We have audited the accompanying standalone financial statements of Himatsingka Seide Limited ("the Company”), which comprise the Balance Sheet as at March 31,2024, the Statement of Profit and Loss including Other Comprehensive Income, Statement of Changes in Equity and 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 31,2024, 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 Standards are further described in the Auditors' 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 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 obtained by us 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 for the year ended March 31, 2024. 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 Matter
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How the Key Audit Matter was addressed in our audit
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1.
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Revenue recognition
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Our audit procedures in respect of this area included:
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(Refer note 2.1 to the material accounting policies and the
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1. Evaluated the appropriateness of the revenue recognition
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disclosures related to revenues in note 20 to the standalone
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accounting policies of the Company with the principles
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financial statements)
As per Ind AS 115 Revenue from Contracts with Customers,
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of Indian Accounting Standard 115 - 'Revenue from contracts with customer' ('Ind AS 115').
2. Evaluated the design, implementation and tested the
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revenue towards satisfaction of a performance obligation is
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operating effectiveness of the relevant key controls
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measured at the amount of transaction price (net of variable
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consideration) allocated to that performance obligation. The
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with respect to revenue recognition including general information and technology control environment, key
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transaction price of goods sold is net of variable consideration
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IT application controls over the Company's IT systems
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on account of various discounts and schemes offered by the
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Company as part of the contract.
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which govern revenue recognition and sales return in the accounting system.
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Revenue from sale of goods is recognised at a point in time
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3. Performed substantive testing by selecting samples of
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when control is transferred to customer and there is no
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revenue transactions recorded during the year, verifying
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unfulfilled obligation.
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with the underlying documents like sales invoices/
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The Company and its external stakeholders focus on revenue
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contracts and related logistics documents.
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as a key performance indicator. This could result in a risk of
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4. Performed cut off testing to ensure that the revenue is
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revenue being overstated or recognised before control has
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recorded in the appropriate period by reviewing the
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been transferred.
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Company's revenue recognition policies, testing samples of revenue transactions near the end of the reporting
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Because of the above factors, we have identified revenue
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period and verified shipping and billing documents to
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recognition as a key audit matter.
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ensure that the revenue is recorded in correct accounting period.
5. Obtained the historical trends for revenue and corresponding sales returns based on the accounting records maintained by the Company.
6. Ensured completeness and existence assertion by performing substantive testing on selected samples of revenue transactions recorded during the year by testing the underlying documents including contracts, invoices, goods dispatch notes, shipping documents and customer receipts, wherever applicable and obtaining independent balance confirmation from the customers at the balance sheet date.
7. Tested on a sample basis, manual journal entries relating to revenues to identify and inquire on unusual items, if any.
8. Performed analytical procedures on revenue recognised during the year to identify and inquire on unusual variances, if any and getting the reasons for variances confirmed from the management of the Company.
9. Assessed the underlying assumptions and estimates used for determination of variable consideration and tested rebates and discount provided to the customers on a sample basis, comparing the same with underlying approvals and terms of the contracts and schemes offered to customers.
10. Assessed the adequacy and appropriateness of the disclosures made in the standalone financial statements to ensure they are accurate, complete, and comply with the requirements ofInd AS 115 - 'Revenue from contracts with customer'.
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Key Audit Matter
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How the Key Audit Matter was addressed in our audit
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2.
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Assessment for impairment of investments in subsidiaries
(Refer note 2.14 to the material accounting policies and the disclosures related to carrying value of investments in subsidiaries in note 4A to the standalone financial statements)
At March 31, 2024, the balance sheet includes investment in subsidiaries amounting to ? 97,361.73 Lacs which constitutes 16.64% of the total assets of the Company. As these investments represents a significant portion of the Company's assets, and accordingly this has been identified as key audit matter.
The Company performs periodic assessment of these investments to identify any indicators of impairment and make adequate provisions in accordance with Ind AS 36 Impairment of Assets. The determination of recoverable value for impairment assessment, being higher of fair value less costs of disposal and value in use, involves significant judgements and involves various estimates including weighted average cost of capital; sales growth rate; operating margins (%); discount rate (%); and perpetuity growth rate (%).
Changes in these assumptions, if any, could lead to significant changes in the value of investment in subsidiaries and accordingly impairment provision. Considering the significant degree of management judgement involved in the assumptions used for computation of the recoverable amount, this is determined as key audit matter.
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Our audit procedures in respect of this area included:
1. Assessed whether the Company's accounting policies relating to the impairment of investments in subsidiaries are in accordance with Ind AS 36 Impairment of Assets.
2. Obtained an understanding of the Company's process for identification of indicators of impairment and tested the design and operating effectiveness of internal controls over such identification and impairment of identified investments through fair valuation of investments.
3. Evaluated and challenged management's assumptions such as implied growth rates during explicit period, terminal growth rate, targeted savings and discount rate, and operating margins, for their appropriateness based on our understanding of the business of the subsidiaries, past results and external factors such as industry trends.
4. Involved our valuation specialists to test the underlying assumptions used by management along with their external experts in computing recoverable value of investments in subsidiaries, such as weighted average cost of capital, sales growth rate, operating margins, perpetuity growth rate and discount rate.
