SRF Limited
Report on the Audit of the Standalone Financial Statements
Opinion
We have audited the standalone financial statements of SRF Limited (the "Company") which comprise the standalone balance sheet as at 31 March 2024, and the standalone statement of profit and loss (including other comprehensive income), standalone statement of changes in equity and standalone statement of cash flows for the year then ended, and notes to the standalone financial statements, including 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 ("Act") in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at 31 March 2024, and 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 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.
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1. Accounting for derivatives
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See Note 38 to standalone financial statements
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Key audit matter
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How the matter was addressed in our audit
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The Company uses derivative financial instruments to mitigate foreign currency risk primarily through foreign currency forward exchange contracts. Further, the Company uses hedge relationship designation as per criteria set out in relevant Indian accounting standards. Accounting thereof, including assessment of hedge effectiveness, and related presentation and disclosures of these transactions require significant judgement. Given the significant level of judgement and estimation involved and the quantitative significance, we have determined this to be a key audit matter.
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In view of the significance of the matter, we applied the following audit procedures in this area, among others, to obtain sufficient appropriate audit evidence:
a. Tested the design, implementation and operating effectiveness of controls over the Company's treasury and other related functions which directly impact the relevant account balances and transactions, including hedge accounting.
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1. Accounting for derivatives
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See Note 38 to standalone financial statements
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Key audit matter
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How the matter was addressed in our audit
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b. For selected samples via statistical sampling, obtained external confirmations from counterparties of the year end positions as well as agreed to original agreements analyzing critical terms, such as nominal amount, maturity, and underlying, of the hedging instrument and the hedged item to assess they are closely aligned.
c. Ferformed sample tests of valuation and accounting of these transactions. In doing so we have involved valuation specialists to assist us in carrying out aforesaid procedure, as considered necessary.
d. Assessed the adequacy of disclosures in the financial statements in respect of both nonderivative and derivative financial instruments.
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2. Assessment of uncertain tax position on taxability of income from sale of Carbon emission reduction ("CER") certificates
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See Note 29 to standalone financial statements
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Key audit matter
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How the matter was addressed in our audit
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The Company has an uncertain tax position with regard to taxability of income from sale of Carbon Emission Reduction (CER) certificates related to certain past years. Assessment of such positions involves significant judgement based on a number of factors, including, interpretation of tax laws, status of assessment of each year by income-tax authorities, evaluation of company- specific orders, and judicial precedents.
As explained in note 29 of the standalone financial statements, based on assessment of relevant factors, the Company has decided to reverse the provision for tax recognised in respect of two assessment years. The above note also explains related uncertainties associated with the matter, including those pertaining to outcome for other assessment years.
Given the significant level of judgement involved and the quantitative significance, we have determined this to be a key audit matter.
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In view of the significance of the matter, we applied the following audit procedures, among others, to obtain sufficient appropriate audit evidence:
a. Aested the design, implementation and operating effectiveness of controls over analysis of uncertain tax position and measuring tax benefits.
b. Abtained status of litigations for relevant assessment years where this uncertain tax position has been identified and management assessment on such tax positions.
c. Fvaluated, with the assistance of specialists, Company's uncertain tax position by performing the following:
i. Identifying key judgements underlying uncertain tax position.
ii. Fvaluating relevant factors taken into consideration by the Company in its probability assessment of uncertain tax position, including status of different assessment years, position taken by tax authorities in company-specific tax assessments and industry precedents.
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2. Assessment of uncertain tax position on taxability of income from sale of Carbon emission reduction ("CER") certificates
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See Note 29 to standalone financial statements
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Key audit matter
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How the matter was addressed in our audit
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iii. Evaluating Company's method of measuring the amount of reversal of provision for tax, including underlying data and past tax filings.
iv. Eased on the above, evaluating whether Company's assessment of tax uncertainties and resulting conclusions are consistent with our assessment, after taking into consideration current facts and circumstances.
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Other Information
The Company's Management and Board of Directors are responsible for the other information. The other information comprises the information included in the Company's annual report, but does not include the financial statements and auditor's report thereon.
Our opinion on the standalone financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the standalone financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the standalone financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Management's and Board of Directors' Responsibilities for the 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/ loss and other comprehensive income/ loss, 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, the 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.
