REPORT ON THE AUDIT OF THE STANDALONE FINANCIAL STATEMENTS
OPINION
We have audited the accompanying standalone financial statements of Zee Entertainment Enterprises Limited (the Company), which comprise the Balance Sheet as at 31st March 2022, and the Statement of Profit and Loss including Other Comprehensive Income, the Statement of Cash Flows and the Statement of Changes in Equity for the year then ended, and a summary of significant 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 read with the Companies (Indian Accounting Standards) Rules, 2015, as amended, (Ind AS) and other accounting principles generally accepted in India, of the state of affairs of the Company as at 31st March 2022, and its profit, total comprehensive income, 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 Auditors’ 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 judgement, 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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Key Audit Matter
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Auditors’ Response
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Goodwill impairment assessment as at 31st March 2022:
The standalone financial statements reflect goodwill aggregating f 1,261 million recognised mainly on acquisitions and allocated to the following cash generating units (CGUs):
1. Online Media Business (f 640 million (net of impairment of f 1,620 million)); and
2. Regional channel in India (f 621 million).
We considered this as key audit matter due to the significance of the balance of goodwill and because of the Company’s assessment of the fair value less cost of disposal (FVLCD) and value-in-use (VIU) calculations of the CGU, which involve significant judgements about the valuation methodology, future performance of business and discount rate applied to future cash flow projections.
Refer note 7(a) of the standalone financial statements.
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Principal audit procedures performed:
Our procedures consisted of understanding the Management’s methodology
and key assumptions and included performance of the following audit
procedures:
• Evaluated the design and operating effectiveness of internal controls relating to review of goodwill impairment testing performed by the Management;
• Validating impairment models through testing of the mathematical accuracy and verifying the application of the key input assumptions;
• Understanding the underlying process used to determine the risk adjusted discount rates;
• Assessing the appropriateness of significant changes to assumptions since the prior period;
• Validating the cash flow forecasts with reference to historical forecasts and actual performance to support any significant expected future changes to the business;
• Working with auditor’s valuation experts to benchmark the discount rates and perpetual growth rates applied by the Company for the purposes of computing VIU;
• We have also engaged auditor’s valuation experts to assist us in evaluating the FVLCD determined by the Company. The valuation experts independently evaluated revenue multiple used in determination of FVLCD.
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Key Audit Matter
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Auditors’ Response
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Audit of transactions involving payment of advance for movie rights acquisitions:
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Principal audit procedures performed:
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The Company pays advances for acquiring movies from aggregators,
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• Evaluated the design and operating effectiveness of internal controls
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sub-agents of aggregators and production houses. During the year, the
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relating to authorisation of movie advances and adherence to the
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Company paid advances to such aggregators and production houses for
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approval policy framed by the Company;
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acquiring rights of movies on the basis of Memorandum of Understanding
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• Obtained supporting documents for the sample of movie advances paid
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(MOU) and/or agreements entered into with the respective aggregators or
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during the year which includes the MOU/agreement executed between
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production houses.
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the Company and content aggregators and production houses stating
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We considered this as key audit matter on account of the value of such
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business rationale for the advance payments;
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movie advances and the risks associated with non-performance.
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• Checked appropriate approvals for the advance payments and adherence to the approval policy;
• For samples selected, obtained direct confirmation from the content aggregators and the production houses confirming the outstanding balances as at the year-end including identification of the films against which the advances were given and the manner of utilisation of the advances by such aggregators, where considered necessary in our professional judgement.
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Recoverability of long overdue receivables from a customer:
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Principal audit procedures performed:
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The Company has receivables of f 2,446 million (net of allowance for
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• Evaluated the design and operating effectiveness of internal controls
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doubtful debts) from a customer, which include amounts which are long
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relating to the assessment of recoverability of receivables and
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overdue, as at 31st March 2022.
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determination of the provision for expected credit loss;
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We considered this as key audit matter on account of risk associated with
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• Verified the completeness and accuracy of data considered for
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long outstanding receivables from this customer, the Company’s assessment
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ageing analysis and assessment of recoverability of receivables and
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of the recoverability of these receivables and consequent determination of
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determination of the provision for expected credit loss;
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provision for expected credit loss which requires significant Management
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• Obtained the payment plan agreed by the Company (presented to the
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estimates and judgements.
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Board of Directors by the Management) with the customer and checked
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Specific factors considered by the Management includes credit worthiness
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if the collections were in line with the agreed payment plan, including
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of the customer, adherence to the payment plan agreed by the Company
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subsequent collection after the balance sheet date till the date of the
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with this customer, including ageing analysis.
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standalone audit report;
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Refer note 44d(ii)B of the standalone financial statements.
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• Evaluated whether the provision for expected credit loss recorded by the Company is appropriate considering specific factors like credit worthiness of these customers and adherence to the payment plan agreed with the Company;
• Obtained direct confirmation from the customer as at the year-end for the outstanding balance.
