We have audited the accompanying standalone financial statements of Oriental Hotels Limited ("the Company"), which comprise the balance sheet as at 31 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, and notes to the financial statements, including a summary of 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 31 March 2024, its profit and other comprehensive income, changes in equity and its cash flows for the year ended on that date.
Basis for Opinion
We conducted our audit in accordance with the Standards on Auditing (SAs) specified under Section 143(10) of the Act. Our responsibilities under those SAs are further described in the Auditor's Responsibilities for the Audit of the Standalone Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India ("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 on the standalone financial statements.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the standalone financial statements of the current period. These matters were addressed in the context of our audit of the standalone financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
We have determined the matters described below to be the key audit matters to be communicated in our report.
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Key Audit Matters
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Description
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Our Response
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Impairment assessment
Impairment assessment of Property, Plant and Equipment (PPE) of one hotel unit, being an independent Cash Generating Unit. (Refer Note 2 to the standalone financial statements)
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In view of the continuing net losses made by one hotel unit, being an independent Cash Generating Unit ("CGU"), (with a carrying value of PPE of Rs 8,581 lakhs as at 31st March 2024), and due to significant management estimate and judgement involved in impairment assessment, we identified this matter as a Key Audit Matter.
At the end of each year, management reviews the carrying amount of the assets of all CGUs to determine if there is any indication of impairment loss. If any such indication exists, management assesses the recoverable amount of the assets of that respective CGU.
To assess the recoverability of the assets of the identified CGUs, management is required to make significant estimates and assumptions related to forecast of future revenue, growth rate and selection of the discount rate. The Company uses the discounted cash flow approach to determine the recoverable value of those assets. Management also carries out a valuation of the hotel building of such CGUs once in three years.
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Our audit procedures in relation to impairment
testing of the identified CGU were:
• Understanding the management's process for estimating the recoverable amount of the assets.
• Evaluating the reasonableness of the market related assumptions (including discount rate and long-term growth rate), judgements, and key inputs considered by the management by comparing those estimates with market data.
• Testing the company specific assumptions used in the cash flow forecasts which includes occupancy rate and average room rate.
• Considering the forecasting risk, also performing sensitivity analysis of the cash flow projections.
• Evaluating the accuracy of the management's assessment by comparing the past estimates to the current year's actual performance of the identified CGU.
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Key Audit Matters
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Description
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Our Response
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The estimation of the recoverable amount of the assets of such identified CGUs involves management judgements and is dependent on certain assumptions and significant inputs which are affected by expected future market or economic conditions of the hospitality industry. Due to the level of uncertainties and judgment involved, changes in these assumptions could have significant impact on the recoverable value of those assets.
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• Reading the latest available valuation report and validating key assumptions used in the valuation and rationale for those assumptions.
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Capital Expenditures
Assessing the appropriateness of accounting treatment of expenditures associated with hotel properties undergoing renovation, as outlined in Note 2, 3 and 4 of the Financial Statements.
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During the year, the company commenced significant renovation projects across multiple units, some of which were completed within the year. The renovation expenditures incurred during the year constituted a substantial portion of the additions to the Property, Plant, and Equipment / Capital Work in Progress ("CWIP"). The renovation expenditure included directly attributable costs such as civil work, electrical installations, interior enhancements, furniture and fittings, as well as project management and other indirect costs.
Accounting for project capitalization and capital work in progress involves significant management judgement in determining if these costs are eligible for capitalization, estimating the useful life of renovated assets and in assessing when an asset is available for use as intended by Management.
In consideration of the materiality of renovation expenditures during the year, and the significant estimates and judgements involved, we have identified this as a Key Audit Matter.
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Our audit procedures in relation to renovation
projects / expenditure incurred during the
year were:
• Understanding the management's and those charged with governance (TCWG)'s process for identification and approval of renovation projects.
• Testing key controls of the project cycle including controls over cost, budgeting, authorizations, and comparison of cost incurred with budgets.
• Validating costs incurred during the year, on a sample basis, to underlying supporting documents including construction contracts, receipt of material / services, supplier/ consultant invoices etc., to ensure the existence and accuracy of the expenditure and the eligibility for capitalization.
• Ensuring costs associated with assets (rooms to be let out) which became ready to use in the year cease to be capitalized.
