We have audited the accompanying standalone financial statements of Solara Active Pharma Sciences Limited ("the Company”), which comprise the Balance Sheet as at 31 March 2024, and the Statement of Profit and Loss (including Other Comprehensive Loss), the Statement of Cash Flows and the Statement of Changes in Equity for the year ended on that date, and notes to the standalone financial statements, including a summary of material accounting policies and other explanatory information.
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, ("Ind AS”) and other accounting principles generally accepted in India, of the state of affairs of the Company as at 31 March 2024, and its loss, total comprehensive loss, its cash flows and the changes in equity for the year ended on that date.
Basis for Opinion
We conducted our audit of the standalone financial statements in accordance with the Standards on Auditing ("SAs”) specified under section 143(10) of the Act. Our responsibilities under those Standards are further described in the Auditor's Responsibility 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 made thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the ICAI's Code of Ethics. We believe that the audit evidence obtained by us is sufficient and appropriate to provide a basis for our audit 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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Sr.
No.
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Key Audit Matter
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Auditor’s Response
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1
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Revenue Recognition
Refer note 2.1 (iii) and note 26 of the standalone financial statements
The Company's sales revenue mainly arose from sale of pharmaceutical products, which are in the nature of API (i.e. Active Pharmaceutical Ingredient). The Company recognises sales revenue based on the terms and conditions of transactions, which vary with different customers. For sales transactions in a certain period around balance sheet date, it is essential to ensure whether the transfer of control of the goods by the Company to the customer occurs before the balance sheet date or otherwise. Considering that there are significant volume of sales transactions close to the year end, involving material amounts and such revenue recognition is subject to whether transfer of control to the customer has occurred before the balance sheet date or otherwise, we consider the risk of revenue from sale of goods being recognised in the incorrect period, a key audit matter.
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Principal audit procedures performed:
We evaluated the design of internal controls over recognition of revenue in the appropriate period on accordance with the Company's accounting policy. On a sample basis, we tested the operating effectiveness of the internal control relating to the determination of point of time at which the transfer of control of the goods occurs.
We tested the relevant information technology systems used in recording the revenue including company's system generated reports, based on which selection of samples was undertaken.
On sample basis, we performed test of details of sales recorded close to year end through following procedures:
- Analysed the terms and conditions of the underlying contract with the customers and
- Verified the evidence for the transfer of control of the goods prior to the balance sheet date or otherwise, from relevant supporting documents.
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Sr.
No.
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Key Audit Matter
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Auditor’s Response
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2.
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Impairment assessment in respect of carrying
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Principal Audit Procedures performed:
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value of the assets of the Cash Generating Unit's (CGUs) as at 31 March 2024
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•
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We assessed the management's process for identification of cash generating units within the Company and process for impairment
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The carrying value of the CGUs are tested by the
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assessment of the carrying value of assets of the CGUs
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Management atleast annually for impairment,
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•
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Evaluated the design and implementation of the management's
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or more frequently if the events or changes in
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internal control around identifying impairment indicators at CGU
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circumstances indicate that the asset might be
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level and carried out testing of the impairment assessment of
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impaired.
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relevant CGUs including the approval of forecasts and valuation
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The evaluation requires a comparison of the
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models.
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estimated recoverable value of the CGU to the
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•
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We inquired with Management to understand the factors
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carrying value of the assets in the CGU. The
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considered when performing the impairment assessment
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Management has involved external specialist to
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including the rationale for the events and circumstances
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carry out impairment assessment.
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considered based on strategic plans of the entity (business revenue
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As stated in note 7 of the standalone financial
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projections, cost reduction plans etc.), consideration of economic
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statements, the Management of the Company has
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and industry matters and the factors considered regarding the
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assessed the annual impairment of CGUs based
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overall value in use conclusion.
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on the impairment indicators identified during the
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•
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Evaluated the competence of the Management's expert and
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year.
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understood the key assumptions considered in the management's
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The Carrying value of CGUs will be recovered
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estimates of future cash flows.
