We have audited the accompanying financial statements of BHARAT AGRI FERT & REALTY LIMITED (the “Company”), which comprise the Balance Sheet as at March 31, 2024, the Statement of Profit and Loss (including Other Comprehensive Income), the Statement of Changes in Equity and the Statement of Cash Flows for the year ended on that date and notes to the financial statements, including a summary of material accounting policies and other explanatory information (hereinafter referred to as the “ Financial Statements”).
In our opinion and to the best of our information and according to the explanations given tous, except for the possible effects of the matters described in the Basis for Qualified Opinion section of our report, the aforesaid Financial Statements give the information required by the Companies Act, 2013 (the “Act”) in the manner so required and give a true and fair view in conformity with the Indian Accounting Standards prescribed under section 133 of the Act, (“Ind AS”) and other accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2024 and its loss, total comprehensive income, changes in equity and its cash flows for the year ended on that date.
Basis for Qualified Opinion
Attention is drawn to:
a) Carrying value of old overdue trade receivables is Rs.10.32 Crores as at 31st March 2024.The Company has not made any provision regarding the said old overdue trade receivables, which constitutes a departure from the Accounting Standards prescribed under section 133 of the Companies Act, 2013. The Company’s records indicate that, had management made provision of the said overdue trade receivables, loss for the year would have been higher by Rs.10.32 Crores, shareholders fund would have been lower by Rs. 10.32 Crores and provision amount would have been higher by Rs. 10.32 Crores.
b) The carrying value of the stores, spares inventory of the fertilizer division is Rs. 0.51 Crores as at 31st March 2024.The requisite data of non-moving and slow- moving inventory is not provide by the Company. As the Company has not maintained inventory of stores & spares of the fertilizer division in the books of accounts, no observations can be made on old and non-moving inventory. The Company has not made any provision for non-moving and slow- moving stores, spares inventory.
c) The Fertiliser Segment of the Company has incurred significant loss in the March 2024 quarter (before accounting for profit on sale of investments) and the earlier reporting periods. The Capacity utilisation is less than 10% in the March 2024 quarter and the earlier reporting periods. The Company has not carried out impairment study as required by Ind AS “Impairment of Assets” 36 of the Property Plant Equipment related to the Fertiliser Segment of the Company. The Company has not made provision in this regard.
d) The Company has not laid down Standard Operating Procedures (SOPs) in respect of any of the Accounting and related functions. This results in major weakness in the Accounting and related functions and consequently the Interim and other Financial Information. This has also an implication in respect of the Internal Financial Control over Financial Reporting (IFCoFR) with regard to accounting and related functions.
e) The gross amount of subsidy accounted for the year ended 31st March 2024 is Rs.2.43 Crores. The outstanding subsidy receivable amount pertaining to the year ended 31st March 2024 is Rs.1.51 Crores. The Company accounts for subsidy on the basis of sales to dealer, however, as per the Government notification the subsidy entitlement/ payment to the Company is on the basis of sale to the customer by the dealers. This may result in short receipt of subsidy in an unforeseen event of failure to sale by dealer to end user. However, the Company has not made provision in this regard.
we are unable to obtain sufficient appropriate audit evidence with respect to the sr. nos. (b) to (e) above.
In view of this. In view of this, we are unable to comment on quantum of provision to be made in respect of sr. nos. (b) to (e) above.
The Matters as per the sr. a) to e) as stated above have been qualified by the preceding auditor firm in the preceding financial year.
We conducted our audit of the 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 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 ofIndia (“ICAI”) together with the ethical requirements that are relevant to our audit of the 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 qualified audit opinion on the Financial Statements.
Matter of Emphasis:
We draw attention to the following matters:
a) The Company has weak internal controls in respect of the following:
i. Booking of revenue expenditure
ii. Booking of capital expenditure and inventory.
iii. Maintenance of inventory records
b) Transfer Developments Rights & Real Estate Expenses:
i. The real estate construction expenses, including Transferable Developments Rights (TDR) amount to Rs.47.90 Crores as at 31st March 2024. The Company's ability to complete the project depends on it raising the required funds.
c) Sub judice matter:
i. The Company has informed that, certain matters are sub judice as at 31st March 2024.The summary in brief is as under:
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Sn.
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Particulars
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t. Rs.(in Crores)
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1.
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Non provision of short receipt of TDR- Refer to
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1.16
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point ii. Below
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2.
