1. We have audited the accompanying standalone financial statements of Aditya Birla Fashion and Retail Limited ("the Company”) which includes the financial statements of ABFRL Employee Welfare Trust, which comprise the Standalone Balance Sheet as at March 31, 2024, and 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 for the year then ended, and notes to the standalone financial statements, including material accounting policy information and other explanatory information.
2. 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 accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2024, and total comprehensive loss (comprising of loss and other comprehensive loss), changes in equity and its cash flows for the year then ended.
Basis for Opinion
3. We conducted our audit 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 together with the ethical requirements that are relevant to our audit of the 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 we have obtained is sufficient and appropriate to provide a basis for our opinion.
4. 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.
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Key audit matter
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How our audit addressed the key audit matter
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Impairment assessment of goodwill
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Our audit procedures included the following:
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(Refer Note 5 to the Standalone Financial
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Understood and evaluated the design and tested
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Statements)
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operating effectiveness of Company’s controls to
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The Company has goodwill of '1,859.60
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assess impairment of goodwill on an annual basis.
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crores as at March 31,2024. The goodwill was
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Evaluated whether the CGUs were determined and
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acquired in business combinations recorded
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the goodwill allocation was performed in accordance
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in the prior years and was allocated to Cash
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with requirements of Ind AS 36 and our knowledge of
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Generating Units (CGU) of the Company.
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the Company’s operations.
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In accordance with Ind AS 36, Impairment
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Evaluated the appropriateness of the approach
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of Assets, goodwill acquired in a business
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selected by the management to determine the
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combination is required to be tested for
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recoverable amount of the CGU.
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impairment annually.
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Evaluated the objectivity, competency and
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Management has performed impairment
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independence of the management expert engaged
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assessment for each of the CGUs to which
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by the Company.
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goodwill has been allocated by comparing
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Evaluated the reasonableness of the cashflow
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the carrying amount of the CGU, including
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projections by testing the key management
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the goodwill, with the recoverable amount
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assumptions and estimates used in the impairment
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of the CGU which is higher of value in use
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analysis and assessed the consistency of the cashflow
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and fair value less costs of disposal.
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projections with the budgets approved by the Board
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Impairment assessment of goodwill requires
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of Directors.
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significant management judgement and
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Evaluated the sensitivity analysis performed by
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estimates such as projected cash flows,
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management on the growth rates and discount rates
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discount rates, growth rates over the
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to determine whether reasonable changes in these key
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projection period and terminal growth
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assumptions would result in the carrying amounts of
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rates. Given the judgement, subjectivity and
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individual CGUs to exceed their recoverable amounts.
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sensitivity of key parameters to the changes
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Involved auditor’s expert to assist in evaluating
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in economic conditions, the impairment
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the impairment assessment including certain
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assessment of goodwill is considered to be
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assumptions used.
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a key audit matter.
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Evaluated the adequacy of the disclosures made in the Standalone Financial Statements.
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Based on procedures above, management’s impairment
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assessment of goodwill appears to be reasonable.
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Key audit matter
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How our audit addressed the key audit matter
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Impairment evaluation of Investments in subsidiaries
(Refer Note 6(a) to the Standalone Financial Statements)
At March 31, 2024, the Company has investments in the following subsidiaries namely:
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Our audit procedures included the following:
• Understood and evaluated the design and tested operating effectiveness of Company’s controls to assess impairment of its investments in subsidiaries.
• Evaluated the appropriateness of the approach selected by the management to determine the recoverable amount.
• Evaluated the objectivity, competency and independence of the Management expert engaged by the Company.
• Evaluated the reasonableness of the cashflow projections by testing the key management assumptions and estimates used in the impairment analysis and assessed the consistency of the cashflow projections with the budgets approved by Board of Directors.
• Evaluated the sensitivity analysis performed by the Management on the recoverable amount and assessed whether any reasonably foreseeable changes in key assumptions could lead to impairment loss or material change in valuation.
• Evaluated the Company’s process regarding impairment assessment with the involvement of auditor’s valuation experts to assist in assessing the appropriateness of the impairment model including independent assessment of certain assumptions underlying the cash flow projections, discount rate, terminal value etc.
• Obtained the audited Standalone Financial Statements of the subsidiaries for the year ended March 31, 2024 and evaluated their financial performance.
