Sheela Foam Limited
Report on the Audit of the Standalone Financial Statements
Opinion
We have audited the accompanying standalone financial statements of Sheela Foam Limited (“the Company”), which comprises the Balance Sheet as at March 31, 2026, the Statement of Profit and Loss (including Other Comprehensive Income), the Statement of Changes in Equity and the Statement of Cash Flows for the year then ended, and notes to the standalone financial statements, including material accounting policy information and other explanatory information (hereinafter referred to as the “standalone financial statements”).
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 read with Companies (Indian Accounting Standards) Rules, 2015, as amended (“Ind AS”) and other accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2026, and its profit (including other comprehensive income), changes in equity and its cash flows 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 SAs are further described in the Auditor’s Responsibilities for the Audit of the standalone Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India 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 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
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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Key Audit Matters
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How the Key Audit Matters was addressed in our audit
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1
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Revenue recognition - Discounts and rebates Refer note 2 and 31 to the standalone financial statements, revenue is measured net of any trade discounts and volume rebates to customers (i.e. to the wholesale traders and retail traders).
As per the scheme, discounts and rebates are passed on to the customers only on secondary sales made by wholesalers to retailers / customers. Further, certain discounts and rebates for goods sold during the year are finalised when the precise amounts are known and revenue thus includes an estimate of variable consideration, particularly in arrangements with customers involving varying terms which are based on annual contracts or shorter-term arrangements. In addition, the value and timing of promotions for products varies from period to period, and the activity can span beyond the year end. The unsettled portion of the variable consideration, results in accrual of discounts and rebates due to customers as at year end.
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Our audit procedures include the following:
1. Assessed the appropriateness of the Company’s revenue recognition accounting policies, including those relating to discounts, incentives and rebates as required under the applicable accounting standards.
2. Understood and verified the design and implementation and tested operating effectiveness of key application controls over the Company’s automated systems and manual controls over rebates agreements/ arrangements, rebate payments / settlements and Company’s review over the rebate accruals.
3. Verified on a test check basis, key customer contracts to identify the relevant terms and conditions related to discounts and rebates.
4. Verified on test check basis, discounts and rebates transactions recorded during the year including period end discounts and rebates accruals and ensured the computation is in accordance with the policy and relevant source documents.
5. Examined historical rebate accrual together with our understanding of current year developments to form an expectation of the rebate accrual as at year end and compared the same with the accrual for the year ended March 31, 2026.
6. Verified completeness and accuracy of the data used by the Company for accrual of discounts and rebates through test of controls.
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Sr.
No
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Key Audit Matters
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How the Key Audit Matters was addressed in our audit
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Significant judgement is required in estimating accruals relating to secondary schemes recognized, based on sales made during the year.
In view of above, accrual for discounts and rebates in relation to revenue recognition is identified as a key audit matter.
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7. Verified on a test check basis, rebate accruals after the reporting date to validate whether the accrual is recorded in the correct period.
8. Verified payments made/credit notes issued after reporting/year end date and where relevant, comparing the payment to the related rebate accrual.
9. Verified manual journal entries posted to revenue, on a test check basis, to identify unusual items and examining the underlying documentation.
10. Verified the related disclosures made in notes to the financial statements in accordance with the requirements of the applicable accounting standards.
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2
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Impairment of intangible assets with indefinite life
Refer note 2.1(d)(vii) to the standalone financial statements.
The Company has significant intangible assets i.e. Goodwill and Brand on account of acquisition of an entity amounting H 1,291.03 crores as on March 31, 2026. In determining the value in use, the Company has applied judgment in estimating future revenues, operating profit margins, long-term growth rate and discount rates.
The carrying value of these intangible assets is tested annually for impairment.
The Company performed its annual impairment test of these intangible assets and determined that there was no impairment.
Due to the significance of the carrying value of these intangible assets and judgment involved in performing impairment test, we have identified this as a key audit matter.
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Our audit procedures include the following:
1. Obtained an understanding from the management with respect to process and controls followed by the Company and tested the design, implementation and operating effectiveness of controls over the process of impairment assessment to perform annual impairment test related to these intangible assets.
2. Obtained the impairment analysis model from the management and reviewed their conclusions.
3. Tested the inputs used in the model by examining the underlying data and validating the future projections by comparing past projections with actual results.
4. Assessed the reasonableness of the assumptions used and appropriateness of the valuation methodology applied. Tested the discount rate and longterm growth rates used in the forecast including comparison to economic and industry forecasts where appropriate.
