1. We have audited the accompanying standalone financial statements of Shriram Properties 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. I n 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 profit (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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1. Revenue recognition for real estate projects
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The Company applies Ind AS 115, Revenue from Contracts with
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Our audit procedures included but were not limited to the following:
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Customers for recognition of revenue from real estate projects.
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• Evaluated the appropriateness of accounting policy for revenue recognition
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Refer note 1.2(g), 23 and 45 to the standalone financial statements
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of the Company in terms of principles enunciated under Ind AS 115;
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for accounting policy and related disclosures.
For the sale of constructed properties, revenue is recognised by the
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• Evaluated the design and implementation of Company's key financial controls in respect of revenue recognition around transfer of control and tested the
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Company as per the requirements of Ind AS 115 over a period of
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operating effectiveness of such controls for a sample of transactions;
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time and is being recognised in the financial year when sale deeds are registered with the revenue authorities of the prevailing State as
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• On sample basis, we have performed the following procedures in relation to
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the management considers that the contract becomes binding on
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revenue recognition from sale of constructed properties:
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both the parties only upon registering the sale deed, as until such
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- Read, analysed and identified the distinct performance obligations in
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registration the customer has right to cancel the contract without
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the customer contracts;
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compensating the Company for the costs incurred along with a
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- Assessed management evaluation of determining revenue recognition
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reasonable margin (as specified in Ind AS 115).
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from sale of constructed property over a period of time in accordance
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Significant judgments are required in identifying the contract
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with the requirements under Ind AS 115;
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obligations, determining when the obligations are completed and
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- Inspected sale deeds evidencing the transfer of control of the property
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recognising revenue over a period of time. Further, for determining
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to the customer based on which revenue is recognised;
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revenue using percentage of completion method, budgeted project
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- Tested costs incurred and accrued to date on the balance sheet by
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cost is a critical estimate, which is subject to inherent uncertainty as it requires ascertainment of progress of the project, cost incurred till date and balance cost to be incurred to complete the project.
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examining underlying invoices and signed work orders and compared it with budgeted cost to determine percentage of completion of the
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project;
- Reviewed management's internal budgeting approvals process, on a sample, for cost to be incurred on a project and for any changes in initial budgeted costs; and;
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For revenue contract forming part of Joint Development Arrangements (‘JDA'), the arrangement comprises of sale of development rights in lieu of construction services provided by the Developer and transfer of constructed area and/or revenue sharing arrangement based on the standalone selling price, which is measured at the fair value of the estimated construction service. Significant estimates are used by the Company in determining the fair value of “non-cash consideration” i.e. receipt of development rights in lieu of the construction service and recognising revenue using percentage of completion method.
Considering the significance of management judgement involved and the materiality of amounts involved, revenue recognition was identified as a key audit matter for the current year audit.
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- Discussed exceptions, if any, to the revenue recognition policy of the management and obtained appropriate management approvals and representations regarding the same.
• For projects executed during the year through JDA, we have performed the following procedures on a sample basis:
- Evaluated estimates involved in determining the fair value of development rights in lieu of construction services in accordance with principles under Ind AS 115;
- Evaluated whether the accuracy of revenue recognised by the Company based on ratio of constructed area or revenue sharing arrangement as agreed in the revenue sharing arrangement as entered with the Developer over a period of time in accordance with the requirements under Ind AS 115; and
- Compared the fair value of the estimated construction service, to the project cost estimates and mark up considered by the management.
• Ensured that the disclosure requirements of Ind AS 115 have been complied with.
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2. Revenue recognition in development management arrangements
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The Company renders development management services (DM) involving multiple performance obligations such as Sales and Marketing, Project Management and Consultancy (PMC) services, Customer Relationship Management (CRM) Services and financial management services to other real estate developers pursuant to separate Development Management Arrangements executed with them.