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Maintenance Charges payable- Refer to point
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0.33
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iii. Below
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ii. Pursuant to the matter referred in the paragraph c) s.no.(i) 1 above:
The Company has made payment for the purpose of purchase of Transferable Developments Rights (TDR) from M/s Hubtown Limited (erstwhile Akruti City Limited) on 19/09/2014 for a sum aggregating to Rs.9.66 Crores. The Company has informed that, TDR is transferred in it’s name and it has received short TDR for area 332.180 sq. mtrs. aggregating to Rs.1.16 Crores. The Company has filed a case in NCLT, the Company has not made any provision for short TDR for area 332.180 sq. mtrs. aggregating to Rs.1.16 Crores as at 31st March 2024.
iii. Pursuant to the matter referred in the paragraph c) s.no. ( i.) 2 above:
The Company has filed a counter claim with regard to the point s.no. C (i) 1 above mentioned above. In view of this, the Company has not provided liability on account of maintenance charges payable Rs.0.33 Crores.
Our opinion is not modified in respect of the said matter.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significancein our audit of the Financial Statements of the current period. These matters were addressed in the context of our audit of the Financial Statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have determined the matters described below to be the key audit matters to be communicated in our report.
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Sn.
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Key Audit Matter
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Auditor’s Response
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1
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Revenue Recognition for Real Estate Projects:
Refer Note 1 m. of financial statements with respect to the accounting policies followed by the Company for recognizing revenue from sale of residential and commercial properties. The Company applies Ind AS 115 “Revenue from contracts with customers” for recognition of revenue from sale of commercial and residential real estate, which is being recognised at a point in time/ over the time depending upon the Company satisfying its performance obligation under the contract with the customer and the control of the underlying asset gets transferred to the customer. Significant judgement/ estimation is involved in identifying performance obligations for revenue recognition under point in time and over the time methods. Determining when control of the asset underlying the performance obligation is transferred to the customer and estimating stage of completion, basis which revenue is recognised as per Ind AS 115, has been considered as a key audit matter.
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Our audit procedures in respect of this area, among others, included the following:
• Read the Company’s revenue recognition accounting policies & evaluated the appropriateness of the same with respect to principles of Ind AS 115 and their application to the significant customer contracts;
• Obtained and understood the Company’s process
for revenue recognition including identification of performance obligations and determination of transfer of control of the property to the customer;
• Evaluated the design and implementation and
verified, on a test check basis, the operating effectiveness of key internal controls over revenue recognition including controls around transfer of control of the property and calculation of revenue recognition which is based on various factors including contract price, total budgeted cost and actual cost incurred;
• Obtained and read the legal opinion taken by the
Company and provided to us to determine timing when the control gets transferred in accordance with the underlying agreements.
• Verified the sample of revenue contract for sale of residential and commercial units to identify the performance obligations of the Company under these contracts and assessed whether these performance obligations are satisfied over time or at a point in time based on the criteria specified under Ind AS 115;
• Verified, on a test check basis, revenue transaction with the underlying customer contract, and other documents based on which the revenue workings are prepared;
• Verified, on a test check basis, budgeted cost of the projects, actual cost incurred, balance cost to be incurred and recomputed stage of project completion based on which the revenue workings are prepared; and
• Assessed the adequacy and appropriateness of the disclosures made in financial statements in compliance with the requirements of Ind AS 115 - ‘Revenue from contracts with customers’
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2
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Provisions and Contingent Liabilities-
The Company is involved in various disputes for which final outcomes cannot be easily predicted and which could potentially result in significant liabilities. The assessment of the risks associated with the litigations is based on complex assumptions, which require the use of judgment and such judgment relates, primarily, to the
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Our audit included but was not limited to the following procedures:
• Assessment of the process and relevant controls implemented to identify legal and tax litigations and pending administrative proceedings.
• Assessment of assumptions used in the evaluation of potential legal and tax risks performed by the legal and tax department
of the company considering the legal precedence and other rulings in similar cases.
• Inquiry with legal and tax departments of the
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assessment of the uncertainties connected to the prediction of the outcome of the proceedings and to the adequacy of the disclosures in the Financial Statements. Because of the judgment required, the materiality of such litigations and the complexity of the assessment process, the area is a key matter for our audit. Refer Note No. 36 B. to the Financial Statement.
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company regarding the status of the most significant disputes and inspection of the key relevant documentation.
• Analysis of opinion received from the experts as per requirement.
• Review of the adequacy of the disclosures in the notes to the Financial Statements.
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3
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Trade Receivables
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Our audit procedures included, among others, the following:
• Evaluation of sales procedure.
