Bajaj Electricals Limited
Report on the Audit of the Standalone Financial Statements
Opinion
We have audited the accompanying standalone financial statements of Bajaj Electricals Limited ("the Company"), which comprise the Balance sheet as at March 31 2024, the Statement of Profit and Loss, including the statement of Other Comprehensive Income, the Cash Flow Statement and the Statement of Changes in Equity for the year then ended, and notes to the standalone financial statements, including a summary of material accounting policies and other explanatory information.
In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone financial statements give the information required by the Companies Act, 2013, 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 other 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), as 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 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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Keyaudit matters
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How our audit addressed the key audit matters
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A. Timing of revenue recognition for Consumer Product business (Refer Notes 1B(3)(1) and 24 of the standalone financial statements)
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Revenue from contracts with customers is recognised upon transfer of control of promised goods and is measured at the transaction price of the consideration received or receivable, net of returns, schemes and rebates, based on contractually defined terms.
The timing of transfer of control in case of sales to distributors is basis the arrangements including delivery specifications and incoterms, payment terms and ability of customers to return the goods if unsold in the market which create complexity and judgment in determining the timing of recognition of revenues.
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Audit procedures included the following:
* Assessed the Company's revenue recognition policy and its compliance in terms of Ind AS 115 'Revenue from contracts with customers';
* Assessed the design and tested the operating effectiveness of internal financial controls related to timing of revenue recognition;
* For sample customers, obtained and assessed the arrangements with the Company and impact on revenue recognition including their payment terms and right to returns;
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The risk is, therefore, that revenue is not recognized in the correct period and accordingly, it was determined to be a key audit matter in our audit of the standalone financial statements.
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Performed sample tests of individual sales transaction based on sales invoices and other related documents. In respect of the samples selected, tested the timing of revenue recognition in accordance with Ind AS 115;
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Selected sample of sales transactions made pre- and post-year end, agreed the period of revenue recognition to underlying documents and the terms of sale;
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Performed analytical procedures on sales and sales return trend including subsequent sales returns;
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For sample customer balances, obtained direct confirmation and tested the reconciliations if any.
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Keyaudit matters
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How our audit addressed the key audit matters
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B. Accounting of scheme of de-merger of Engineering Procurement and Construction (EPC) business into Bajel Projects Limited (Resulting Company) ('Scheme') (Refer note 45 for disclosure of the accompanying standalone financial statements)
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The Company in the current year has given effect to the scheme of demerger of Engineering Procurement and Construction business (demerged business) into a separate company Bajel Projects Limited (BPL). The scheme was approved by the Hon'ble National Company Law Tribunal, Mumbai bench (''the Tribunal'') vide its order dated July 05, 2023 and the effective date of the scheme is September 01, 2023. In virtue of this scheme being effective in the current year, the said demerged business has been disclosed as a discontinuing operations till the effective date of the demerger. At the effective date, all assets and liabilities pertaining to the demerged business has been transferred to Bajel Projects Limited in accordance with the approved scheme.
Due to the complexity of the transaction, and considering the assumptions and estimates required to be made by management as part of identifying assets and liabilities to be de-recognised, including presentation and disclosures in the standalone financial statements we have reported this to be a key audit matter in the current year audit.
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Audit procedures included the following:
* Obtained and read the Scheme and final order passed by the Hon'ble National Company Law Tribunal and submitted with the ROC to understand its key terms and conditions;
* Evaluated the design and tested the operating effectiveness of the internal financial controls relevant for recording the impact of the Scheme and related disclosures;
* Assessed the appropriateness of accounting policy of accounting of this de-merger and comparing with applicable accounting standards and the approved accounting treatment in the scheme;
* Tested the Management's working for identification of specific assets and liabilities of the demerged business including apportionment of common assets and liabilities to the demerged business and relevant impact in the reserves as per the Scheme; and
* Assessed the adequacy and appropriateness of the disclosures made with respect to the accounting of the transaction under the Scheme in note 45 to the accompanying standalone financial statements, as required by the applicable Indian Accounting Standards.
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C. Inventory existence and allowance for inventory (Refer note 1B(13) and 11 for disclosure of the accompanying standalone financial statements)
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As at 31 March 2024, the carrying amount of inventories amounted to H 75,664.03 lakhs, after considering allowance for inventory obsolescence of H 4,553.96 lakhs. These inventories are kept at Factories, Warehouses and Branches of the Company.
Inventory valuation and existence was an audit focus area because of the additional risks assessed due to the number of locations that the inventory was held at, and the judgement applied in the provision of inventory. Additionally during the year the Company has discontinued end-to-end logistics arrangement (including warehousing and pre-primary, primary and secondary transportation) with a third party provider in a phased manner leading to relocation of inventory to new warehouses and locations.
The spread of inventory and the hand over from the third-party warehouse management system in the current year has significantly increased our focus on the inventory management including the existence of inventory as at the year end. Further there are judgements applied in assessing the level of provision for stock basis ageing and obsolescence. Hence this matter has been considered as a key audit matter in the current year.
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Audit procedures included the following:
* Obtained an understanding, evaluated the design and tested the operating effectiveness of internal financial controls that the Company has in relation to the inventory count process and allowance for inventory;
* We have obtained the physical verification reports of the third party appointed by the Company and have reconciled the same with books of accounts;
* We performed testing on the Company's controls over the inventory count process. In testing these controls we observed the inventory count process at selected Factory, Warehouse and Branches on a sample basis near to period end, inspected the results of the inventory count and confirmed variances were accounted for and approved by management;
* We evaluated whether the provisions towards ageing and obsolete inventory has been made in accordance with the approved policy. On a sample basis, we tested the aging of inventory. For our sample we agreed the purchase date recorded in the inventory aging report to supplier invoices.
