Crompton Greaves Consumer Electricals Limited
Report on the Audit of the Standalone Financial Statements
Opinion
We have audited the accompanying Standalone Financial Statements of Crompton Greaves Consumer Electricals Limited (“the Company"), which comprise the Balance Sheet as at March 31,2024, and the Statement of Profit and Loss, including Other Comprehensive Income, Statement of Changes in Equity and 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 (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 (“the Act') in the manner so required and give a true and fair view in conformity with the Indian Accounting Standards prescribed under section 133 of the Act read with Companies (Indian Accounting Standards) Rules, 2015, as amended (“Ind AS") and other accounting principles generally accepted in India, of the state of affairs of the Company as at March 31,2024, and total comprehensive income (comprising of profit and other comprehensive income), changes in equity and its cash flows for the year then ended.
Basis for Opinion
We conducted our audit of the Standalone Financial Statements in accordance with the Standards on Auditing (SAs) specified under section 143(10) of the Act. Our responsibilities under those Standards are further described in the ‘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 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 obtained by us is sufficient and appropriate to provide a basis for our opinion.
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 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.
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Key Audit Matter
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How the Key Audit Matter was addressed in our audit
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1
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Assessment of recoverability of the carrying value of investments in subsidiary and other intangible assets
(Refer Notes 2D and 3A to the Standalone Financial Statements)
As at March 31,2024, the Company has I 1,914.01 Crores of investments in its subsidiary company, Butterfly Gandhimathi Appliances Limited ("Butterfly") and carries Trademarks of I 32.91 Crores with indefinite useful live purchased on acquisition of the said subsidiary.
The Company’s evaluation of impairment of its investments in Butterfly and recoverability of Trademarks involves a comparison of its expected recoverable values against its carrying values. The recoverable amount of the investment is based on Value in Use (ViU) calculations determined based on a Discounted Cash Flow with Exit Multiple Method. Determination of ViU involves significant estimates, assumptions and judgements as regards reasonableness of assumptions involved in developing projections of entity's financial performance, exit multiples, and discount rates to be considered.
Considering the uncertainty involved in forecasting of cash flows and the judgement involved with respect to key assumptions used in computing the recoverable amount, this audit area is considered a key audit matter.
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Our audit procedures with respect to this matter included, but were
not limited to, the following:
a) Obtained an understanding of the process and assessed the design, implementation and tested the operating effectiveness of internal controls over the Company's review of impairment analysis.
b) Assessed reasonableness of the estimated revenue and margin projections, the historical accuracy of the estimates and its ability to produce accurate long-term forecasts.
c) Involved our valuation experts (“auditor’s expert") to assist in examining and challenging the reasonableness of the Company’s valuation model and reviewing the underlying basis for key assumptions, including terminal growth rates, exit multiplier and discount rates.
d) Reviewed sensitivity in the valuation, resulting from changes to key assumptions applied and compared the assumptions to corroborating information including industry reports and data from competitors, historic performance, local economic developments and industry outlook.
e) Compared the reasonableness of future operating cash flow forecasts with the business plan and budgets approved by the Board and tested the mathematical accuracy of management’s calculations.
f) Assessed the adequacy and appropriateness of the disclosures made in the Standalone Financial Statements.
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2
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Goodwill
(Refer Notes 2C and 34 to the Standalone Financial Statements)
The goodwill balance as of March 31, 2024 of I 779.41 Crores pertains to demerger of the Consumer Business from Crompton Greaves Limited (now CG Power and Industrial Solutions Limited) and Crompton Greaves Consumer Electricals Limited in 2015.
Carrying value of goodwill is material as at March 31,2024 and inherent uncertainty is involved in forecasting and discounting future cash flows, determination of discount and terminal growth rates for computing the value and the assessment of its recoverability.
The Company has carried out an impairment assessment using the value-in-use (ViU) calculations which is based on Discounted Cash Flow with Exit Multiple Method. Determination of ViU involves significant estimates, assumptions and judgements as regards reasonableness of assumptions involved in developing projections of entity's financial performance, exit multiples, and discount rates to be considered.
Considering the uncertainty involved in forecasting of cash flows and the judgement involved with respect to key assumptions used in computing the recoverable amount, this audit area is considered a key audit matter.