• Evaluated the design of the internal controls relating to sale booking.
• Evaluated sales invoices on test check basis.
• Evaluated ageing analysis and ledger accounts of the trade receivables.
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Information Other than the 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 Management Discussion and Analysis, Board’s Report including Annexures to Board’s Report, Business Responsibility and Sustainability Report, Corporate Governance and Shareholder’s Information, but does not include, Financial Statements and our auditor’s report thereon. The above-referred information is expected to be made available to us after the date of this audit report.
Our opinion on the 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 Financial Statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the Financial Statements or our knowledge obtained during the course of our 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 and Those Charged with Governance for the 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 Financial Statements that give a true and fair view of the financial position, financial performance, including other comprehensive income, changes in equity and cash flows of the Company in accordance with the accounting principles generally accepted in India, including Ind AS 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 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.
In preparing the Financial Statements, management and Board of Directors is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board of Directors either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
The Company’s Board of Directors is also responsible for overseeing the Company’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the Financial Statements as a whole are free from material misstatement, whether due to fraud or error, andto 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.
As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the Financial Statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal financial control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Act, we are also responsible for expressing our opinion on whether the Company has adequate internal financial controls 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 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 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 Financial Statements, including the disclosures, and whether the Financial Statements represent the underlying transactions and events in a manner that achieves fair presentation.
Materiality is the magnitude of misstatements in the Financial Statements that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the Financial Statements may be influenced. We consider quantitative materiality and qualitative factors in (i) planning the scope of our audit work andin evaluating the results of our work; and (ii) to evaluate the effect of any identified misstatements in the Financial Statements.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal financial controls that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the 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.
Other Matters:
Attention is drawn to the fact that the financial statements of the Company for the previous year ended
March 31, 2023 were audited by predecessor audit firm and have expressed their modified opinion on those
statements.
Our opinion is not modified in respect of the above matter.
Report on Other Legal and Regulatory Requirements
1. As required by Section 143(3) of the Act, based on our audit we report that:
a) We have sought and obtained all the information and explanations except for the effects of the matter described in the ‘Basis of Qualified Opinion’ paragraph above, which to the best of our knowledge and belief were necessary for the purposes of our audit.
b) Except for the effects of the matter described in the ‘Basis of Qualified Opinion’ paragraph above, in our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books.
c) The Balance Sheet, the Statement of Profit and Loss including Other Comprehensive Income, Statement of Changes in Equity and the Statement of Cash Flows dealt with by this Report are in agreement with the books of account.
d) Except for the effects of the matter described in the ‘Basis of Qualified Opinion’ paragraph above, in our opinion, the aforesaid Financial Statements comply with the Ind AS specified under Section 133 of the Act.
e) On the basis of the written representations received from the directors as on 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 Financial Statements of the Company and the operating effectiveness of such controls, refer to our separate Report in “Annexure A”. Our report expresses modified opinion on the adequacy and operating effectiveness of the Company’s internal financial controls with reference to Financial Statements.
g) With respect to the other matters to be included in the Auditor’s Report in accordance with the requirements of section 197(16) of the Act, as amended, in our opinion and tothe best of our information and according to the explanations given to us, the remuneration paid by the Company to its directors during the year is in accordance with the provisions of section 197 of the Act.
h) With respect to the other matters to be included in the 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 Financial Statements. Refer Note 36.B. to the 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
(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 entity (“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 orthe like on behalf of the Ultimate Beneficiaries;
(b) The Management has represented, that, to the best of its knowledge and belief, no funds (which are material either individually or in the aggregate) have been received by the Company from any person 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;
(c) Based on the audit procedures 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 (i) and (ii) of Rule 11(e), as provided under (a) and (b) above, contain any material misstatement.
v. Dividend:
(a) The Company did not proposed dividend in the immediately preceding previous year. As dividend is not declared, question of compliance or otherwise do not arise.
(b) 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 amount of dividend proposed is in accordance with section 123 of the Act, as applicable.
vi. Based on our examination, which included test checks, the Company has used accounting softwares 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 softwares. 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 in terms of Section 143(11) of the Act, we give in “Annexure B” a statement on the matters specified in paragraphs 3 and 4 of the Order.
For Desai Saksena & Associates
Chartered Accountants
Firm’s registration number: 102358W
CA (Dr.) Shashank N. Desai Partner
Membership number: 32546 Mumbai, Date: 30th May 2024 UDIN: 24032546BKEJGJ6111
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