KESORAM INDUSTRIES LIMITED
Report on the Audit of the Standalone Financial Statements
Opinion
1. We have audited the accompanying Standalone Financial Statements of Kesoram 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 Flow 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, 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 loss (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 is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
4. Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the 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.
5. We have determined the matters described below to be the key audit matters to be communicated in our report.
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Sr. No.
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Key Audit Matter
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How our audit addressed the key audit matters
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1
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Recoverability of deferred tax assets recognized
on brought forward tax losses including
unabsorbed depreciation.
• Refer to Company's significant material accounting policies in note 2 and the deferred tax related disclosure in notes 10 and 34 of the Standalone Financial Statements.
• The Company has recognized deferred tax assets on unutilized business loss (including unabsorbed depreciation) (together hereinafter referred to as "tax losses") as at March 31, 2024 amounting to ' 351.86 Crores.
• The deferred tax assets have been recognized based on the Company's assessment of ability to utilize the same, which is based on forecast of business operations including the assessment of ability of utilization of the said deferred tax assets by the transferee company in the event of successful completion of proposed demerger transaction of cement division, to UltraTech Cement Limited ("UltraTech") which is subject to regulatory approvals as stated in note 45 to the standalone financial statements.
• The assessment of meeting the recognition criteria as well as recoverability of the deferred tax assets within the time frame allowed under the Income Tax Act, 1961, requires significant management judgement as it involves use of assumptions and estimates that are inherently subjective and depend on various factors including future market and economic conditions. Any change in aforesaid assumptions could have a material impact on the carrying value of the deferred tax.
• Owing to the materiality of the balances, complexities and judgements involved as described above, we have identified the recoverability of deferred tax assets recognized on brought forward tax losses as a key audit matter for the current year audit.
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Our audit procedures in relation to recoverability of
deferred tax assets included, but were not limited to
the following:
• Evaluated of the design and tested operating effectiveness of Company's controls relating to taxation and the assessment of carrying amount of deferred tax assets relating to unabsorbed tax losses.
• Assessed the reasonableness of the period of projections used in the deferred tax asset recoverability assessment considering that the Company / Group operates in a highly competitive industry which is subject to disruptions through changing technology.
• Compared the Company projections of future taxable profit to the approved business plans.
• Tested whether projections prepared were consistent with our understanding and knowledge of current business and the general economic environment in which the Company operates and whether the tax losses can be utilized within the forecast recoupment period, including by the transferee company upon successful completion of proposed scheme of demerger of cement division of the Company.
• Tested the assumptions used in the aforesaid future projections relating to the forecasts of future taxable profits and evaluated the reasonableness of the assumptions, including future growth rate underlying the preparation of these forecasts based on actual historical results, other relevant existing conditions external data and market conditions.
• Tested the arithmetical accuracy of projections including those related to sensitivity analysis performed by the management.
• Assessed the appropriateness and adequacy of disclosures made by the management in notes 10 and 34 to the Standalone Financial Statements in accordance with requirements of the accounting standards.
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Sr. No.
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Key Audit Matter
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How our audit addressed the key audit matters
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2
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Impairment assessment of investments in and recoverability of loans to wholly owned subsidiary (Cygnet Industries Limited)
• As detailed in notes 6 and 33 of Standalone Financial Statements, the carrying value of Company's investments in Cygnet Industries Limited ('the Subsidiary Company') as at 31 March 2024 amounts to ' 291 crores. Further, as detailed in note 8 to the Standalone Financial Statements, loans given to subsidiary as at 31 March 2024 amounts to ' 136.07 crores.
• The recoverability of the above-mentioned amounts is dependent on the operational performance of the subsidiary. The subsidiary has incurred losses during the recent years, and the management has identified the aforesaid as possible impairment indicators as per the principles enunciated under Ind AS 36, Impairment of Assets ('Ind AS 36').
• The Management has assessed the recoverability of the said investment and loans, by carrying out a valuation of the subsidiary with the help of an external valuation expert using discounted cash flow method, which requires management to make significant estimates and assumptions relating to forecast of future business performance, and selection of the discount rates to determine the recoverable value to be considered for impairment testing of the carrying value of above-mentioned balances.
Considering the materiality of the above matter to the Standalone Financial Statements, complexities and judgement involved, and significant auditor attention required to test management assessment. We have identified this as a key audit matter for the current year audit.
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Our audit procedures in relation to impairment
assessment of investments included, but were not
limited to the following:
• Obtained an understanding of process and controls implemented by the Company to identify impairment indicators and to determine impairment in the value of investment in/ recoverable from Subsidiary Company and tested the design and operating effectiveness of such controls.
• Assessed the competence and objectivity of management's expert involved by the management in determining the enterprise recoverable value of the Subsidiary Company;
• Assessed the valuation methodology and assumptions used by management's expert to estimate the recoverability of investment with the help of auditor's valuation experts.
• Reconciled the projected cashflows used in the valuation to approved business plans of the Subsidiary Company;
• Evaluated the appropriateness of assumptions applied in determining key inputs such as discount rate and terminal growth rate which included assumptions based on our knowledge of the business and relevant external market conditions;
• Tested mathematical accuracy of the projections and applied independent sensitivity tests to the key assumptions mentioned above to determine and focus on inputs with high estimation uncertainty.
• Assessed the appropriateness and adequacy of disclosures made by the management in note 6 to the Standalone Financial Statements in accordance with requirements of the accounting standards.
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Information other than the Standalone 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 Directors 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.
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 Standalone 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 Standalone 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 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 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 Standalone 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 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 to Standalone 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 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; and
• Evaluate the overall presentation, structure and
content of the Financial Statements, including the disclosures, and whether the Financial Statements represent the underlying transactions and events in a manner that achieves fair presentation.
12. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
13. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
14. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the 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
15. As required by section 197(16) of the Act based on our audit, 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.
16. 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.
17. Further to our comments in "Annexure A", as required by section 143(3) of the Act based on our audit, 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 17(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 account;
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 adverse remark relating to the maintenance of accounts and other matters connected therewith are as stated in paragraph 17(b) above on reporting under section 143(3)(b) of the Act and paragraph 17(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 36 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 long-term contracts including derivative contracts for which there were any material foreseeable losses as at 31 March 2024;
iii. The following delays were noted in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company during the year ended 31 March 2024:
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Amount (' crores)
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Due date
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Date of payment
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0.02
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Multiple dates
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Not yet paid
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iv. a. The management has represented that, to the best of its knowledge and belief, as disclosed in note 48 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 48 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 Company has not declared or paid any
dividend during the year ended 31 March 2024.
vi. As stated in Note 43 to the financial statements and Based on our examination which included test checks, except for instances mentioned below, the Company, in respect of financial year commencing on 1 April 2023, 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 been 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 other than the consequential impact of the exception given below:
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Nature of exception noted
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Details of Exception
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Instances of accounting software for maintaining books of account for which the feature of recording audit trail (edit log) facility was not operated throughout the year for all relevant transactions recorded in the software.
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i) The audit trail feature for master data changes for accounting software (Ramco) used for maintenance of accounting records was not enabled at the application level.
ii) The audit trail feature was not enabled at the database level for accounting software to log any direct data changes, used for maintenance of records by the Company.
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Place: Kolkata Date: 22 April 2024
For Walker Chandiok & Co LLP
Chartered Accountants Firm's Registration No.: 001076N/N500013
Manoj Kumar Gupta
Partner
Membership No.: 083906 UDIN: 24083906BKFLVE4484
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