We have audited the accompanying standalone financial statements of Dishman Carbogen Amcis 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 year then ended, on that date and notes to the financial statements, including material accounting policies and other explanatory information (hereinafter referred to as "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 the 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 Loss 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 financials statements in accordance with the Standards on Auditing (SAs) as 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 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 independence 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 ICAI’s Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the standalone financial statements.
EMPHASIS OF MATTER
a) We draw attention to Note 28 to the standalone financial statements detailing the accounting treatment relating to the scheme Involving merger of Dishman Pharmaceuticals and Chemicals Limited and Dishman Care Limited with Dishman Carbogen Amcis Limited, which has been
accounted in the year 2016-17 under the "Purchase Method” as per the then prevailing Accounting Standard 14 - Accounting for Amalgamation (AS 14) in compliance with scheme of Amalgamation pursuant to Section 391 to 394 of Companies Act, 1956 Approved by Hon’ble High Court of Gujarat in accordance with the scheme, the Company had recognized goodwill on Amalgamation amounting to ' 1,326.86 Crores which is amortized over the period of 15 years from the appointed date i.e., January 01, 2015. Further, Board of directors has re-assessed the life of goodwill during FY 22-23 and increased its life further by 8 Years (approx.). This accounting treatment is different from that prescribed under Indian Accounting Standard (Ind-AS 103) - ‘Business Combinations’.
Had the goodwill not been amortized as required under Ind AS 103, the Depreciation and Amortization expense for the year ended March 31, 2024, would have been lower by ' 45.71 Crores, respectively, and the Profit Before Tax for the corresponding periods would have been higher by an equivalent amount. Goodwill amounting to ' 594.17 Crores is outstanding as on March 31, 2024. Had the goodwill not been amortized, assets of the Company would have been higher by ' 732.70 Crores.
b) We draw attention to Note 41 to the standalone financial statements in relation to certain audit observation issued by the Swissmedic and European Directorate for the quality of medicines & Healthcare (EDQM) on account of joint inspection carried out by them for the Company’s manufacturing plant at Bavla and certain Certificate of suitability (CEPs) were also suspended. As a result, Company’s operations at Bavla, production, revenue and profitability has been adversely impacted since March 2020 till now.
c) We draw attention to Note 37 to the standalone financial statements in relation to receipt of a waiver for a breach of financial covenants related to the issue of Listed, senior, rated, secured, redeemable, principal protected, market linked, non-convertible debentures. As disclosed in the note, the Company breached certain financial covenants as of 31st March 2024. However, subsequent to the balance sheet date but prior to the date of the board meeting held on 30th May 2024, the Company obtained revised financial covenants from the debenture holders.
Our opinion is not modified in respect of the above
matters.
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 financial year ended 31st March 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.
We have fulfilled the responsibilities described in the ‘Auditor’s Responsibilities for the Audit of the Standalone Financial Statements’ section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the standalone financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying standalone financial statements.
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Key Audit Matter
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How our Audit addressed the Key Audit Matter
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Impairment assessment of the carrying value of Goodwill (Refer Note 3 to the standalone financial statements)
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Company carries goodwill amounting to
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Our procedures included the following:
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' 594.17 Crores in its standalone financial statements as at March 31, 2024 which was recorded due to the merger of Dishman Pharmaceuticals and Chemical Limited and Dishman Care Limited into Dishman Carbogen Amcis Limited.
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• Obtained an understanding from the management with respect to process and controls followed by the Company to perform annual impairment test related to goodwill and performed necessary audit procedures to test the operating effectiveness of the relevant internal controls during the year ended and as of March 31, 2024;
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In terms with Ind AS 36, goodwill is tested for impairment annually at the CGU level whereby the carrying amount of the CGU (including goodwill) is compared with the recoverable amount of the CGU. However,
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• Evaluated management’s identification of CGU’s, the carrying value of each CGU and the methodology followed by management for the impairment assessment in compliance with the prevailing accounting standards.
