1. We have audited the accompanying standalone financial statements of RattanIndia Power 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.
Emphasis of Matter - Recognition of exceptional item
4. We draw attention to note 55 of the accompanying standalone financial statements which describes that pursuant to the re-initiation of Corporate lnsolvency Resolution Process ('CIRP') against Sinnar Thermal Power Limited ('STPL') under the lnsolvency and Bankruptcy Code, 2016 ('IBC'), STPL has ceased to be a subsidiary of the Company with effect from 19 January 2024. In view of uncertainties associated with the outcome of CIRP proceedings, the Company has recorded full impairment of the carrying balance of its investment in and write off of loans extended to STPL amounting to ' 121,181.76 lakhs and ' 3,332.64 lakhs, respectively and has presented such impairment / write off expenses aggregating to ' 124,514.40 lakhs as 'exceptional item' in the Standalone Statement of Profit and Loss.
Our opinion is not modified in respect of this matter.
Emphasis of Matter- Application filed by one of the Redeemable Preference Share Holders
5. We draw attention to note 17(viii) of the accompanying standalone financial statements, which describes that one of the RPS holders, holding 0.001% Redeemable Preference Shares (RPS) of ' 2,872.10 lakhs in the Company, has filed an application against the Company and its subsidiary company which is not yet admitted, under Section 7 of Insolvency and Bankruptcy Code, 2016 ('IBC Code') demanding the redemption of the principal amount along with interest and dividend.
The management is of the view that the aforesaid application filed under Section 7 of IBC Code is not maintainable under applicable laws and no material impact is expected on the accompanying standalone financial statements and/or on the operations and functioning of the Company.
Our opinion is not modified in respect of this matter.
Key Audit Matters
6. 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 financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
7. 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 our audit addressed the key audit matter
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Revenue recognition and assessment of recoverability of receivables related to 'change in law' event claims
(Refer Notes 2 and 3 for material accounting policy information and Notes 12 and 26 for disclosures in the standalone financial statements)
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The Company is engaged in the business of power generation which is supplied to Maharashtra State Electricity Distribution Company Limited ('MSEDCL'/'Discom') as per the Power Purchase Agreement (PPA) entered with such party.
Revenue recognition under Ind AS 115 - Revenue from Contracts with Customers ('Ind AS 115') requires the management to make certain judgements and estimates such as determining timing of revenue recognition and transaction price, including variable consideration, as per the terms of the contract with customer.
Under the aforementioned PPA, the Company is eligible for various compensation claims relating to 'change in law' events resulting in higher costs incurred by the Company against earlier estimates, such as additional duties and taxes, increased procurement cost of coal from alternative sources, etc alongwith Late Payment Surcharge (LPS) thereon. Such compensation claims are raised by the Company upon approval of aforesaid 'change in law' events by the relevant regulatory authorities and are subject to partial/ final acceptance of such claims by the Discom.
In certain cases where the regulatory orders are subject matter of appeal with higher appellate forums/ authorities and the amount of claims are not ascertainable, revenues for change in law claims are not recognised, pending outcome of the final decision.
In view of the materiality of the amount, complexity and significant judgement involved in estimation of the amounts of such claims and recoverability thereof, the matter is identified as a key audit matter for the current year audit.
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Our audit procedures in relation to revenue recognition and
recoverability assessment of receivables relating to 'change
in law' event claims included, but were not limited to, the
following:
• Examined the Company's accounting policies with respect to assessing compliance with Ind AS 115.
• Evaluated the design and tested the operating effectiveness of the key internal financial controls for recognition of revenue, including those relating to monitoring of 'change in law' events and related status of pending claims under appeals before various regulatory authorities.
• Inspected the relevant state regulatory commission, appellate tribunal and court rulings and examined management assumptions / judgement relating to assessing impact of such regulatory orders on the measurement / estimation of recoverability of related claims.
• Tested, on a sample basis, the accuracy of the underlying data and reviewed the assumptions used by the management for measuring / computing the amounts of compensation claims as per regulatory orders, basis historical information and other available internal and external data.
• Obtained legal opinion from the Company's external legal counsels with respect to recoverability assessment of compensation claims and LPS thereon and reviewed the same basis our understanding of the matter and current industry practice.
• Assessed the professional competence and objectivity of management's legal experts involved as above.
• Tested the latest joint reconciliations for trade receivables performed by the Company with the Discom, as available, with underlying records.
• Assessed the adequacy and appropriateness of disclosures made in the standalone financial statements in accordance with the requirements of Ind AS 115.
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Litigation and contingent liabilities relating to litigations
(Refer notes 2 and 3 for material accounting policy information and note 33 for disclosures related to legal and regulatory cases in the standalone financial statements)
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The Company is exposed to a large number of litigations with various authorities, third parties/vendors and income tax matters which could have a significant impact on the financial position of the Company, if the potential exposures were to materialise. The eventual outcome of these legal proceedings is dependent on the outcome of future events.