• Reviewing the repairs and maintenance charge for the year to ensure no capital expenditure has been charged to P&L.
• Assessing the stage of completion of renovation projects and when the assets will be available for use as intended by the Management.
• For completed projects, verifying the asset classification and useful life determination, on a sample basis, to ensure alignment with Capitalization Policy / Accounting Policy of the Company, and depreciation charges commencing when the underlying assets are ready to use.
• Ensuring adequate disclosures in the financial statements.
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Information Other than the Standalone Financial Statements and Auditors' Report Thereon
The Company's Management and Board of Directors are responsible for the preparation of the other information. The other information comprises the information included in the Company’s annual report / Directors report / the management report and business responsibility and sustainability report, but does not include the financial statements and our auditors' 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 during 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 the Management and Board of Directors for Standalone Financial Statements
The Company's Management and Board of Directors are responsible for the matters stated in Section 134(5) of the Act with respect to the preparation of these standalone financial statements that give a true and fair view of the state of affairs, profit and other 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. 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 and 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. Refer Note. 44.
The Board of Directors is 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.
As part of an audit in accordance with SAs, 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 financial 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 the 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 the Management.
• Conclude on the appropriateness of Management and Board of Directors use of the going concern basis of accounting and, based on the audit evidence obtained,
Investor Education and Protection Fund by the Company during the year ended 31 March 2024; and
iv. (a) The management has represented that,
to the best of its knowledge and belief, as disclosed in the notes to the accounts, 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, 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 its knowledge and belief, as disclosed in the notes to the accounts, 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
(c) Based on such audit procedures that the we have considered reasonable and appropriate in the circumstances, nothing has come to our notice that has caused us to believe that the representations under sub-clause (a) and (b) contain any material mis-statement.
v. The final dividend paid by the Company during the year in respect of the same declared for the previous year is in accordance with Section 123 of the Act to the extent it applies to payment of dividend.
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 auditors’ 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 auditors' 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 standalone financial statements, including the disclosures, and whether the standalone 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 auditors' 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 (Auditors' 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.
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 matter stated in the paragraph (h) (vi) below on reporting under Rule 11(g) of the Companies (Audit and Auditors) Rules, 2014.
(c) The Standalone Balance Sheet, the Standalone Statement of Profit and Loss (including other comprehensive income), the Standalone 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 Indian Accounting Standards (Ind AS) specified under Section 133 of the Act.
(e) On the basis of the written representations received from the directors as on 31 March 2024 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) With respect to the adequacy of the internal financial controls with reference to the standalone financial statements of the Company and the operating effectiveness of such controls, refer to our separate Report in 'Annexure B".
(g) The observation relating to the maintenance of accounts and other matters connected therewith are as stated in the paragraph b above on reporting under Section 143(3)(b) and paragraph h(vi) below on reporting under Rule 11(g) of the Companies (Audit and Auditors) Rules, 2014.
(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 as at 31 Match 2024 on its financial position in its standalone financial statements - Refer Note 29 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
As stated in note 52 to the standalone financial statements, the Board of Directors of the Company has 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.
vi. Relying on representations/explanations from the company and software vendor and based on our examination which included test checks, the company has used an accounting software for maintaining its books of accounts which has a feature of recording audit trail (edit log) facility. This has operated throughout the year for all relevant transactions recorded in the software, except that, the feature of recording audit trail (edit log) facility was enabled at the application layer of the accounting software (mainly ERP for masters and transactions), majorly during June 2023 and July 2023.
The feature of recording audit trail (edit log) facility was not enabled at the database level to log any direct data changes in the accounting softwares used for maintaining the books of accounts.
Further, for the periods where audit trail (edit log) facility was enabled and operated, we did not come across any instance of the audit trail feature being tampered with.
Refer Note 46 of Standalone Financial Statements.
3. With respect to the matter to be included in the Auditors' Report under Section 197(16) of the Act:
In our opinion and according to the information and explanations given to us, the remuneration paid / provided by the Company during the current year is in accordance with the provisions of Section 197 read with Schedule V of the Companies Act.
For PKF Sridhar & Santhanam LLP
Chartered Accountants
Firm's Registration No.003990S/S200018
S Rajeshwari
Partner
Membership No. 024105
UDIN : 24024105BKAOEA9525
Place of Signature: Chennai
Date : 18th April 2024
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