5. Evaluated the competence and objectivity of the valuation specialist engaged by the management.
6. Performed sensitivity analysis of aforesaid key assumptions to assess the effect of reasonably possible variations on the current estimated recoverable amounts of investments to evaluate sufficiency of headroom between recoverable values and carrying amounts.
7. Tested the arithmetical accuracy of the management's impairment testing model.
8. Assessed and validated the adequacy and appropriateness of the related presentation and disclosures made by the management as per the requirements of Ind AS 36: "Impairment of Assets” ("Ind AS 36”) in the standalone financial statements.
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Key Audit Matter
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How the Key Audit Matter was addressed in our audit
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3.
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Recognition of government grants and assessment of its recoverability
(Refer note 2.5 to material accounting policies and the disclosures related to government grants in Note 6 and 8 to the accompanying standalone financial statements.)
The Company is eligible for government grants under various schemes enacted by the State and the Central Government.
Each of these schemes requires fulfilment of certain conditions by the Company to be eligible to receive the grant.
Recognition of grants (including its classification as capital or revenue grant) requires a suitable assurance by the Company towards compliance with the conditions specified in the relevant schemes and that the grants will be received. The assessment of fulfilment of relevant conditions specified in the grant at the time of recognition involves judgement and assumptions which are subject to uncertainty. The Company reassesses the recoverability of these grants at each balance sheet date.
We have identified recognition of grant and assessment of its recoverability as a key audit matter because of the complexities in establishing the compliance with the eligibility conditions of the grant and judgement involved towards assessment of its recoverability and related provisions made considering the delayed recoveries in accordance with Ind AS 109 'Financial Instruments'.
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Our audit procedures in respect of this area included:
1. Evaluated the government grant accounting policies adopted by the management of the Company, for compliance are with IndAS 20 - Accounting for Government Grants and Disclosure of Government Assistance.
2. Tested the design and operating effectiveness of internal controls with respect to recognition of grants (including its classification as capital or revenue grant) and assessment of its recoverability.
3. Performed substantive testing, on a sample basis, towards recognition of grants in accordance with the respective schemes, its classification as revenue or capital grant and verified the same with supporting documents.
4. Evaluated the Company's assessment of recoverability of respective grants based on ageing analysis and obtained explanations from management to assess the adequacy of the level of provision, if any, required for amounts considered recoverable.
5. Tested the ageing analysis for matter that are not under litigation, and assessed the information used by the management to determine the recoverability of these grants by considering collections against historical trends.
6. Tested the arithmetical accuracy of the calculation of accrual of export benefits and prevailing discount on e-Scrips in compliance with the relevant conditions as specified in the notifications and policies, as applicable.
7. Evaluated management's assessment of determination of provision for time value of money determined on the basis of expected credit loss methodology, evaluated the reasonableness of expected credit loss amount and assessed whether the requirements of applicable accounting principles have been complied.
8. Assessed and validated the adequacy and appropriateness of the disclosures made by the management as per requirement of Ind AS 20 - 'Accounting for Government Grants and Disclosure of Government Assistance' in the standalone financial statements.
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INFORMATION OTHER THAN THE STANDALONE FINANCIAL STATEMENTS AND AUDITORS' REPORT THEREON
The Company's Board of Directors is responsible for the other information. The other information comprises the information included in the Management report, Chairman's statement and Director's report but does not include the standalone financial statements and our Auditors' report thereon. The Management report, Chairman's statement and Director's report is expected to be made available to us after the date of this Auditors' 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 Management report, Chairman's statement and Director's report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance under SA 720 'The Auditors' responsibilities Relating to Other Information'.
RESPONSIBILITIES OF MANAGEMENT AND THOSE CHARGED WITH GOVERNANCE FOR THE STANDALONE FINANCIAL STATEMENTS
The Company's 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 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 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 are also responsible for overseeing the Company's financial reporting process.
AUDITORS' 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 Auditors' 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 Auditors' responsibilities for Audit of the Standalone Financial Statements.
REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS
1) As required by the Companies ( Auditors' 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 "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;
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 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;
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 are disqualified as on March 31,2024 from being appointed as a director in terms of Section 164 (2) of the Act;
f) The reservation 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 Auditors' 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 28 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, 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, 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, as on the date of this audit report, 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, and according to the information and explanations provided to us by the Management in this regard 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 (1) and (2) above, contain any material mis-statement.
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 13 to the standalone financial statements);
vi) In regard to SAP S4 HANA
Based on our examination, the Company has used an accounting software for maintaining its books of account during the year ended March 31, 2024, which has a feature of recording the audit trail (edit log) facility at application level, however no audit trail feature was enabled with respect to certain relevant transactions. Further, the audit trail (edit log) facility was not enabled at the database level to log any direct data changes.
The audit trail facility, to the extent it was enabled, as reported above, has been operated throughout the year for the relevant transactions in the accounting software. Further, during the course of our examination, we did not come across any instance of the audit trail being tampered with, in respect of the accounting software for the period for which the audit trail feature was enabled and operating.
3) In our opinion, according to information, explanations given to us, the remuneration paid by the Company to its directors is within the limits laid prescribed under Section 197 read with Schedule V of the Act and the rules thereunder.
For M S K A & Associates
Chartered Accountants
ICAI Firm Registration No. 105047W
Vikram Dhanania
Partner
Membership No. 060568
UDIN: 24060568BKDZHI4177
Place : Bengaluru
Date : May 23, 2024
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