1) We have audited the accompanying standalone financial statements of Finolex Industries Limited (the ‘Company’), which comprise the Balance Sheet as at 31 March 2024, 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 then ended, and notes to the standalone financial statements, including material accounting policy information and other explanatory information.
2) In our opinion and to the best of our information and according to the explanations given to us, and based on the consideration of the report of the auditor of Finolex Industries Employees’ Welfare Trust (the ‘Welfare Trust’) as referred to in paragraph 15 below, 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 (‘Ind AS’) specified under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015 and other accounting principles generally accepted in India, of the state of affairs of the Company as at 31 March 2024, and its profit (including other comprehensive income), its cash flows and the changes in equity for the year ended on that date.
Basis for Opinion
3) We conducted our audit in accordance with the Standards on Auditing 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 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 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 together with the audit evidence obtained by the auditor of the Welfare Trust, in terms of their report referred to in paragraph 15 of the Other Matter section below is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matter
4) Key audit matters are those matters that, in our professional judgment, and based on the consideration of the report of the auditor of the Welfare Trust as referred to in paragraph 15 below, 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 financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
5) We have determined the matter described below to be the key audit matter to be communicated in our report.
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Key audit matter
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How our audit addressed the key audit matter
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Valuation of inventory
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Our audit procedures related to valuation
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of
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At the balance sheet date 31 March 2024, the Company held inventories comprising of raw
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inventory included, but were not limited, to following:
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the
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materials and components, finished goods,
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• Assessed the appropriateness of the Company’s
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work-in-progress aggregating to ' 728.03 crore
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accounting policy and valuation method
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of
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as disclosed in note 8 to the accompanying
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inventory in accordance with Ind AS 2.
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standalone financial statements of the Company. Such inventories are carried at cost or net realisable value, whichever is lower, as per the accounting policy disclosed in note 2.7 to the aforesaid standalone financial statements.
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• Evaluated the design and tested the operating effectiveness of key controls (including IT automated controls) around purchase of inventory, valuation of inventory, computation of overhead, and determination of net realisable
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value of inventory items.
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Key audit matter
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How our audit addressed the key audit matter
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Cost of inventory comprises of cost of purchase,
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• Discussed with management the rationale
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costs of conversion and other costs incurred in
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supporting assumptions and estimates used
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bringing the inventories to their present location
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in carrying out the inventory valuation and
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and condition.
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corroborated the same to our understanding of
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Determination of cost of conversion includes costs directly related to production of units
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the business.
• Understood and assessed the management
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and also includes a systematic allocation of
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process of determining overhead absorption
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various fixed and variable production overheads
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rates applied by verifying the appropriateness
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to convert raw material into finished goods.
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of underlying variables used such as cost data,
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Fixed production overheads are allocated to
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normal production capacity, actual production
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the costs of conversion based on the normal
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data, bill of materials and stage of production.
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capacity of the production facilities and variable production overheads are allocated to each unit
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• Verified the expenses considered as cost of
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of production based on the actual use of the
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conversion including estimates for apportionment
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production facilities, in accordance with the
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of such conversion cost to different classes of
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principles of Ind AS 2, Inventories (‘Ind AS 2’),
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finished goods and work in progress and ensured
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which involves management judgement and
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arithmetical accuracy of such workings.
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estimation.
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• Performed substantive testing for samples of raw
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Further, at the end of each reporting period,
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materials’ purchase transactions recorded during
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the management of the Company also assesses
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the year, and purchase transactions recorded
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whether the carrying value of inventory is in
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before and after the year end, to ensure such
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excess of amounts expected to be realised from
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purchases are booked accurately and in the correct
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their sale or use and in such cases, inventories
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period, by verifying the underlying documents for
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are written down to their net realisable value in
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such selected samples, which included contracts,
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accordance with Ind AS 2.
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purchase orders, invoices, shipping documents
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Considering the abovementioned complexities and materiality of amounts and management
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such as lorry receipts, etc.
• Obtained understanding of management process
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judgement involved, valuation of inventory
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for identification of slow moving, non-moving or
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matter is considered to be a key audit matter for
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obsolete inventories and ensured that the same
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the current year audit.
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is consistently applied. Tested ageing of inventory
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items obtained through system reports, as applicable.
• Recomputed the net realisable value of the finished goods on a sample basis and ensured the inventory is carried at lower of cost or net realizable value as per Ind AS 2.
• Performed analytical procedures on current year cost of goods sold based on product-wise gross profit margin analysis, and where appropriate, conducted further enquiries and testing.
• Assessed that the disclosures made in the accompanying standalone financial statements is in accordance with the applicable accounting standards.
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Information other than the Financial Statements and Auditor’s Report thereon
6) The Company’s Board of Directors are responsible for the other information. The other information comprises the information included in the Annual Report, but does not include the standalone financial statements and our auditor’s report thereon. The Annual Report 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 when it becomes available 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 Annual Report, 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 Those Charged with Governance for the Standalone Financial Statements
7) The accompanying standalone financial statements have been approved by the Company’s Board of Directors. The Company’s Board of Directors are responsible for the matters stated in section 134(5) of the Act with respect to the preparation and presentation of these standalone financial statements that give a true and fair view of the financial position, financial performance including other comprehensive income, changes in equity and cash flows of the Company in accordance with the Ind AS specified under section 133 of the Act and other accounting principles generally accepted in India. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and 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.
