TO THE MEMBERS OF
STERLING AND WILSON RENEWABLE ENERGY LIMITED Report on the Audit of the Standalone Financial Statements
Opinion
We have audited the accompanying standalone financial statements of STERLING AND WILSON RENEWABLE ENERGY LIMITED ("the Company"), which comprise the Standalone Balance Sheet as at 31 March 2024, the Standalone Statement of Profit and Loss (including Other Comprehensive Income), the Standalone Statement of Changes in Equity, the Standalone Statement of Cash Flows for the year ended on that date and the Notes to the standalone financial statements, including a summary of material accounting policies and other explanatory information in which are incorporated the returns for the year ended on that date audited by the branch auditors of the Company's branches located at Australia, Argentina, Chile, Dubai, Egypt (2 branches), Jordan (2 branches), Kenya, Mali, Namibia, Philippines, United Kingdom, Vietnam (3 branches), Tanzania, and Zambia.Greece, Mexico, New Zealand and Italy branches of the Company do not have any transaction till date.
In our opinion and to the best of our information and according to the explanations given to us and based on the consideration of reports of branch auditors on financial statement of such branches as were audited by the branch auditors, 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, and with other accounting principles generally accepted in India, of the state of affairs of the Company as at 31 March 2024, its profit, total comprehensive profit, changes in equity and its cash flows 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 Responsibilities for the Audit of the Standalone Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India (ICAI) together with the ethical requirements that are relevant to our audit of the standalone financial statements under the provisions of the Act
and the Rules thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the ICAI's Code of Ethics. We believe that the audit evidence we have obtained along with the consideration of audit reports of the branch auditors referred to in paragraph (i) of the "Other Matters" paragraph below, is sufficient and appropriate to provide a basis for our audit opinion on the standalone financial statements.
Emphasis of Matters We draw attention to:
i) Note 58 to the Standalone Financial Statements which details the Company's exposure in respect of its investment in a wholly owned subsidiary, loans given together with accrued interest thereon and other receivables aggregating to ' 2,733.10 crores as at 31 March 2024. The Company is confident that these amounts are recoverable based on the projected cash flows of the wholly owned subsidiary and amounts recoverable under the indemnity agreement with the Promoter Selling Shareholders.
ii) Note 54 to the Standalone Financial Statement which describes the Indemnity Agreement dated December 29, 2021, entered into by the Company with Shapoorji Pallonji and Company Private Limited, Khurshed Yazdi Daruvala (jointly the "Promoter Selling Shareholders") and Reliance New Energy Limited (formerly known as Reliance New Energy Solar Limited) pursuant to which, the Promoter Selling Shareholders would indemnify and re-imburse the Company and its subsidiaries / branches for a net amount, on settlement of liquidated damages pertaining to certain identified past and existing projects (as on the date of signing the aforementioned agreement), old receivables, direct and indirect tax litigations as well as certain legal and regulatory matters, if such claims (net of receivables) exceeds ' 300.00 crores. Consequently, trade receivables from the customer undergoing a resolution process under the supervision of the National Company Law Tribunal ('NCLT') and bank guarantees related to liquidated damages encashed by certain customers would also be recoverable from the Promoter Selling Shareholders once crystallized, if not recovered from the customers. Since all future crystallized claims beyond ' 300.00 crores will be fully charged back and recovered from the Promoter Selling Shareholders, there will be no further impact on the results of the Company.
Our opinion is not modified in respect of these matters.
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 year. 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 Matters
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Principal Audit Procedures performed
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1.
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Revenue recognition of Engineering, Procurement and Commissioning Contracts (EPC Contracts) - Estimated
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Understood the Management controls around estimation process and derivation of the estimated cost (Cost to Complete) thereof.
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Costs to Complete
(Refer Note 31 of the Standalone Financial Statements).
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Evaluated and tested the design, implementation and operating effectiveness of controls addressing this risk.
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The Company follows a Percentage of Completion Method for Revenue Recognition of Engineering, Procurement and Commissioning (EPC)Contracts which involves actual cost and estimate / forecast for balance cost.
Due to significant judgment involved in the estimation of the total revenue, costs to complete and the revenue that should be recognized and significant audit risk of overstatement, we have considered Revenue Recognition - Estimated cost to complete EPC Contracts as a key audit matter.
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Reviewed the Company's accounting policies with respect to accounting and revenue recognition relating to EPC Contracts.
Obtained the list of all the contracts for which the Company has recognised revenue during the year and selected samples on which we conducted our test of details.
For selected samples:
- Obtained the Job Status Report ("JSR") / Percentage of Completion ("POC") working for EPC Contracts and traced the same to financial statements and general ledgers.