• Evaluated the adequacy of the disclosures made in the Standalone Financial Statements.
Based on the above work performed, Management’s
assessment of impairment of subsidiaries appears to be
reasonable.
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Name of subsidiary
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Amount (' In crores)
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Jaypore E-Commerce Private Limited
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254.75
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Finesse International Design Private Limited
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97.77
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Sabyasachi Calcutta LLP
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440.84
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Indivinity Clothing Retail Private Limited (#)
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254.20
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House of Masaba Lifestyle Private Limited
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90.00
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Aditya Birla Digital Fashion Ventures Limited (a)
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650.00
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TCNS Clothing Co. Ltd.
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1,626.19
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(#) including investment of ' 100 crores for which equity shares have not been allotted at March 31, 2024.
(a) including investment of ' 150 crores in Optionally Convertible Redeemable Preference Shares (OCRPS).
The Company evaluates the recoverability of the carrying values of these investments in accordance with Ind AS 36 ‘Impairment of Assets'. Impairment assessment is performed and recoverable amounts of the investments are determined if indicators of impairment are identified.
Management has considered losses suffered by these subsidiaries as an indicator for impairment assessment.
Management has therefore performed impairment assessment by determining the recoverable amount of the investments in these subsidiaries using the value in use method and comparing the same with the carrying value. Where the carrying value exceeds the recoverable amount, an impairment loss is recognized.
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Key audit matter
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How our audit addressed the key audit matter
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Determination of value in use involves use of projected cash flows based on financial budgets approved by the Board of Directors. Management has involved external experts to determine the recoverable amounts.
Impairment evaluation of investment in subsidiaries is considered as a key audit matter as it requires significant management judgement and estimates in addition to consideration of economic and entity specific factors in determination of the recoverable value used in impairment assessment such as projected cash flows, discount rates, growth rates over the projection period and terminal growth rates which are subject to management judgement and subjectivity and might be affected by changes in economic conditions.
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Provision for Inventory obsolescence
(Refer Notes 2.4(d) and 12 to the Standalone Financial Statements)
The Company held inventories of ' 3,625.65 crores as at March 31, 2024. In accordance with Ind AS 2, Inventories, inventories are carried at lower of cost or net realizable value. The Company operates in a fast changing fashion market where there is a risk of inventory falling out of fashion and proving difficult to be sold above cost. Management has a policy to recognize provisions for inventory considering assessment of future trends and the Company’s past experience related to its ability to liquidate the aged inventory.
The provision for inventory obsolescence has been considered as a key audit matter, as determination of provision for inventory involves significant management judgment and estimates.
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Our audit procedures included the following:
• Understood and evaluated the design and tested the operating effectiveness of Company’s controls to assess the adequacy of provision for inventory obsolescence.
• Evaluated the methodology used by the management to determine the provision for inventory obsolescence and determined whether the method is consistent with that applied in the prior year.
• Assessed whether the changes in the methodology (if any) are reasonable and consistent with our understanding of the changes in the business.
• Tested the ageing report including assessing its completeness and the underlying management judgements and estimates made. Further, assessed on a sample basis whether the calculation of provision for obsolescence is in accordance with Company’s policy.
• Verified appropriate approvals for specific obsolescence provisions and assessed their reasonableness on a sample basis.
• Evaluated the adequacy of the disclosures made in the Standalone Financial Statements.
Based on the above procedures performed, we did not
identify any material exceptions in recognition and
measurement of provision for inventory obsolescence.
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Key audit matter
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How our audit addressed the key audit matter
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Provisions for discount and sales returns
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Our audit procedures included the following:
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(Refer Note 2.4(e) to the Standalone
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• Understood and evaluated the design and tested
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Financial Statements)
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the operating effectiveness of Company’s controls to
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The Company has recognised provisions
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assess the adequacy of provision for discounts and
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for unsettled discounts and sales returns
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sales returns.
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amounting to ' 378 crores and ' 488.04
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• Evaluated the periodic account reconciliations
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crores, respectively, as at March 31, 2024.
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prepared by the management during the year.
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Revenue from contracts with customers
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• Evaluated the management estimates andjudgements
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is recognised when the entity satisfies a
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in determining the provision for discounts and sales
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performance obligation by transferring
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returns and assessed whether the same is consistent
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control of promised goods to a customer.
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with the prior year.
