicable from April 1, 2023, reporting under Rule 11 (g) of the Companies (Audit and Auditors) Rules, 2014 on preservation of audit trail as per the statutory requirements for record retention is not applicable for the financial year ended March 31, 2024.
2. As required by the Companies (Auditor's Report) Order, 2020 ("the Order”) 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.
For Deloitte Haskins & Sells LLP
Chartered Accountants Firm's Registration No.117366W/W-100018)
R Prasanna Venkatesh
(Partner)
Place: Chennai (Membership No.214045)
Date: May 29, 2024 (UDIN: 24214045BKEKKP7625)
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