- Verified the executed version of contracts and its amendments for key terms and milestones to verify the estimated total revenue and costs to complete and / or any changes thereto;
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- Inquired with the project and commercial departments about significant modification to Cost to Complete, evaluated and challenged rationale for modification
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- Evaluated key Management estimates used in determining cost to complete by comparing it with prior periods and past precedents.
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- Verified the approval documents for change in the estimated cost during the year and if there is change in the margin due to addition / deletion of items in Bill of Quantity (Forecast) ("BOQ") / JSR / POC, the approval of the Chief Executive Officer is obtained.
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2.
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Litigated Overdue Receivables
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(Refer Note 13, 18, 43, 54 and 55 of the Standalone Financial Statements).
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- Understood the processes and controls around estimation process of recoverability and provision thereof.
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We considered this as key audit matter on account of risk associated with litigated overdue receivables, the Company's assessment of the recoverability of these receivables and consequent determination of provision which requires significant Management estimates and judgements.
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- Verified the completeness and accuracy of data considered for ageing analysis and assessment of recoverability of receivables in respect of receivables not covered under indemnity and determination of the provision.
- Wherever required, obtained the legal opinions for evaluating the case position and assessing potential outcome.
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Sr.
No.
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Key Audit Matters
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Principal Audit Procedures performed
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3.
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Assessment of Impairment of Investments made in, loans given to and other receivables from the subsidiaries of the Company.
(Refer Note 6, 7, 16, 18, 43, 46, 53 (c](i] and 58 of the Standalone Financial Statements].
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Understood the processes and controls around Management's impairment assessment of exposure in the Company's subsidiaries in the nature of investments made, loans given and other receivables from the Company's subsidiaries.
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Due to operating losses, the net-worth of certain subsidiaries / sub-subsidiaries have become negative as on 31 March 2024. The Company's exposure is reflected in the standalone financial statements in form of Investments in, Loans (Current and Non-Current] given to and other receivables from those subsidiaries.
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Assessed the reasonability of Management's assumptions used to project the future cashflows for the purposes of analysing the recoverability of investments made, loans given and other receivables from the Company's subsidiaries.
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The Management has prepared projected cashflows for it's subsidiaries for the next financial year. The determination of the recoverable amount from it's subsidiaries involves Management estimates and judgment which may affect the outcome.
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So, there is an inherent risk in the valuation of investment / recoverability of loans and other receivables, due to the use of estimates and judgements mentioned above and accordingly, the assessment of impairment of investment / loans in subsidiary company has been determined as a key audit matter.
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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 Management Discussion and Analysis, Board's Report including Annexures to Board's Report and Report on Corporate Governance but does not include the standalone financial statements, consolidated financial statements and our auditor's report thereon. The Management Discussion and Analysis, Board's Report including Annexures to Board's Report and Report on Corporate Governance are 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, compare with the financial statements of the branches audited by the branch auditors, to the extent it relates to these branches, and in doing so, place reliance on the work of the branch auditors and 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.
When we read the Board's Report, including the Annexures to Board's Report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance under SA 720 'The Auditor's responsibilities Relating to Other Information'.
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 income, changes in equity and the cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards specified under section 133 of the Act. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the standalone
financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
In preparing the standalone financial statements, Management and Board of Directors 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 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
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 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 Companies Act, 2013, 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.
• Obtain sufficient appropriate audit evidence regarding the financial information of the Company and its branches to express an opinion on the standalone financial statements. We are responsible for the direction, supervision and performance of the audit of financial information of such branches included in the standalone financial statements of which we are the independent auditors. For the other branches included in the standalone financial statements, which have been audited by branch auditors, such branch auditors remain responsible for the direction, supervision and performance of the audits carried out by them. We remain solely responsible for our audit opinion. Our responsibilities in this regard are further described in paragraph (i) of the section titled "Other Matters" in this audit report.
Materiality is the magnitude of misstatements in the financial statements that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the 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 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 year 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.
Other Matters
i) We did not audit the financial statements of 17 branches included in the standalone financial statements of the Company, whose financial statements reflect total assets (before consolidation adjustments) of ' 717.19 crores as at 31 March 2024, total revenues (before consolidation adjustments) of ' 188.28 crores, total net loss after tax (before consolidation adjustments) of ' 0.60 crores, and total comprehensive loss (before consolidation adjustments) of ' 0.60 crores for the year ended on 31 March 2024, and net cash outflows of ' 3.19 crores for the year ended on that date as considered in the standalone financial statements of the Company.