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Our audit procedures included, but were not limited to the following:
• Evaluated the appropriateness of accounting policy for revenue recognition of the Company in terms of principles enunciated under Ind AS 115;
• Evaluated the design and implementation of Company's key financial controls in respect of revenue recognition for DM contracts and tested the operating effectiveness of such controls for a sample of transactions;
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Refer note 1.2(g), 23 and 45 to the standalone financial statements for accounting policy and revenue recognised during the year.
The assessment of such services rendered to customers involves significant judgment in determining:
• Identifying different performance obligations
• Allocating transaction price to these performance obligations
• Assessing whether these obligations are satisfied over a period of time or at the point in time for the purposes of revenue
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• On a sample of contracts, we have performed the following procedures in relation to revenue recognition in DM contracts:
- Read, analysed and identified the distinct performance obligations in these contracts
- Assessed management's evaluation of identifying different performance obligations, allocating transaction price (adjusted with financing element) and determining timing of revenue recognition i.e., over a period of time or at the point in time in accordance with the requirements under Ind AS 115;
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recognition,
• Assessing whether the transaction price has significant financing element, and;
• Assessing for any liability arising on guarantee contracts entered by the Company.
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- On a sample basis inspected the sale agreements entered with respect to sale of units in DM projects;
- Recomputed the amount to be billed in terms of DM contract and compared that with amount billed and investigated the differences if any and held discussions with management;
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Considering the significance of management judgements involved as mentioned above and the materiality of amounts involved, we have identified this as a key audit matter.
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- Reviewed communications between the Company and DM customers regarding construction progress for contract obligations that involve recognising revenue over a period of time; and
- For contracts modified during the period without change in the scope of services such as incentives, we have reviewed whether the accounting for contract modification is made in accordance with the principles of Ind AS 115;
• Ensured that the disclosure requirements of Ind AS 115 have been complied with.
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3. Assessing the recoverability of carrying value of Investment, loans, advances and other receivables (financial and non-financial assets) in subsidiaries and joint ventures
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Refer note 1.2(t), (u) and (v) to the accompanying standalone financial statements for accounting policies on impairment for Investment, loans, advances, other receivables and 28 for related financial disclosures on impairment.
As at the balance sheet date, the carrying amount of investment in subsidiaries and joint ventures and loans, advances and other receivables carried at amortised cost represent 46% and 12% of the Company's total assets respectively.
At each reporting date, management regularly reviews whether there are any indicators of impairment.
Significant judgements are involved in determining impairment/ recoverability of the carrying value, which includes assessment of conditions and financial indicators of the investee such as assessing net worth of investee, future business plans, upcoming projects and estimation of projected cash flow from the real estate projects in the underlying entities.
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Our audit procedures included, but were not limited to the following:
• Assessed the appropriateness of the Company's accounting policy by comparing with applicable Ind AS;
• Evaluated the design and implementation of Company's key financial controls in respect of impairment and recoverability assessment and tested the operating effectiveness of such controls for a sample of transactions
• Analysed and obtained an understanding of the management process for identification of possible impairment indicators and process performed by the management for impairment testing;
• For the investments, where carrying amount (including loans) exceeded the net asset value, obtained understanding from the Company regarding the basis and assumptions used in determining projected cashflows and recognising impairment loss in case of non-availability of sufficient headroom; and
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Considering the materiality of carrying value of investments, loans,
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• Assessed the appropriateness of disclosures made in the standalone financial
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advances and other receivables from subsidiaries and joint ventures
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statements regarding such investments including loans, advances and other
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in the context of the standalone financial statements as a whole and significant degree of judgement and subjectivity involved in determining the cash flows, the aforementioned area has been determined as a key audit matter for current year audit.
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receivables in accordance with applicable Ind AS.
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4. Assessing the recoverability of advances paid for land purchase and refundable deposit paid under Joint Development
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Agreements (JDA):
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As at 31 March 2024, the carrying value of land advance is
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Our audit procedures included, but was not limited to, the following procedures:
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H 19,602 lakhs and refundable deposit paid under JDA is H 4,914
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• Evaluated the design and implementation of Company's key financial
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lakhs.