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Recognition of revenue requires
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• Evaluated the contract terms for a sample of customer
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determination of the net selling price
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contracts to assess the reasonableness of the provision
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after considering variable consideration
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for discounts and returns and determine whether the
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including forecast of sales returns and
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same is in line with terms of the contract.
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discounts.
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• Verified credits notes issued to customers on a sample
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The estimate of sales returns and discounts
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basis and assessed the validity of claims with the
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depends on contract terms, forecasts of sales volumes and past history of quantum
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underlying documents and appropriate approvals.
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of returns. The expected returns and
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• Evaluated the adequacy of the disclosures made in
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discounts that have not yet been settled
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the Standalone Financial Statements.
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with the customers are estimated and
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Based on the above procedures performed, we did not
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accrued.
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identify any material exceptions in recognition and
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Determination of provisions for discounts and sales returns is determined as a key audit matter as it involves significant management judgement and estimation.
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measurement of provisions for discount and sales returns.
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Other Information
5. The Company’s Board of Directors is responsible for the other information. The other information comprises the information included in the annual report, but does not include the financial statements and our auditor’s report 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 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, 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.
When we read the annual report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance and take appropriate action as applicable under the relevant laws and regulations.
Responsibilities of management and those charged with governance for the standalone financial
statements
6. 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, changes in equity and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the 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 financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
7. 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.
Auditor's responsibilities for the audit of the standalone financial statements
8. 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 financial statements.
9. As part of an audit in accordance with SAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:
a) 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.
b) 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.
c) Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
d) 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 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.
e) 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.
10. 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.
11. 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.
12. 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
13. 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 the "Annexure B” a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.
14. 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, except that the backup of certain books of account and other books and papers maintained in electronic mode has not been maintained on a daily basis on servers physically located in India during the year and the matters stated in paragraph 14(h)(vi) below on reporting under Rule 11(g) of the Companies (Audit and Auditors) Rules, 2014 (as amended) ("the Rules”).
(c) The 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 Accounting Standards specified under Section 133 of the Act.
(e) On the basis of the written representations received from the directors and 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.
(f) With respect to the maintenance of accounts and other matters connected therewith, reference is made to our remarks in paragraph 14(b) above on reporting under Section 143(3)(b) and paragraph 14(h)(vi) below on reporting under Rule 11(g) of the Rules.
(g) With respect to the adequacy of the internal financial controls with reference to standalone financial statements of the Company and the operating effectiveness of such controls, refer to our separate Report in “Annexure A”.
(h) 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, 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 Notes 29 and 45 to the standalone financial statements)
ii. The Company was not required to recognise a provision as at March 31, 2024 under the applicable law or accounting standards, as it does not have any material foreseeable losses on long-term contract. The Company has made provision as required under the accounting standards for material foreseeable losses, if any, on derivative contracts as at March 31,2024.
iii. There were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company during the year ended March 31, 2024.
iv. (a) The management has represented that, to the best of its knowledge and belief, as
disclosed in Note 57 (vii) to the standalone financial statements, no funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the Company to or in any other person(s) or entity(ies), including foreign entities ("Intermediaries”), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall, 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 the Note 57 (vii) 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, 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 we 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 Company has not declared or paid any dividend during the year.
vi. Based on our examination, which included test checks, the Company has used accounting software for maintaining its books of account which has the feature of recording audit trail (edit log) facility, except for changes made by certain users through specific access at application level and for direct database changes. During the course of performing our procedures, other than the aforesaid instances of audit trail not maintained where the question of our commenting does not arise, we did not notice any instance of audit trail feature being tampered with.
In respect of accounting software maintained by third party service providers, due to absence of or insufficient information in the service auditors’ report related to audit trail, we are unable to comment whether the audit trail feature of the aforesaid software were enabled and operated throughout the year for all relevant transactions recorded in the software or whether there were any instances of the audit trail feature been tampered with.
15. The Company has paid/ provided for managerial remuneration in accordance with the requisite approvals mandated by the provisions of Section 197 read with Schedule V to the Act.
For Price Waterhouse & Co Chartered Accountants LLP
Firm Registration Number: 304026E/E-300009
A. J. Shaikh
Partner
Membership Number: 203637
UDIN: 24203637BKENLU4780
Place: Mumbai
Date: May 28, 2024
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