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We assessed whether there were inventories which were sold with a (consistent) negative margin by evaluating recent sales invoices to validate management's assessment and decision whether inventories should or should not be provided for.
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Furthermore we analyzed the inventory turnaround and compared that to management's estimates on obsolete inventories.
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We assessed the adequacy and appropriateness of the Company's disclosures in Note 1B(13) on material accounting policy and Note 11 Inventories to the standalone financial statements, as required by the applicable Indian Accounting Standards.
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Keyaudit matters
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How our audit addressed the key audit matters
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D. Impairment testing of Goodwill (Refer Note 46 of the standalone financial statements)
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As at March 31, 2024, the Company has carrying amount of
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Our audit procedures included the following:
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Goodwill of H 19,001.09 lakhs pertaining to Starlite Lighting Limited and Nirlep Appliances Private Limited, wholly owned subsidiaries which has been merged into the Company.
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Obtained an understanding of the process followed by the
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management to determine the recoverable amounts of cash
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generating units determined by the Company.
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In accordance with the requirements of Ind AS 36 Impairment of Assets, the Company performs an annual impairment assessment of Goodwill and the corresponding cash generating units to
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Evaluated the design and implementation and tested the operating effectiveness of key internal controls related to
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determine whether the recoverable value is below the carrying
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the Company's process relating to review of the annual
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amount as at March 31, 2024.
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impairment analysis.
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For this purpose, the recoverable value of the cash generating unit is based on the value in use model, which has been derived from the discounted cash flow model. The model requires the Company to make significant assumptions such as discount rate, near and long-term revenue growth rate and projected margins which involves inherent uncertainty since they are based on future business prospects and economic outlook.
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Assessed Company's valuation methodology applied in determining recoverable value including the reasonableness of identification of cash generating units around the key drivers (cash flow forecasts, discount rates, expected growth rates, forecasted margins and terminal growth rates) based on our knowledge of the Company and Industry. Compared the historical accuracy by comparing past forecasts to actual results achieved.
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Changes in certain methodologies and assumptions can lead to significant changes in the assessment of the recoverable value.
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Assessed the recoverable value headroom by performing sensitivity testing of key assumptions used.
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Due to the level of judgments involved and its significance to the Company's financial position, this is considered to be a key audit
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Tested the arithmetical accuracy of the computation of
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matter.
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recoverable amounts of cash generating units
Assessed the disclosures made in the standalone financial statements
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We have determined that there are no other key audit matters to communicate in our report.
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 information included in the Annual report, but does not include the standalone financial statements and our auditor's report thereon.
Our opinion on the standalone financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the standalone financial statements, our responsibility is to read the other information and, in doing so, consider whether such other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of Management 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 accounting principles generally accepted in India, including the Indian Accounting Standards (Ind AS) specified under section 133 of the Act read with the 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 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 the 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 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
Our objectives are to obtain reasonable assurance about whether the standalone financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these standalone financial statements.
As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
* Identify and assess the risks of material misstatement of the standalone financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
* Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)0) 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.
* Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by 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 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.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditor's Report) Order, 2020 ("the Order"), issued by the Central Government of India in terms of sub-section (11) of section 143 of the Act, we give in the ''Annexure 1" a statement on the matters specified in paragraphs 3 and 4 of the Order.
2. As required by Section 143(3) of the Act, 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 except for the matters stated in the paragraph (i).(vi) below on reporting under Rule 11(g);
(c) The Balance Sheet, the Statement of Profit and Loss including the Statement of Other Comprehensive Income, the Cash Flow Statement 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 Accounting Standards specified under Section 133 of the Act, read with Companies (Indian Accounting Standards) Rules, 2015, as amended;
(e) 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;
(f) With respect to the adequacy of the internal financial controls with reference to these standalone financial statements and the operating effectiveness of such controls, refer to our separate Report in “Annexure 2" to this report;
(g) In our opinion, the managerial remuneration for the year ended March 31, 2024 has been paid / provided by the Company to its directors in accordance with the provisions of section 197 read with Schedule V to the Act;
(h) The modification relating to the maintenance of accounts and other matters connected therewith are as stated in the paragraph (b) above on reporting under Section 143(3)(b) and paragraph (i)(vi) below on reporting under Rule 11(g).
(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 40 to the 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 its knowledge and belief, 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, 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 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 sub-clause (a) and (b) contain any material misstatement.
v. As stated in note 17 to the standalone financial statements, the final dividend 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. Further, the 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 declared 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, except for the instances discussed in note 48(11) to the standalone financial statements, the Company has used accounting software for maintaining its books of account 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 except that we are unable to comment on whether certain features of the audit trail of the said software has operated from the period April 01, 2023 to June 04, 2023 and from October 08, 2023 to November 12, 2023 or whether there were any instances of audit trail feature being tampered during the said period in the absence of log of changes to certain audit features.
For S R B C & CO LLP
Chartered Accountants
ICAI Firm Registration Number: 324982E/E300003
per Vikram Mehta
Partner
Membership No.: 105938
UDIN: 24105938BKELXT7463
Mumbai, May 14, 2024
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