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controls in respect of recoverability assessment of the advances and deposits
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Advances paid by the Company to the landowner/intermediary
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and tested the operating effectiveness of such controls for a sample of
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towards purchase of land is recognised as land advance under
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transactions;
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other assets on account of pending transfer of the legal title to the Company, post which it is recorded as inventories.
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• Obtained and tested the computation involved in assessment of carrying value of advances;
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Further, for land acquired under joint development agreement, the Company has paid refundable deposits for acquiring the development rights.
The aforesaid deposits and advances are carried at the lower of the amount paid/payable and net recoverable value, which is based on the management's assessment which include, among other things, the likelihood when the land acquisition would be completed, expected date of completion of the project, sale prices and construction costs of the project.
Considering the significance of the amount and assumptions involved in assessing the recoverability of these balances the aforementioned areas has been determined as a key audit matter for current year audit.
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• Obtained status of the project/land acquisition from the management and enquired for the expected realization of deposit amount;
• Assessed the appropriateness and adequacy of the disclosures made by the management in accordance with applicable Ind AS.
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5. Assessing the recoverability of carrying values of inventories
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The accounting policies for Inventories are set out in Note 1.2 (h) to
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Our audit procedures included, but was not limited to, the following procedures:
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the Standalone financial statements.
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• Assessed the appropriateness of the Company's accounting policy by
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As at 31 March 2024, inventory of the Company comprises of
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comparing with applicable Ind AS;
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properties held for development, properties under development, properties held for sale and as referred in note 10 to the standalone financial statements and represents 14% of the Company's total
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• Evaluated the design and implementation of Company's key financial internal controls related to testing recoverable amounts with carrying amount of inventory, including evaluating the Company's management processes
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assets.
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for estimating future costs to complete projects and tested the operating
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Inventory is valued at cost and net realisable value (NRV), whichever
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effectiveness of such controls for a sample of transactions. We carried out
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is less. In case of properties under development and properties
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a combination of procedures involving inquiries and observations and
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held for sale, determination of the NRV involves estimates based
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inspection of evidence in respect of operation of such key controls;
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on prevailing market conditions, current prices, and expected date of completion of the project, the estimated future selling price, cost to complete projects and selling costs. For NRV assessment, the estimated selling price is determined for a phase, sometimes comprising multiple units.
We have identified the assessment of the carrying value of inventory as a key audit matter due to the significance of the balance to the standalone financial statements as a whole and the involvement of estimates and judgement in the NRV assessment.
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• Performed re-computation of NRV and compared it with the recent sales or estimated selling price (usually contracted price) to test inventory units are held at the lower of cost and NRV;
• Compared the estimated construction costs to complete each project with the Company's updated budgets; and
• Assessed the appropriateness and adequacy of the disclosures made by the management in accordance with applicable Ind AS.
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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 Annual Report, but does not include the standalone financial statements and our auditor's report thereon. The report is expected to be made available for us after the date of this audit report.
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.
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
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. I n 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 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.
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
as disclosed in note 50 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 or entity, 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 50 to the standalone financial statements, no funds have been received by the Company from any person or entity, 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.
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 I 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 I, 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 and 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) I n 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 qualification 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 II 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 40 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,
v. The Company has not declared or paid any dividend during the year ended 31 March 2024; and
vi. As stated in note 47 to the standalone financial statements and based on our examination which included test checks, except for instance 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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The audit trail feature was not enabled at the database level for accounting software SAP to log any direct data changes, used for maintenance of all accounting records by the Company.
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For Walker Chandiok & Co LLP
Chartered Accountants Firm's Registration No.: 001076N/N500013
Nikhil Vaid
Partner
Membership No.: 213356 UDIN: 24213356BKEXZC8703
Hyderabad 29 May 2024
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