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the goodwill generated on the merger is amortized over a period of 15 years (i.e., revised life derived as on 1st April’22)
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• Involved our valuation specialists to assists us in evaluating methodologies, impairment calculations and underlying assumptions applied by the management in the impairment
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The recoverable amount is determined
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testing.
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on the basis of the value in use which is the present value of future cash flows of the CGU using discounted cash flow model ‘Model’), which involves estimates pertaining to expected business and earnings forecasts and key assumptions including those related to discount and long-term growth rates. These estimates
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• Evaluated appropriateness of key assumptions included in the cash flow forecasts used in computing recoverable amount of each CGU, such as growth rates, profitability, discount rates, etc., with reference to our understanding of their business and
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historical trends; and comparing past projections with actual results, including discussions with management relating to these projections;
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require high degree of management judgment resulting in inherent subjectivity.
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• Considered the impairment testing valuation report for goodwill outstanding in standalone books carried on by independent valuer;
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We considered this as a key audit matter due to significant judgement and assumption involved in estimating future cashflow using the model.
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• Performed sensitivity analysis on these key assumptions to assess potential impact of downside in the underlying cash flow forecasts and assessed the possible mitigating actions identified by management; and
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• Evaluated the appropriateness of the disclosure in the standalone
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financial statements and assessed the completeness and mathematical accuracy.
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Key Audit Matter
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How our Audit addressed the Key Audit Matter
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Impairment assessment of carrying value of investments in subsidiaries (Refer Note 4(a)(i) to the standalone financial statements)
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The Company has equity investments
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Our procedures included the following:
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in its unlisted wholly owned subsidiaries amounting to ' 2,834.26 Crores as at March 31, 2024 ("Investments”) which are carried at cost (net of provision) as per Ind
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• Obtained understanding of design and implementation of relevant internal controls w.r.t Investments including its
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impairment assessment;
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AS 27 on ‘Separate Financial Statements’.
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• Performed necessary audit procedures to test the operating
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We considered the valuation of such Investments to be significant to the audit, because of the materiality of the
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effectiveness of the relevant internal controls with respect to valuation of Investments including impairment assessment thereof during the year ended as of March 31, 2024.
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Investments to the standalone financial statements of the Company.
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• Obtained management’s evaluation of impairment analysis including future cash flows used by the management in the
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The management assesses at least annually the existence of impairment indicators of each investment. The management has assessed the
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model to compute the recoverable value/value in use.
• Obtained the valuation report on Impairment testing of investments in standalone books.
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impairment of its investments by reviewing the business forecasts of subsidiaries, using discounted cashflow
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• Obtained the subsidiary auditors Impairment testing working file certifying the fair value of Investment at various subsidiaries.
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valuation model. The recoverable amounts of the investments are determined based on the management’s estimates of future cashflows and their judgement w.r.t the
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• Involved our valuation specialists to assists us in evaluating methodologies, impairment calculations and underlying assumptions applied by the management in the impairment
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investee’s performance including key
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testing.
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assumptions related to discount and long-term growth rates.
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• Evaluated the appropriateness of the disclosure in the standalone financial statements and assessed the completeness and
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Accordingly, the impairment assessment of Investments was determined to be a key audit matter in our audit of the standalone financial statements.
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mathematical accuracy.
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Evaluation of uncertain tax positions
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(Refer Note 29 to the standalone financial statements)
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The Company operates in multiple jurisdictions and is subject to periodic challenges by local tax authorities on a range of tax matters during the normal course of business including transfer pricing and indirect tax matters. This
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Our procedures included the following:
• Gained an understanding of the process of identification of claims, litigations and contingent liabilities and identified key controls in the process. For selected controls we have performed tests of controls.
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involves significant management judgment to determine the possible outcome of the uncertain tax positions, consequently having an impact on related accounting and disclosures in the standalone financial statements. Hence,
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• Obtained the summary of Company’s legal and tax cases and critically assessed management’s position through discussions with the Legal Counsel, Head of Tax and operational management, on both the probability of success in significant cases, and the magnitude of any potential loss.
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this has been considered as a key audit matter.
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• Inspected external legal opinions (where considered necessary)
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and other evidence to corroborate management’s assessment of the risk profile in respect of legal claims.