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through future cash flows and there is a risk of
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Involving our valuation specialists, to assist in evaluating
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impairment loss where the actual cash flows are
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methodologies, terminal growth rates considered in the estimates
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less than expected. The impairment assessment
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of future cash flows and the discount rate used in the calculations,
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performed by the Management contained a
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which included benchmarking the weighted average cost of
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number of significant judgements and estimates
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capital with sector averages for the relevant markets in which
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including short and long term growth rates and
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the CGU operates and considering Company specific factors and
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discount rate.
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other key assumptions considered in the calculations.
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We focused on this area because of the significance
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Compared the historical cash flows (including for current year)
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of the balance and the significant judgements and assumptions involved in impairment assessment carried out by the Management about based on
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against past projections of the management for the same periods and gained understanding of the rationale for the changes.
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the future results
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Performed sensitivity analysis on the key assumptions within the forecast cash flows and focused our attention on those assumptions we considered most sensitive to the changes such as revenue growth and profitability during the forecast period, the terminal growth rate and discount rate applied to the future cash flows.
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We ascertained the extent to which a change in these assumptions both individually or in aggregate would result in impairment and considered the likelihood of such events occurring.
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We
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Ý further assessed the adequacy of the disclosures made in the
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standalone financial Statements for the year ended 31 March 2024
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3.
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Going concern assessment
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Principal Audit Procedures performed:
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The Company has incurred a loss of ' 566.87
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Our audit procedures to assess the going concern assumption and
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crores for the year ended 31 March 2024 and the
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whether a material uncertainty exists related to events or conditions
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Company has negative working capital position of
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that may cast a significant doubt on the Company's ability to
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' 447.00 crores as at 31 March 2024. In addition to
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continue as a going concern included the following audit procedures
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meeting its current obligations, the Company also
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to obtain sufficient appropriate audit evidence:
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requires funds to continue its day-to-day operations
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Gaining an understanding and assessing the design,
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and expansion projects.
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implementation and operating effectiveness of Company's key
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Note 2.1 (ii) of the standalone financial statements
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internal controls over preparation of cash flow forecasts to assess
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explain that Board of directors has concluded that
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its liquidity;
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the going concern basis is appropriate in preparing the Standalone financial statements of the
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Compared the forecasted cash flows with the Company's business
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Company. The evaluation of whether the Company
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plan approved by the board of directors;
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is a going concern was based upon an assessment
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Evaluating the key assumptions in the cash flow forecasts with
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of the Company's cash position, future cash flow
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reference to historical information, current performance, future
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forecasts, its debt repayment obligations and other
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plans, and market and other external available information;
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commitments and its availability of financing
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Assessing the management's ability to raise funds through rights
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facilities, after considering breaches of its existing debt covenant, and based on proposed fund raise through rights issue to the existing shareholders.
This required the exercise of significant judgement, particularly in forecasting the Company's future revenues, profitability and cash flows. Based on their
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issue to existing shareholders and availability of financing facilities from lenders;
Performing sensitivity analysis on the forecasted cash flows by considering plausible changes to the key assumptions adopted by the Company;
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assessment, the Company concluded that there
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Assessing the adequacy of the disclosures related to application of
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are no material uncertainties related to events or conditions which, individually or collectively, may cast significant doubt on the Company's ability to continue as a going concern.
Considering the significance of the area to the overall financial statements this was significant for our audit.
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the going concern assumption.
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Information Other than the Standalone Financial Statements and Auditor's Report Thereon
• The Company's Board of Directors is responsible for the other information. The other information comprises the Board's report but does not include the consolidated financial statements, standalone financial statements and our auditor's report thereon which we obtained prior to the date of this auditor's report. And the Management Discussion and Analysis, Corporate Governance Report and Business Responsibility and Sustainability Report which is expected to be made available to us after that date.
• Our opinion on the standalone financial statements does not cover the other information and we do not/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 and, in doing so, consider whether the other information is materially inconsistent with the standalone financial statements or our knowledge obtained during the course of our audit or otherwise appears to be materially misstated.