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Our audit procedures with respect to this matter included, but were
not limited to, the following:
a) Obtained an understanding of the process and assessed the design, implementation and tested the operating effectiveness of internal controls over the accounting for goodwill arising out of business reconstruction transaction.
b) Assessed reasonableness of the future revenue and margin projections, the historical accuracy of the estimates and its ability to produce accurate long-term forecasts.
c) Involved our valuation experts (“auditor’s expert") to assist in examining and challenging the reasonableness of the Company’s valuation model and reviewing the underlying basis for key assumptions, including terminal growth rates and discount rates.
d) Reviewed sensitivity in the valuation, resulting from changes to key assumptions applied and compared the assumptions to corroborating information including industry reports and data from competitors, historic performance, local economic developments and industry outlook.
e) Compared the reasonableness of future operating cash flow forecasts with the business plan and budgets approved by the Board and tested the mathematical accuracy of management’s calculations.
f) Assessed the adequacy and appropriateness of the disclosures made in the Standalone Financial Statements.
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Sr.
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Key Audit Matter
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How the Key Audit Matter was addressed in our audit
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3
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Estimates - Provision for Warranties
(Refer Note 13 to Standalone Financial Statements)
The Company's business involves the sale of products under warranty. The Company also has back-to-back contractual arrangements with its vendors for reimbursement of cost relating to products supplied by the vendors.
Warranty provisions, which are inherently judgmental in nature, are provided by the Company to record an appropriate estimate of the costs of repairing and replacing products and spares within the warranty period. The Company estimates and provides for liability for product warranties in the year in which the products are sold. Further, the timing of outflows will vary based on the actual warranty claims made during the warranty period in the future.
The above estimations of warranty provision require significant judgement considering the nature and timing of the cash outflows. Also, there is estimation uncertainty as regards to the timing and the amount of the actual warranty claims that may devolve over the warranty period. Accordingly, provision for warranties has been determined by us to be a key audit matter.
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Our audit procedures with respect to this matter included, but were
not limited to, the following:
a) Obtained an understanding of the warranty claims process and assessed the design and implementation and tested the operating effectiveness of internal controls over the provision for warranties.
b) Reviewed the historical data of warranty costs incurred in regard to the product sales, the trend of claims over the warranty period and the comparison between provisions previously recognised and actual expenses. Also reviewed the historical data of recoveries from vendors against warranty claims and defective returns.
c) Reviewed reconciliations of sales made during the year with sales register to determine completeness on which warranty obligation is determined.
d) Performed enquiry procedures and reviewed relevant documents in evaluating the accuracy of historical information prepared by the management (including cost of repairs and returns).
e) Reviewed the recognition and appropriateness of provisions by verifying the computation of defect rates, vendors recovery and mathematical accuracy of management calculations and obtaining management statements, evidence and supporting documents.
f) Assessed the adequacy and appropriateness of the relevant disclosures made in the Standalone Financial Statements.
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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 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 Standalone Financial Statement that give a true and fair view and are free from material misstatement, whether due to fraud or error.
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 Management Discussion and Analysis, Chairman's statement, Director's 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 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. 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.
In preparing the Standalone Financial Statements, the 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 the management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. The Board of Directors is 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.
We give in “Annexure A" a detailed description of Auditor's responsibilities for Audit of the Standalone Financial Statements.
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 “Annexure B" a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.
2. 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.
(c) The Balance Sheet, the Statement of Profit and Loss including Other Comprehensive Income, the 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) I n 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 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 Standalone Financial Statements of the Company and the operating effectiveness of such controls, refer to our separate Report in “Annexure C".
(g) 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 Note 27 to the Standalone Financial Statements;
ii. The Company did not have any long-term contracts for which there were any material foreseeable losses.
i ii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.
I v. (1) 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.
(2) 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, as on the date of this audit report, 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.
(3) Based on the audit procedures performed that have been considered reasonable and appropriate in the circumstances, and according to the information and explanations provided to us by the Management in this regard, 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 (1) and (2) above, contain any material mis-statement.
v. 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 Companies Act 2013 to the extent it applies to payment of dividend.
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. (Refer Note 10(h) to the Standalone Financial Statements)
vi. Based on our examination which included test checks, the Company has used an 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. Further, during the course of our audit we did not come across any instance of audit trail feature being tampered with.
As proviso to Rule 3(1) of the Companies (Accounts) Rules, 2014 is applicable from April 01, 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.
3. I n our opinion, according to information, explanations
given to us, the remuneration paid by the Company to its directors is within the limits laid prescribed under Section 197 read with Schedule V of the Act and the rules thereunder.
For M S K A & Associates
Chartered Accountants ICAI Firm Registration No. 105047W
Vishal Vilas Divadkar
Partner
Place: Mumbai Membership No.: 118247
Date: May 16, 2024 UDIN: 24118247BKFOJD9871
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