To the Members of Godavari Biorefineries Limited
Report on the audit of the Standalone Financial Statements
Opinion
1. We have audited the accompanying standalone financial statements of Godavari Biorefineries Limited (“the Company”), which comprise the Balance Sheet as at 31st March 2024, and the Statement of Profit and Loss (including Other Comprehensive Income), Statement of Changes in Equity and Statement of Cash Flows for the period then ended, and notes to the financial statements, including a summary of significant accounting policies and other explanatory information.
2. 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 accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2024, and total comprehensive income (comprising of profit and other comprehensive income), changes in equity and its cash flows for the period ended on that date.
Basis for opinion
3. We conducted our audit in accordance with the Standards on Auditing (SAs) specified under section 143(10) of the Companies Act, 2013. Our responsibilities under those Standards are further described in the Auditor's Responsibilities for the Audit of the 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 opinion.
Key audit matters
4. Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
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Key Audit Matters
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How the matter was addressed in our audit
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1.
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Valuation of inventory of Sugar, Distillery and Cogen Division as at the year ended March 31, 2024 (Refer note 2.2(i) and 7 of the Standalone Financial Statements)
As per the accounting policy of the Company, inventory of sugar division, distillery and cogen division are valued at the lower of cost and net realisable value (‘NRV'). Sugarcane crushing results in production of products and by-products which are sold in market as well as used as inputs in the production in Distillery and Cogen Divisions of the Company. The valuation for all the products and by-products requires use of management's judgements and assumptions. These judgements and assumptions are subject to inherent limitations due to various external factors.
We have determined this to be a key audit matter given the complexity in the judgments involved due to different valuation parameters arising out of variability in external factors such as government regulations, availability of sugarcane, sugarcane crushing days, recovery from cane crushing, fluctuating selling price of sugar and non-availability of industry data for cost/NRV of by-products. Further, any change in the management's judgements and assumptions is likely to have significant impact on the valuation of inventories.
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1. Obtained an understanding of the matter from the management.
2. Considered the appropriateness of the Company's accounting policies relating to valuation of finished goods and by-products and assessing compliance with the applicable accounting standards.
3. Tested the effectiveness of the Company's controls over calculation of cost of inventories and estimation of corresponding NRV.
4. Based on data used by the Company to arrive at cost and NRV, including minimum selling price and actual selling price during the year end, we assessed the permanence of methods used, relevance and reliability of data and the calculations applied.
Based on the above procedures performed, we concluded that management's process for determination of NRV and comparing that with cost of inventories seems reasonable.
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Key Audit Matters
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How the matter was addressed in our audit
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2.
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Accounting Treatment of CWIP of expenditure done on account of Anti-Cancer Drug - MSP008-22
In accordance with the IND AS 38, upto F.Y 2018-2019 as the drug was under research phase, all the expenditures (revenue and capital) incurred on the research were being accounted as revenue expenditures. The drug entered development phase in F.Y 2019-2020, and since then, all the expenditures were split and accounted as revenue and capital expenditures. Accordingly, all capital expenditures i.e. the equipment and machines acquired were accounted as Capital Work in Progress (CWIP) in the books of accounts since F.Y 2019-2020.
The Company being under the development phase has achieved a stable composition of the drug which is now under safety trials. The Company has also received approval from Central Drugs Standard Control Organisation (CDSCO) to continue the safety trials to completion or until a Serious Adverse Event is reported.
The Company has also started phase 1 efficacy trials to establish the efficacy of the drug.
The Company has approached pharma companies who have shown interest in the drug but are waiting for the efficacy results. The Company has also approached VC Companies and is trying to explore possibilities for investments.
Given the current stage of the drug and that the fact that
(i) Company has the intention to complete the efficacy of the drug,
(ii) has the resources - Financial and Technical to do so and lastly,
(iii) wants to commercialize the drug,
the Company has decided to consider all the expenditures (including revenue expenditures) as addition towards CWIP under Intangible assets under development till such time that the drug is not commercialized.
We have determined this to be a key audit matter given the fact that the company is continuing the development phase of the drug and, in accordance with IND AS 38, all the expenditures incurred will be treated Capital Expenditures and will be accounted under CWIP under Intangible assets under development till the time the drug is not commercialized
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1. Obtained an understanding of the matter from the management.
2. Obtained an understanding of the matter from the strategy and business development manager who as represented to us, is leading and interacting with external parties regarding the drug.
3. Considered the appropriateness of the Company's accounting treatment of accounting all expenditures on Anti-Cancer Drug - MSP008-22 as CWIP under Intangible assets under development and assessing compliance with the applicable accounting standards.
Based on the above procedures performed, we concluded that management's policy for treating all expenditure as CWIP seems reasonable.
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3.
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Additional Cane Price for the Financial Year 2021-2022 crystalized and accounted during the period under audit in cost of materials consumed (Refer note to schedule 24 in the Standalone Financial Statement)
Additional Cane price amounting to ' 1,393.91 Lakhs for the FY 2021-2022 accounted as cost of material consumed during the period under audit.
The above liability has crystalized and also accounted during the period under audit. However same has not been included in the valuation of the Closing Stock.
We have considered this to be a Key Audit Matter considering the materiality of the amount involved.
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1. Obtained an understanding of the matter from the management.
2. Examined the following:
a) Supporting data and documents to ascertain that
the expenses even though relate to FY 20212022, same were Crystallized and Finalized during the year under audit.
b) Valuation of inventory of sugar to ascertain that the additional price have not been considered in the valuation.
Based on the above procedures performed we noted that the Management assessment of considering the additional cane price for the FY 2021-2022 as cost of cane consumed during the period under audit is reasonable.
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Other Information
5. The Company's Board of Directors is responsible for the other information. The other information comprises the information included in the Board of Directors report, but does not include the financial statements and our auditor's report thereon.
6. Our opinion on the financial statements does not cover the other information and we will not express any form of assurance conclusion thereon.
7. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the 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 and those charged with
governance for the financial statements
8. 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, changes in equity and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under section 133 of the Act. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statement that give a true and fair view and are free from material misstatement, whether due to fraud or error.
9. In preparing the 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. The Board of Directors are also responsible for overseeing the Company's financial reporting process.
Auditor's responsibilities for the audit of the financial
statements
10. Our objectives are to obtain reasonable assurance about whether the 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 financial statements.
11. As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the 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 financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
12. 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.
13. 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.
14. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the 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
15. 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 paragraphs 3 and 4 of the Order, to the extent applicable.
16. 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 accounts 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), the Statement of Changes in Equity and the Cash Flow Statement 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 Accounting Standards 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) With respect to the adequacy of the internal financial controls with reference to financial statements of the Company and the operating effectiveness of such controls, refer to our separate Report in “Annexure B”.
(g) 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:
i) The Company has disclosed the impact of pending litigations on its financial position in its financial statements - Refer Note 34 B, i to iii to the Ind AS financial statements;
ii) There are no material foreseeable losses arising out of any long-term contracts for which provision is required to be made under any law or accounting standards. The Company has made provision in respect of derivative contracts as required under the applicable law or accounting standard;
iii) There were no amounts which required to be transferred by the Company to the Investor Education and Protection Fund.
FOR VERMA MEHTA & ASSOCIATES
Chartered Accountants
Firm's Registration No: 112118W
Sandeep Verma
Partner M.N.045711
Place: Mumbai
Date: 31st May, 2024
UDIN: 24045711BKIAFL8177
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