ZEN TECHNOLOGIES LIMITED
Report on the Audit of the Standalone Financial Statements
OPINION
We have audited the accompanying standalone financial statements of ZEN TECHNOLOGIES LIMITED (the "Company"), which comprise the Balance Sheet as at March 31, 2024, the Statement of Profit and Loss (including Other Comprehensive Income), Statement of Cashflows and the Statement of Changes in Equity for the year then ended, and notes to the financial statements, including a summary of material accounting policies and other explanatory information (hereinafter referred to as the "standalone financial statements").
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, as amended (the "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 March 31, 2024, its profit including total other comprehensive income, its cashflows 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 ("SA's") 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 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 for the financial year ended March 31, 2024. 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. For each matter below, our description of how our audit addressed the matter is provided in that context.
We have determined the matters described below to be the key audit matters to be communicated in our report. We have fulfilled the responsibilities described in the Auditor's responsibilities for the audit of the standalone financial statements section of our report, including in relation to these matters.
Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the standalone financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying standalone financial statements.
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Key Audit Matters
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How our audit addressed the key audit matter
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Receipts from Insurance Claims (Exceptional item) (As described in Note 46 of the standalone financial statements)
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We have identified the exceptional item as a key audit matter due to
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Our audit procedures included the following:
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the significance of the project to the standalone financial statements and the fact that the integral part of Maheshwaram Building was damaged as a result of a fire during the year ended March 31, 2022.
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a)
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Obtaining an understanding of the progress of Maheshwaram Plant by inquiring the Company's project management team, external quantity surveyors and architects;
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As disclosed in note 4C to the standalone financial statements, the carrying value of CWIP (Construction Work-in-Progress) of Maheshwaram Plant was approximately ' 154.89 Lakhs at March 31, 2022 which were incurred as a part of renovation to damaged building due to fire accident. The relevant accounting policies in relation to capitalization of additions to CWIP are set out
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b)
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Evaluating the appropriateness of the Company's construction costs and borrowing costs capitalization policies by analysing the nature of those costs capitalized against the requirements of Ind AS 16 "Property, Plant and Equipment";
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in Note 3H.
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c)
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Checking, on a sample basis, the number of additions
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The management performed an assessment of the damage of building, plant & Machinery on account of fire accident and likelihood of recoverability of damages based on the reports from the Company's project management team and external quantity
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capitalized with reference to the contractors' invoices, and quantity surveyors' and architects' certificates of the construction contract works capitalized in CWIP of Maheshwaram Plant;
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surveyors and the analysis from the Company's in-house legal counsels, and considered that there will be an exceptional item of amount ' 27.96 Lakhs due to derecognition of damaged PPE (Property, Plant, and Equipment) for the year ended March 31, 2022.
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d)
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Obtaining an understanding from the Company's project management team and external quantity surveyors in relation to the damage caused by the fire to PPE of Maheshwaram
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Key Audit Matters
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How our audit addressed the key audit matter
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Receipts from Insurance Claims (Exceptional item) (As described in Note 46 of the standalone financial statements)
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In the financialyear FY2022-23, the management has filed a
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Plant and the management's assessment of the impact of
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total insurance claim of ' 712.00 Lakhs out of which it received an
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the fire on the future economic performance and useful lives
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ad-hoc amount of ' 200.00 Lakhs and the total insurance
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of the PPE of Maheshwaram Plant;
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claim was subsequently revised to ' 656 Lakhs, with a balance of ' 456.00 Lakhs yet to be received by the Company as
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e)
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Evaluating the analysis performed by the Company's
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on March 31, 2023.
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management in respect of the contractual performance obligations of the contractors arising from the fire under the
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During the current financialyear 2023-24, the Company received the full and final settlement of ' 240.90 Lakhs. Thus,
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terms of construction contracts; and
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the Company received a total claim of ' 440.90 Lakhs from the
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f)
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Evaluating the overall appropriateness of the Company's
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insurance company.
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management's assessment of the financialeffect of the fire on the carrying values of the respective PPE in Maheshwaram Plant.