5. Reconciled the future operating cash flow forecasts with the business plan approved by the Company’s board of directors.
6. Evaluated the appropriateness of the disclosures made in the financial statement in relation to the above as required under applicable accounting standards.
7. Verified the related disclosures made in notes to the financial statements in accordance with the requirements of the applicable accounting standards.
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Information Other than the Standalone 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 Chairman’s statement, Director’s report, Business Responsibility and Sustainability Reporting etc. but does not include the standalone financial statements and our auditor’s report thereon. The Chairman’s statement, Director’s report, Business Responsibility and Sustainability Reporting etc. is expected to be made available to us after the date of this auditor's report.
Our opinion on the standalone financial statements does not cover the other information and we will 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 identified above 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.
When we read the Chairman’s statement, Director’s report, Business Responsibility and Sustainability Reporting etc., if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance.
Responsibilities of Management and Board of Directors for the Standalone Financial Statements
The Company’s Management and Board of Directors are 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 Indian 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 standalone financial statement that give a true and fair view and are free from material misstatement, whether due to fraud or error.
In preparing the standalone financial statements, the Board of Directors of the Company 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 the Board of Directors either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
The Board of Directors is also responsible for overseeing the Company’s financial reporting process.
Auditor’s Responsibilities 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.
We give in “Annexure A” a detailed description of Auditor’s responsibilities for Audit of the Standalone Financial Statements.
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 subsection (11) of section 143 of the Act, we give in “Annexure B” a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.
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 of the aforesaid standalone financial statements.
(b) In our opinion, proper books of account as required by law relating to preparation of the aforesaid standalone financial statements have been kept by the Company so far as it appears from our examination of those books, except for the matters stated in the paragraph 2(h)(vi) below on reporting under Rule 11(g).
(c) The Balance Sheet, the Statement of Profit and Loss (including other comprehensive income), the Statement of Changes in Equity and the Statement of Cash Flows dealt
with by this Report are in agreement with the books of account maintained for the purpose of preparation of the standalone financial statements.
(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, 2026 taken on record by the Board of Directors, none of the directors are disqualified as on March 31, 2026 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 are as stated in paragraph 2(b) above on reporting under Section 143(3)(b) and paragraph 2(h)(vi) below on reporting under Rule 11(g).
(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 C”.
(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, 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 53 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, to the Investor Education and Protection Fund by the Company during the year ended March 31, 2026.
(iv) a. To the best of our knowledge and belief, as disclosed in the note 43 to the standalone 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 persons or entities, 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. To the best of our knowledge and belief, as disclosed in the note 43 to the standalone financial statements, no funds have been
received by the Company from any persons or entities, 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 subclause (i) and (ii) of Rule 11(e) contain any material misstatement.
(v) The Board of Directors of the Company have proposed final dividend for the year which is subject to the approval of the members at the ensuing Annual General Meeting. The dividend declared is in accordance with section 123 of the Act to the extent it applies to declaration of dividend. (Refer Note 67 to the Standalone financial statements)
(vi) In regard to the accounting software Based on our examination, which included test checks, the Company has used an accounting software for maintaining its books of account 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. Further, during the course of our audit, we did not come across any instance of audit trail feature being tampered with. Additionally, the audit trail of prior years has been preserved by the Company as per the statutory requirements for record retention as explained in Note 42 to the standalone financial statements.
In regard to the Payroll software
Based on our examination which included test checks, the Company has used an additional software w.e.f. April 01, 2025 for maintaining its payroll (managed and maintained by a third-party software service provider) which has a feature of recording audit trail (edit log) facility and the same has been operated throughout the year for all the relevant transactions recorded in the software as explained in Note 42 to the financial statements. Further, during the course of our audit and considering SOC report, we did not come across any instance of audit trail feature being tampered with.
The company used a different payroll software before April 01, 2025 and in the absence of sufficient and appropriate audit evidence, we are unable to comment on whether the audit trail of prior years has been preserved by the Company as per the statutory requirements for record retention prescribed under Rule 11(g) of the Companies (Audit and Auditors) Rules, 2014.
3. In our opinion, according to information, explanations given to us , the remuneration paid or provided by the Company to its directors is within the limits laid prescribed under Section 197 read with Schedule V of the Act.
For M S K A & Associates LLP (Formerly known as M S K A & Associates)
Chartered Accountants ICAI Firm Registration No. 105047W/W101187
Nipun Gupta
Partner
Place: Gurugram Membership No.: 502896
Date: May 14, 2026 UDIN: 26502896PMVLBC1942
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