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Valuation of investment in Optionally Convertible Debentures (OCDs) of a subsidiary as at 31st March 2022:
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Principal audit procedures performed:
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The standalone financial statements reflect investments in Optionally
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Our procedures consisted of understanding the Management’s methodology
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Convertible Debentures (OCDs) in a subsidiary with a carrying value of f
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and key assumptions and included the following audit procedures:
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2,151 million. These OCDs are accounted at fair value through profit and
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• Evaluated the design and operating effectiveness of internal controls
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loss account.
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relating to Management’s review of fair value calculations;
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We considered this as key audit matter due to the fair value gain recorded
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• Validating fair valuation model through testing of the mathematical
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during the year and because of the Company’s assessment of the fair value
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accuracy and verifying the application of the key input assumptions;
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calculations of the OCDs. This assessment involves significant judgements
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• Validating the cash flow forecasts with reference to historical forecasts
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about the valuation methodology, future performance of business and
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and actual performance to support any significant expected future
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discount rate applied to future cash flow projections.
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changes to the business;
• Obtained the fair valuation report issued by an independent valuer to the Company and evaluated the appropriateness of key assumptions.
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Key Audit Matter
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Auditors’ Response
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Matter of litigation relating to Letter of Comfort (LOC) issued by the Company to Yes Bank Limited:
With respect to the matter relating to the LOC issued by the Company to Yes Bank as explained in note 36 of the standalone financial statements. On account of the amount involved as well as the matter being under sub-judice, we considered this to be a key audit matter.
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Principal audit procedures performed:
• Perused the legal opinions obtained by the Management from various lawyers based on which the Management has concluded that LOC is not in the nature of guarantee;
• Perused the judgements of the Hon’ble High Court of Bombay respect of the ad-interim application;
• Considered if the LOC met the requirements of an executory contract and if so whether it could be onerous in nature requiring a provision under Ind AS 37 on ‘Provisions, Contingent Liabilities and Contingent Assets’.
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INFORMATION OTHER THAN THE FINANCIAL STATEMENTS AND AUDITORS’ REPORT THEREON
• The Company’s Board of Directors is responsible for the other information. The other information comprises the information included in Management Discussion and Analysis report and Directors’ report (including annexures to Directors’ report), but does not include the consolidated financial statements, standalone financial statements and our auditors’ report thereon. Management Discussion and Analysis report and Directors’ report (including annexures to Directors’ report) is expected to be made available to us after the date of this auditors’ report.
• Our opinion on the standalone financial statements does not cover the other information and we do not and will not express any form of assurance conclusion thereon.
• In connection with our audit of the standalone financial statements, our responsibility is to read the other information identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the standalone financial statements or our knowledge obtained during the course of our audit or otherwise appears to be materially misstated.
• When we read Management Discussion and Analysis report and Directors’ report (including annexures to Directors’ report), if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance as required under SA 720 on ‘The Auditor’s responsibilities Relating to Other Information’.
MANAGEMENT’S RESPONSIBILITY 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, cash flows and changes in equity of the Company in accordance with the Ind AS 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 the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgements 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 statement 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 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 management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Those Board of Directors are also responsible for overseeing the Company’s financial reporting process.
AUDITORS’ 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 auditors’ 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 judgement 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 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 system 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 auditors’ 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 auditors’ 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 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 auditors’ 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.
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 it’s knowledge and belief, as disclosed in the note 49 to the 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 subclause (i) and (ii) of Rule 11(e), as provided under (a) and (b) above, contain any material misstatement.
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 so far as it appears from our examination of those books.
c) The Balance Sheet, the Statement of Profit and Loss including Other Comprehensive Income, the Statement of Cash Flows and Statement of Changes in Equity 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) On the basis of the written representations received from the directors as on 31st March 2022 taken on record by the Board of Directors, none of the directors is disqualified as on 31st March 2022 from being appointed as a director in terms of Section 164(2) of the Act.
f) With respect to the adequacy of the internal financial controls over financial reporting 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 over financial reporting.
g) With respect to the other matters to be included in the Auditors’ 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.
h) With respect to the other matters to be included in the Auditors’ 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;
ii. The Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses.
iii. There has been no delay in transferring amounts, 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
it’s knowledge and belief, as disclosed in note 49 to the financial statements no funds have been advanced or loaned or invested (either from borrowed funds or
v. The final dividend proposed in the previous year, declared and paid by the Company during the year is in accordance with Section 123 of the Act, as applicable.
As stated in note 46 to the financial statements, the Board of Directors of the Company has proposed final dividend for the year which is subject to the approval of the members at the ensuing Annual General Meeting. The dividend proposed is in accordance with Section 123 of the Act, as applicable.
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)
A. B.Jani
Partner
Membership No. 46488
Mumbai, 26th May 2022 UDIN: 22046488AJQDJO6088
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