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g)
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Confirmed the amounts received from the insurance company and verified the adequacy of the disclosure in the financial statements.
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h)
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Reviewed the subsequent events and adjustments made by management to ensure the completeness and accuracy of the exceptional item and insurance recoveries.
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i)
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Evaluating the total amount spend by the company on renovation of factory building at Maheshwaram and the same has been accounted as capital work in progress (refer note 4C) after capitalisation of identifiable items which are ready for intended use by the management.
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Key Audit Matters
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How our audit addressed the key audit matter
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Accounting for Employee Stock Option Plan-2021 (As described in Note 45 of the Standalone financial statements)
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We identified Material transactions related to the Employee Stock
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Our audit procedures include the following:
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Option Plan (ESOP) during the year: During the Annual General meeting held on August 28, 2021, Zen technologies limited issued the Employee stock option plan-2021 (ESOP), which was subsequently ratified by the shareholders on September 29, 2022 in accordance with SEBI Regulations.
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a)
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We have assessed the appropriateness of the accounting policies regarding the recognition and measurement of share-based payments of employee stock option plan is in compliance with applicable Indian accounting standards.
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As disclosed in the note-45 the management decided to grant the ESOP shares on February 21, 2023, with the exercise price set at ' 100/- per option. As of March 31, 2023, the ESOP Trust purchased 4,81,524 shares from the secondary market for an aggregate consideration of ' 966.13 Lakhs. The management has adopted the policy of treating the shares purchased by the ESOP
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b)
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We have assessed whether all the statutory regulations and rules governing the company regarding employee stock option plan have been complied and verified the authorization and approval process of the ESOP scheme during the Annual General Meeting and its subsequent ratification by the shareholders.
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Trust as treasury shares under "Other Equity" in the standalone financial statements.
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c)
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We have assessed the fair value calculation of the ESOPs granted, including the assumptions and valuation models
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As of March 31, 2023, the management has considered an
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used by management.
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amount of ' 44.21 Lakhs as share-based payments expenses (refer Note-30 & Note-45).
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d)
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Verified the share-based payment expenses recognized in the financial statements for the years ended March 31, 2023,
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During the year, the management has granted additional ESOP shares on October 30, 2023, with an exercise price of ' 100/- per
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and March 31, 2024, and reconciled these with the underlying records and calculations.
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option. As of March 31, 2024, the management has considered an amount of ' 437.69 Lakhs as share-based payment expenses (refer Note-30 & Note-45). Additionally, during the year, the Trust repaid an amount of ' 127.6 Lakhs from the proceeds realized on the exercise of options.
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e)
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Evaluated the adequacy and completeness of disclosures related to the ESOP transactions in the financial statements, including Notes 30 and 45 in the financial statements.
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Key Audit Matters
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How our audit addressed the key audit matter
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Revenue from operations (As described in Note 25 of the standalone financial statements)
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During the year, the Company's revenue from operations increased
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Our audit procedures included the following:
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by 166.53%. Revenue is recognized when control of the underlying products has been transferred and the performance obligations have been satisfied. The terms of sales arrangements, including the timing of the transfer of control and delivery specifications,
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a)
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We have evaluated the appropriateness of the Company's accounting policies for revenue recognition and assessed compliance with relevant accounting standards.
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create complexity and require significant judgment in determining the point of time at which sales revenues should be recognized.
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b)
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We have reviewed the terms of significant sales arrangements to understand the timing of transfer of control and delivery
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Due to the judgment involved in determining the point in time
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specifications.
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when the performance obligations are satisfied, this matter is considered a key audit matter
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c)
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We have assessed the design and operating effectiveness of key controls over revenue recognition processes, including controls over the timing of transfer of control and the satisfaction of performance obligations.
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d)
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We have performed substantive testing on a sample of revenue transactions by inspecting supporting documentation, such as contracts, invoices, and delivery notes, to verify the timing of revenue recognition.
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e)
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We have reviewed management's judgments and estimates in determining the point of time for the satisfaction of performance obligations, including any contractual terms that could impact the timing of revenue recognition.