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
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 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 financial statements in place and the operating effectiveness of such controls.
• Ivaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Management and Board of Directors.
• Oonclude on the appropriateness of the Management and Board of Directors use of the going concern basis of accounting in preparation of standalone financial statements 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.
• Ivaluate 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 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 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.
2 A. 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. I n 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 2(B)(f) below on reporting under Rule 11(g) of the Companies (Audit and Auditors) Rules, 2014.
c. Ahe standalone balance sheet, the standalone statement of profit and loss (including other comprehensive income), the standalone statement of changes in equity and the standalone 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 Ind AS specified under Section 133 of the Act.
e. An 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. Ahe modification relating to the maintenance of accounts and other matters connected therewith are as stated in the paragraph 2A(b) above on reporting under Section 143(3)(b) and paragraph 2B(f) below on reporting under Rule 11(g) of the Companies (Audit and Auditors) Rules, 2014.
g. Aith respect to the adequacy of the internal financial controls with reference to financial statements of the Company and the operating effectiveness of such controls, refer to our separate Report in "Annexure B".
B. Aith 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, in our opinion and to the best of our information and according to the explanations given to us:
a. Ahe Company has disclosed the impact of pending litigations as at 31 March 2024 on its financial position in its standalone financial statements
- Refer Note 31 to the standalone financial statements.
b. Ahe Company has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long-term contracts including derivative contracts
- Refer Note 38 to the standalone financial statements.
c. Ahere has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.
d (i) Ahe management has represented that, to the best of its knowledge and belief, as disclosed in the Note 40(h)(viii) to the standalone financial statements, no funds have been advanced or loaned or invested (either from borrowed
Place: Gurugram Date: 07 May 2024
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.
(ii) The management has represented that, to the best of its knowledge and belief, as disclosed in the Note 40(h)(ix) 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 Parties ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
(iii) Tased on the audit procedures that have been considered reasonable and appropriate in the circumstances performed, 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 (i)
and (ii) above, contain any material misstatement.
e. The interim dividend declared and paid by the Company during the year and until the date of this audit report is in accordance with Section 123 of the Act.
f. B ased on our examination which included test checks, except for the instances mentioned below, the Company has used accounting softwares for maintaining its books of account, which have a feature of recording audit trail (edit log) facility and the same has operated throughout the year for all relevant transactions recorded in the respective softwares:
(i) The feature of audit trail (edit log) facility was not enabled throughout the year in the accounting softwares used for maintaining the books of account relating to general ledger and other related records, for certain tables relating to areas, such as, inventory, purchase and payables and certain master tables. Further, the feature of recording audit trail (edit log) facility was not enabled for the period from 1 April 2023 to 11 April 2023 for certain tables relating to areas such as receivables, property, plant and equipment, intangible assets, sale and purchase invoices, journal entries etc.
(ii) The feature of audit trail (edit log) facility was not enabled throughout the year in the database layer of the software used for maintaining the books of account relating to payroll, to log any direct data changes. Further, the feature of audit trail (edit log) facility was enabled at the application layer, however, due to limitations in the system configuration, we are unable to comment whether the audit trail feature operated throughout the year.
(iii) I n case of the edit logs generated by the accounting softwares, only an authorised privileged user had rights to make direct changes to the edit log. However, the feature of audit trail (edit log) facility for recording any such changes was not enabled throughout the year, and hence, we are unable to determine whether any direct changes to the edit logs were made during the year.
lor the periods where audit trail (edit log) facility was enabled and operated for the respective accounting softwares,
we did not come across, subject to our comment in sub-paragraph (iii) above, any instance of the audit trail feature being tampered with.
C. With respect to the matter to be included in the Auditor's Report under Section 197(16) of the Act:
In our opinion and according to the information and explanations given to us, the remuneration paid by the Company to its directors during the current year is in accordance with the provisions of Section 197 of the Act. The remuneration paid/ payable to any director is not in excess of the limit laid down under Section 197 of the Act. The Ministry of Corporate Affairs has not prescribed other details under Section 197(16) of the Act which are required to be commented upon by us.
For B S R & Co. LLP
Chartered Accountants Firm's Registration No.:101248W/W-100022
Kaushal Kishore
Partner
Membership No.: 090075 ICAI UDIN:24090075BKGTYN3757
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