8) In preparing the financial statements, the 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 intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
9) 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
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 Standards on Auditing 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 Standards on Auditing, specified under section 143(10) of the Act we exercise professional judgment and maintain professional skepticism 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 Board of Directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the
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; and
• Obtain sufficient appropriate audit evidence regarding the financial statements of the Company and its Welfare Trust or the business activities within the Company to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the audit of financial statements of the Company of which we are the independent auditors. For the Welfare Trust included in the financial statements, which has been audited by the other auditor, such other auditor remains responsible for the direction, supervision and performance of the audit carried out by them. We remain solely responsible for our audit opinion.
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.
Other Matter
15) We did not audit the financial statements of the Welfare Trust included in the standalone financial statements of the Company whose financial statements reflect total assets of ' 60.39 crore as at 31 March 2024, and the total revenues of Nil, total net profit after tax of ' 17.06 crore, total comprehensive income of ' 17.06 crore, and cash flows (net) of ' - crore (rounded off to nil) respectively for the year ended on that date, as considered in the standalone financial statements. This financial statements have been audited by the another auditor whose report has been furnished to us by the management, and our opinion on the standalone financial statements, in so far as it relates to the amounts and disclosures included in respect of the Welfare Trust, and our report in terms of subsection (3) of section 143 of the Act in so far as it relates to the aforesaid Welfare Trust, is based solely on the report of the Welfare Trust’s auditor.
Our opinion above on the standalone financial statements, and our report on other legal and regulatory requirements below, are not modified in respect of the above matter with respect to our reliance on the work done by and the report of the Welfare Trust’s auditor.
Report on Other Legal and Regulatory Requirements
16) As required by section 197(16) of the Act based on our audit, and on consideration of the report of the Welfare Trust’s auditor as referred to in paragraph 15 above, we report that the Company has paid remuneration to its directors during the year in accordance with the provisions of and limits laid down under section 197 read with Schedule V to the Act.
17) As required by the Companies (Auditor’s Report) Order, 2020 (the ‘Order’) issued by the Central Government of India in terms of section 143(11) 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.
18) Further to our comments in Annexure A, as required by section 143(3) of the Act based on our audit, and on consideration of the report of the auditor of the Welfare Trust as referred to in paragraph 15 above, we report, to the extent applicable, 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 purpose of our audit of the accompanying standalone financial statements;
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 the matters stated in paragraph 18(h)(vi) below on reporting under Rule 11(g) of the Companies (Audit and Auditors) Rules, 2014 (as amended);
c) The standalone financial statements dealt with by this report are in agreement with the books of accounts;
d) In our opinion, the aforesaid standalone financial statements comply with Ind AS specified under section 133 of the Act;
e) On the basis of the written representations received from the directors and taken on record by the Board of Directors, none of the directors is disqualified as on 31 March 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 are as stated in paragraph 18(b) above on reporting under section 143(3)(b) of the Act and paragraph 18(h)(vi) below on reporting under Rule 11(g) of the Companies (Audit and Auditors) Rules, 2014 (as amended);
g) With respect to the adequacy of the internal financial controls with reference to standalone financial statements of the Company as on 31 March 2024 and the operating effectiveness of such controls, refer to our separate report in Annexure B wherein we have expressed an unmodified opinion; and
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, as detailed in note 38.2 to the standalone financial statements, has disclosed the impact of pending litigations on its financial position as at 31 March 2024;
ii. the Company did not have any longterm contracts including derivative
contracts for which there were any material foreseeable losses as at 31 March 2024;
iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company during the year ended 31 March 2024;
iv. a. The management has
represented that, to the best of its knowledge and belief, as disclosed in note 45 to the standalone financial statements, no funds have been advanced or loaned or invested (either from borrowed funds or securities premium or any other sources or kind of funds) by the Company to or in any person(s) or entity(ies), including foreign entities (‘the 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 (‘the Ultimate Beneficiaries’) or provide any guarantee, security or the like on behalf the Ultimate Beneficiaries;
b. The management has
represented that, to the best of its knowledge and belief, as disclosed in note 45 to the standalone financial statements, no funds have been received by the Company from any person(s) or entity(ies), including foreign entities
(‘the 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 as considered
reasonable and appropriate in the circumstances, nothing has come to our notice that has caused us to believe that the management representations under sub-clauses (a) and (b) above contain any material misstatement.
v. The final dividend paid by the Company during the year ended 31 March 2024 in respect of such dividend declared for the previous year is in accordance with section 123 of the Act to the extent it applies to payment of dividend. Further as stated in note 15 to the accompanying standalone financial statements, the Board of Directors of the Company have proposed final dividend for the year ended 31 March 2024 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; and
vi. Based on our examination which included test checks, the Company, in respect of financial year commencing
on 1 April 2023, has used accounting software for maintaining its books of account which has a feature of recording audit trail (edit log) facility and the same has been operated throughout the year for all relevant transactions recorded in the software except that, the audit trail feature was not enabled at database level for accounting software SAP to log any direct data change as described in note 50 to the standalone financial statements. Further, during the course of our audit we did not come across any instance of audit trail feature being tampered with in respect of the accounting software where such feature was enabled.
For Walker Chandiok & Co LLP
Chartered Accountants
Firm’s Registration No.: 001076N/N500013
Rajni Mundra
Partner
Membership No.: 058644
UDIN: 24058644BKFUFF7074
Place: Mumbai
Date: 10 May 2024
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