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f)
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We have evaluated the adequacy of disclosures related to revenue recognition in the financial statements to ensure they are complete and provide relevant information about the Company's revenue recognition policies and judgments.
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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 annual report, but does not include the financial statements and auditor's report(s) thereon. The annual report is expected to be made available to us after the date of this auditor's report.
Our opinion on the standalone financialstatements 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 financialstatements or our knowledge obtained during the course of our audit or otherwise appears to be materially misstated.
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 and presentation of these standalone financial statements that give a true and fair view of the financialposition, financial
performance including other comprehensive income, cash flows and changes in equity 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 read with Companies (Indian Accounting Standards) Rules, 2015, as amended. 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, 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 management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance 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 financialstatements 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 control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under Section l43(3)(i) of the Act, we are also responsible for expressing our opinion on whether the Company has adequate internalfinancial 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 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.
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 for the financial year ended March 31, 2024 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 MATTER
We did not audit the financialstatements and other financial information of one branch included in the accompanying standalone financial statements of the Company whose financial statements and other financialinformation reflect total assets of' 2,266.25 Lakhs as at March 31, 2024 and total revenues of ' (2,106.39) Lakhs for the year ended on that date, as considered in the financial statements of these branch have been audited by branch auditor whose reports have been furnished to us by the management, and our opinion in so far as it relates to the amounts and disclosures included in respect of branch, is based solely on the report of such branch auditor Our opinion is not modified in respect of these matters.
REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS
1. 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) 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 branch not visited by us;
c) The report on the accounts of the branch office of the Company audited under Section 143(8) of the Act by branch auditor have been sent to us and have been properly dealt with by us in preparing this report;
d) The Balance Sheet, the Statement of Profit and Loss including the Statement of Other Comprehensive Income, Statement of Cashflows and Statement of Changes in Equity dealt with by this Report are in agreement with the books of account and with the returns received from the branch 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, read with Companies (Indian Accounting Standards) Rules, 2015, as amended;
f) On the basis of the written representations received from the directors as on March 31, 2024 taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2024 from being appointed as a director in terms of Section 164(2) of the Act;
g) With 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" to this report;
h) In our opinion, the managerial remuneration for the year ended March 31, 2024 has been paid/provided by the Company to its directors is in accordance with the provisions of Section 197 read with Schedule V to 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 derivatives 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 its knowledge and belief, as disclosed in note-52 to the financial statements, no funds (which are material either individually or in the 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 or entity, including foreign entities ("Intermediaries"), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall, whether, directly or indirectly lend or
invest in other persons or entities identified in any manner whatsoever by or on behalf of the Company ("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 note-52 to the financial statements, no funds (which are material either individually or in the aggregate) have been received by the Company from any person or entity, including foreign entity ("Funding Parties"), with the understanding, whether recorded in writing or otherwise, that the Company shall, whether , directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party ("Ultimate Beneficiaries ") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries; and
(c) Based on such audit procedures that were 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 (a) and (b) contain any material misstatement.
v The finaldividend paid by the Company during the year in respect of the same declared for the previous year is in accordance with Section 123 of the Act to the extent it applies to payment of dividend.
As stated in note 48 to the standalone financial statements, Board of Directors of the Company have 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 to the extent it applies to declaration of dividend.
vi. Based on our examination, which included test checks, the Company has used accounting software's for maintaining its books of account for the financial year ended March 31, 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's. Further, during the course of our audit we did not come across any instance of the audit trail feature being tampered with.
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 financial year ended March 31, 2024.
2. As required by the Companies (Auditor's Report) Order, 2020 (the "Order") issued by the Central Government of India in terms of sub-section (11) of Section 143 of the Act, we give in "Annexure A" a statement on the matters specified in paragraphs 3 and 4 of the Order
For Ramasamy Koteswara Rao and Co LLP
Chartered Accountants ICAI Firm Registration Number: 010396S/S200084
Murali Krishna Reddy Telluri
Partner
Place: Hyderabad Membership No: 223022
Date: May 4, 2024 UDIN: 24223022BKARLD2474
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