The financial statements of these branches have been audited by the respective branch auditors whose reports have been furnished to us and our opinion in so far as it relates to the amounts and disclosures included in respect of these branches, is based solely on the report of such branch auditors and the procedures performed by us as stated in Auditor's Responsibilities section above.
ii) The branches referred to above are located outside India whose financial statements have been prepared in accordance with the accounting principles generally accepted in their respective countries and which have been audited by the respective branch auditors under generally accepted auditing standards applicable in their respective countries. The Company's Management has converted the financial statement of such branches located outside India from the accounting principles generally accepted in their respective countries to the accounting principles generally accepted in India. We have audited these conversion adjustments made by the Company's Management.
Our opinion in so far as it relates to the amounts and disclosures included in respect of these branches located outside India is based on the report of such branch auditors and the conversion adjustments prepared by the Management of the Company and audited by us.
Our opinion on the standalone financial statements and our report on Other Legal and Regulatory Requirements below, is not modified in respect of the above matters with
respect to our reliance on the work done and the reports of the branch auditors.
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 Section 143(11) of the Companies Act, 2013, we give in the "Annexure A", a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.
2. As required by section 143(3) of the Act, based on our audit and on the consideration of the reports of the branch auditors on the separate financial information of the branches and referred to in the Other Matters section above 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 purposes of our audit.
b) In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books and proper returns adequate for the purposes of our audit have been received from the branches not visited by us, except for maintaining backup on a daily basis of such books of account maintained by certain branches in electronic mode, in a server physically located in India and for not complying with the requirement of audit trail as stated in (i) (vi) below.
c) The reports on the accounts of the branch offices of the Company audited under Section 143(8) of the Act by branch auditors have been provided to us and have been properly dealt with by us in preparing this report.
d) The Standalone Balance Sheet, the Standalone Statement of Profit and Loss (including Other Comprehensive Income), the Standalone Cash Flows Statement and the Standalone Statement of Changes in Equity, dealt with by this Report are in agreement with the relevant books of account and with the returns received by us and the branch auditors from the branches not visited by us.
e) In our opinion, the aforesaid standalone financial statements comply with the Indian Accounting Standards specified under Section 133 of the Act.
f) In our opinion, the Emphasis of Matter with respect to the Company's exposure in respect of its investment in a wholly owned subsidiary, loans given together with accrued interest thereon and other receivables aggregating to ' 2,733.10 crores as at 31 March 2024 could have adverse effect on the functioning of the Company.
g] On the basis of the written representations received from the Directors of the Company as on 31 March 2024, taken on record by the Board of Directors, none of the Directors of the Company are disqualified as on 31 March 2024, from being appointed as a Director in terms of Section 164 (2) of the Act.
h] The modification relating to the maintenance of accounts and other matters connected therewith, are as stated in the paragraph (b) above.
i] 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 B". Our report expresses an unmodified opinion on the adequacy and operating effectiveness of the Company's internal financial controls with reference to the financial statements.
j] 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.
k] 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 43 to the standalone financial statements.
ii] The Company has made provision, as required under the applicable law or Accounting Standards, for material foreseeable losses, if any, on long-term contracts - Refer Note 26 to the standalone financial statements. The Company did not have any long-term derivative contract.
iii] There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.
iv] The Management has represented that:
a] to the best of its knowledge and belief, other than as disclosed in the note 46 to the financial statements, no funds (which are material either individually or in
aggregate] 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] to the best of its knowledge and belief, no funds (which are material either individually or in the aggregate] 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;
Based on the audit procedures performed by us which is 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] contain any material misstatement.
v] As per information and explanation provided by Management and based on the records of the Company, no dividend has been declared or paid or proposed during the year by the Company. Hence the compliance with Section 123 of the Act is not applicable.
vi] Based on our examination, which included test checks, the Company have used accounting software for maintaining its books of account which has a feature of recording audit trail (edit log] facility and the audit trail has been operating throughout the year for all relevant transactions recorded in the software, except that no audit trail was enabled
at the database level for accounting software SAP (database HANA] to log any direct data changes.
Further, during the course of our audit, we did not come across any instance of audit trail feature being tampered with, in respect of accounting software for the period for which the audit trail feature was enabled and operating.
For KALYANIWALLA & MISTRY LLP
CHARTERED ACCOUNTANTS
Firm Regn. No.: 104607W / W100166
Daraius Z. Fraser
PARTNER M. No.: 42454
UDIN:24042454BKBKBT6517 Mumbai: 20 April 2024
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.
For DELOITTE HASKINS & SELLS LLP
CHARTERED ACCOUNTANTS
Firm Regn. No.: 117366W-W-100018
Mohammed Bengali
PARTNER M. No.: 105828 UDIN: 24105828BKFIIA7233 Mumbai: 20 April 2024
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