• If, based on the work we have performed on the other information that we obtained prior to the date of this auditor's report, 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
The Company's Board of Directors is responsible for the matters stated in section 134(5) of the Act with respect to the preparation of these standalone financial statements that give a true and fair view of the financial position, financial performance including other comprehensive loss, cash flows and changes in equity of the Company in accordance with the accounting principles generally accepted in India, including 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 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 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 intend to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
The Company's Board of Directors are also responsible for overseeing the Company's financial reporting process.
Auditor's Responsibility for the Audit of the Standalone Financial Statements
Our objectives are to obtain reasonable assurance about whether the standalone financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these standalone financial statements.
As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
• Identify and assess the risks ofmaterial 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 controls 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 the management.
• Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the standalone financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the standalone financial statements, including the disclosures, and whether the standalone financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Materiality is the magnitude of misstatements in the standalone financial statements that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the standalone financial statements may be influenced. We consider quantitative materiality and qualitative factors in (i) planning the scope of our audit work and in evaluating the results of our work; and (ii) to evaluate the effect of any identified misstatements in the standalone financial statements.
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 financial controls that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the standalone financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS
1. As required by Section 143(3) of the Act, based on
our audit 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 except for not complying with the requirement of audit trail as stated in (i)(vi) below.
c) The Balance Sheet, the Statement of Profit and Loss including Other Comprehensive Loss , the Statement of Cash Flows and Statement of Changes in Equity dealt with by this Report are in agreement with the relevant books of account.
d) In our opinion, the aforesaid standalone financial statements comply with the 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) The modification relating to the maintenance of accounts and other matters connected therewith, is as stated in paragraph (b) above.
g) With respect to the adequacy of the internal financial controls with reference to standalone financial statements of the Company and the operating effectiveness of such controls, refer to our separate Report in "Annexure A”. Our report expresses an unmodified opinion on the adequacy and operating effectiveness of the Company's internal financial controls with reference to standalone financial statements.
h) With respect to the other matters to be included in the Auditor's Report in accordance with the requirements of section 197(16) of the Act, as amended, in our opinion and to the best of our information and according to the explanations given to us, the remuneration paid by the Company to its directors during the year is in accordance with the provisions of section 197 of the Act.
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 has disclosed the impact of pending litigations on its financial position in its standalone financial statements - Refer Note 38 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 were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company.
iv. (a) The Management has represented
that, to the best of its knowledge and belief as disclosed in the note 49(h) to the standalone financial statements 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, 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 note 49(h) to the Standalone financial statements, 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, 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 the audit procedures performed that have been considered reasonable and appropriate in the circumstances, nothing has come to our notice that has caused us to believe that the representations under sub-clause (i) and (ii) of Rule 11(e), as provided under (a) and (b) above, contain any material misstatement.
v. The Company has not declared or paid any dividend during the year and has not proposed final dividend for the year.
vi. Based on our examination, which included test checks, the Company has used accounting software for maintaining its books of account for the financial year ended 31 March 2024 which has a feature of recording audit trail (edit log) facility and the same has operated throughout the year for all relevant transactions recorded in the software except that no audit trail was enabled for certain direct changes to tables at the application level. Accordingly, we are unable to comment on whether there was any instance of the audit trail feature being tampered with. (Refer note 50 to the standalone financial statements)
As proviso to Rule 3(1) of the Companies (Accounts) Rules, 2014 is applicable from April 1, 2023, reporting under Rule 11 (g) of the Companies (Audit and Auditors) Rules, 2014 on preservation of audit trail as per the statutory requirements for record retention is not applicable for the year ended 31 March 2024.
2. As required by the Companies (Auditor's Report) Order, 2020 ("the Order”) issued by the Central Government in terms of Section 143(11) of the Act, we give in "Annexure B” a statement on the matters specified in paragraphs 3 and 4 of the Order.
For DELOITTE HASKINS & SELLS LLP
Chartered Accountants (Firm's Registration No. 117366W/W-100018)
Sathya P. Koushik
Partner
(Membership No. 206920) (UDIN: 24206920BKANYX2757)
Place: Bengaluru
Date: 29 May 2024
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