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• Engaged our tax specialists to technically appraise the tax
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positions taken by management with respect to local tax issues.
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• Assessed the relevant disclosures made within the financial
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statements to address whether they appropriately reflect the facts and circumstances of the respective tax and legal exposures and the requirements of relevant accounting standards.
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Key Audit Matter
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How our Audit addressed the Key Audit Matter
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Accounting and valuation of Hedging Instrument (Refer Note 4(e) to the standalone financial statements)
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The Company hedges its foreign currency risk and interest rate risk through derivative instruments and applies hedge accounting principles for derivative instruments as prescribed by Ind AS 109. Receivable pertaining to derivative instruments as at March 31, 2024 is amounting to ' 9.69 Crores and debit
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Our procedures included the following:
• Obtained understanding of the Company’s overall hedge accounting strategy, forward contract valuation and hedge accounting process from initiation to settlement of derivative financial instruments including assessment of the design and implementation of controls, and tested the operating effectiveness of those controls.
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balance of Cash Flow Hedge Reserve of ' 28.09 Crores as on that date.
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• Assessed Company’s accounting policy for hedge accounting in accordance with Ind AS.
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These contracts are recorded at fair value and cash flow hedge accounting is applied, such that gains and losses arising
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• Tested the existence of hedging contracts by tracking to the confirmations obtained from respective counter parties.
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from fair value changes are deferred in equity and recognized in the standalone statement of profit and loss when hedges
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• Tested management’s hedge documentation and contracts, on sample basis.
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mature and/or when the hedge item occurs.
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• Involved our valuation specialists to assist in reperforming the
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year end fair valuations of derivative financial instruments on a
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The valuation of hedging instruments and consideration of hedge effectiveness has been identified as a key audit matter as it
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sample basis and compared these valuations with those records by the Company including assessing the valuation methodology and key assumptions used therein.
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involves a significant degree of complexity and management judgment and are subject to an inherent risk of error.
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• Assessed the relevant disclosures of hedge transactions in the financial statements.
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INFORMATION OTHER THAN THE STANDALONE FINANCIAL STATEMENT 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 and Annexure to Board’s Report but does not include the 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 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.
MANAGEMENT'S RESPONSIBILITY FOR THE STANDALONE FINANCIAL STATEMENT
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, total comprehensive income, changes in equity and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards (Ind AS) specified under Section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended. 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 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 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.
Those Board of Directors are 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.
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 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 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 in 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 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 financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
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.
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 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.
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.
(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, read with Rule 7 of the Companies (Indian Accounting Standards) Rules, 2015, as amended.
(e) On the basis of the written representations received from the directors as on 31st March, 2024 taken on record by the Board of Directors, none of the directors is disqualified as on 31st March, 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 these standalone financial statements of the Company and the operating effectiveness of such controls, refer to our separate Report in “Annexure B” to this report;
(g) 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 managerial remuneration has been paid by the Company to its directors during the year is in accordance with provisions of Section 197 of the Act read with Schedule V to the Act;
(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 has disclosed the impact of pending litigations on its financial position in its standalone financial statements -Refer Note 29 to the standalone financial statements;
ii. Provision has been made in the financial statements, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long-term contracts including derivative contracts.
iii. There has been no delay in transferring amounts, required to be transferred, to the investor’s education and protection fund by the Company.
iv. (a) The Management has represented that,
to the best of their 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 entities, including foreign entities ("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 ("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 their 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, 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 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 (a) and (b) contain any material mis-statement.
v. Company has not declared or paid any dividend during the year.
vi. Based on our examination which included test checks, the Company 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 operated throughout the year for all relevant transactions recorded in the software. However, the audit trail feature is not enabled at the database level for the accounting software, as described in Note 42 to the 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.
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.
For T R Chadha & Co LLP Chartered Accountants Firm's Reg. No: 006711N/N500028
Brijesh Thakkar
(Partner)
Membership No: 135556 UDIN: 24135556BKABDR8803 Place: Ahmedabad Date: 30th May, 2024
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