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Our audit procedures in relation to contingent liabilities relating to litigations included, but were not limited to, the following:
• Obtained an understanding of the management process for:
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The amounts involved are material and the application of
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identification of legal and tax matters initiated against
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accounting principles as given under Ind AS 37, Provisions,
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the Company;
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Contingent Liabilities and Contingent Assets ('Ind AS 37'), in order to determine the amount to be recorded as a liability or to be disclosed as a contingent liability, in each case, is inherently subjective, and needs careful evaluation and judgement to be applied by the management.
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- assessment of accounting treatment for each such litigation identified under Ind AS 37 accounting principles; and
- measurement of amounts involved.
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Key judgments involved are with respect to estimating the amount of liabilities, provisions and/or contingent liabilities related to aforementioned litigations, timing of cash outflows, basis interpretation of laws, past rulings, etc .
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Evaluated the design and tested the operating effectiveness of key controls around above process including for completeness and accuracy of the list of litigations outstanding against the Company.
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Considering the degree of judgment, significance of the amounts involved, inherent high estimation uncertainty and reliance on external legal and tax experts, this matter has been identified as a key audit matter for the current year audit.
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Obtained an understanding of the nature of litigations pending against the Company and discussed the key developments during the year for key litigations with the management and respective legal counsels handling such cases on behalf of the Company.
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Obtained and reviewed the necessary evidence which includes correspondence with the external and internal legal counsels, wherever applicable and inspected minutes of case proceedings available in public domain, to support the decisions and rationale for creation of provisions and / or disclosure of contingent liabilities in respect of each such litigation selected for testing. We focused on the developments in the existing litigations and new litigations, which could have materially impacted the amounts recorded as provisions or disclosed as contingent liability in the standalone financial statements.
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Assessed management's conclusions through discussions held with the in-house legal counsel and understood past precedents for similar cases.
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Obtained and read the correspondence with the regulatory authorities, including past judgements on the subject matter of specific significant litigations.
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I nvolved auditor's tax experts to assess appropriateness of key estimates and judgements made in relation to uncertain tax positions.
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Assessed the appropriateness of methods used, and the reliability of underlying data for the underlying calculations made for quantifying the amounts involved. Tested the arithmetical accuracy of such calculations.
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Evaluated the appropriateness and adequacy of disclosures made by the Management of the Company in the financial statements in accordance with applicable accounting standards.
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Information other than the Financial Statements and Auditor's Report thereon
8. The Company's Board of Directors are responsible for the other information. The other information comprises the information included in the Annual Report, but does not include the standalone financial statements and our auditor's report thereon. The Annual Report is expected to be made available to us after the date of this auditor's report.
Our opinion on the standalone financial statements does not cover the other information and we will not express any form of assurance conclusion thereon.
In connection with our audit of the standalone financial statements, our responsibility is to read the other information identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the standalone financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.
When we read the Annual Report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance.
Responsibilities of Management and Those Charged with Governance for the Standalone Financial Statements
9. The accompanying standalone financial statements have been approved by the Company's Board of Directors. The Company's Board of Directors are responsible for the matters stated in section 134(5) of the Act with respect to the preparation and presentation of these standalone financial statements that give a true and fair view of the financial position, financial performance including other comprehensive income, changes in equity and cash flows of the Company in accordance with the Ind AS specified under section 133 of the Act and other accounting principles generally accepted in India. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
10. In preparing the financial statements, the Board of Directors is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board of Directors either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
11. The 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
12. Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
13. As part of an audit in accordance with Standards on Auditing, specified under section 143(10) of the Act we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control;
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Act we are also responsible for expressing our opinion on whether the Company has adequate internal financial controls with reference to financial statements in place and the operating effectiveness of such controls;
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management;
• Conclude on the appropriateness of Board of Directors' use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern; 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.
14. 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.
15. 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.
16. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
Report on Other Legal and Regulatory Requirements
17. 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.
18. 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.
19. 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 matter stated in paragraph 19(i)(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) The matters described in paragraph 5 under the Emphasis of Matter in our opinion, may have an adverse effect on the functioning of the Company;
f) 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;
g) The modification relating to the maintenance of accounts and other matters connected therewith are as stated in paragraph 18(b) above on reporting under section 143(3)(b) of the Act and paragraph 19(i)(vi) below on reporting under Rule 11(g) of the Companies (Audit and Auditors) Rules, 2014 (as amended);
h) With respect to the adequacy of the internal financial controls with reference to 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
i) 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 33 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. There were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company during the year ended 31 March 2024;
iv. a. The management has represented that, to the best of its knowledge and belief, as disclosed in note 58(v) 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 58(vi) 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 59 to the standalone financial statements and based on our examination which included test checks, 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 except that the audit trail feature was not enabled at the database level to log any direct data changes, used for maintenance of all accounting records by the Company.
Further, during the course of our audit we did not come across any instance of audit trail feature being tampered with, where such feature was enabled.
For Walker Chandiok & Co LLP
Chartered Accountants Firm's Registration No.: 001076N/N500013
Deepak Mittal
Partner
Place: Gurugram Membership No.: 503843
Date: 22 May 2024 UDIN: 24503843BKFAPF9899
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