We have audited the accompanying financial statements of Everest Organics 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 Financial Statements including a summary of the significant accounting policies and other explanatory information.
QUALIFIED OPINION
In our opinion and to the best of our information and according to the explanations given to us except for the possible effects of the matter described in the Basis for Qualified Opinion paragraph the aforesaid financial statements give the information required by the Act as amended in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India including Ind-AS specified under Section 133 of the Act of the state of affairs (financial position) of the Company as at March 31, 2024 and its profit (financial performance including other comprehensive income) its cash flows and the changes in equity for the year ended on that date.
BASIS FOR QUALIFIED OPINION:
We conducted our audit in accordance with the Standards on Auditing (SAs) specified under section 143(10) of the Companies Act, 2013. 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 of India together with the ethical requirements that are relevant to our audit of the financial statements under the provisions of the Companies Act, 2013 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.
I. The revocation order of Telangana State Pollution Control Board (TSPCB) dated 4th February 2022 in connection with the closure order dated 22nd Dec 2020, stipulates that, the company cannot exceed its production capacity indicated in it's order No. TSPCB/RCP/SRD/CFO& HWA/HO/ 20172714, Dt. 22-11-2017. However, the company is operating at a substantially enhanced level of actual production without necessary approvals from TSPCB in the form of Consent For Establishment (CFE) for starting the establishment, followed by the consequent Consent For Operation (CFO). Such non-compliance could impact the going concern status of the company in the form of Closure Order from TSPCB. According to the explanations given to us, the management of the Company is in the process of addressing the issue. Refer to Note No.32(viii)(a).
ii. During the year under report, certain sales are made by the company on or before 31st March, 2024 for which control over the goods have not been passed on to the respective customers though dispatches were made on or before the aforesaid date and the same is not in accordance with Ind-AS 115 on Income Recognition. Considering the corresponding effect of the previous year 2022-23, the impact on Net Profit after tax for the year ended 31.03.2024 and reserves and surplus under Balance sheet have been overstated by Rs.194.73 Lakhs and the net turnover for the year ended
31.03.2024 have been overstated by Rs.609.45 Lakhs.
iii. In respect of Ind AS-19 Employee Benefits, there is a non-compliance as under
(a) . As stated in the notes to the financial statements of the company, the company has not revised
the provision for the liability on account of gratuity payable which was made in earlier period based on the management's own assessment instead of actuarial valuation and the gratuity liability is shown at 31.03.2024 under report, the liability for payment of gratuity has been shown at Rs. 162.17 Lakhs. As per the valuation obtained from LIC the gratuity liability is coming to Rs.247.03 Lakhs as on 31.03.2024. Thus, there is an understatement of liability and expenditure to the extent of Rs.84.86 Lakhs in the financial statements.
(b) . As per LIC Fund account statement, fund balance as on 31.03.2024 is coming to Rs.191.17
Lakhs, which is shown as Rs.162.17 Lakhs in the financial statements. Thus, the Other Comprehensive Income and reserves are understated by Rs.29.99 Lakhs.
(Refer Note No.32(xii)(a)(ii).
iv. The company has made a turnover of Rs.19,724.13 Lakhs for the year ended 31st March 2024. The sundry debtors as at 31st March, 2024 stood at Rs.10,008.55 Lakhs and out of which in respect of the Sundry debtors outstanding at Rs.2,869.26 Lakhs only confirmations were obtained at any time during the year.
v. During year 2022-23, the company has capitalised expenditure incurred on R&D to the extent of Rs. 209.65 lakhs under the head Intangible Assets-Products under Development instead of treating it as revenue expenditure and charging it in the Statement of Profit & loss Account. Out of this an amount of Rs.41.93 Lakhs has been amortised to profit and loss a/c and balance amount of Rs.167.72 Lakhs has been carried in the balance sheet under the head Intangible Assets-Products under Development. The nature of such expenditure shall be substantiated with tangible basis for certainty of corresponding future revenues against the expenditure being continued in the balance sheet at Rs.167.72 Lakhs. The expenditure shall also be identified and ascertained against each product under development. As the same was not furnished to us, we are of the opinion that the treatment of such expenditure as capital in nature is not in accordance with IND-AS 1 on Presentation of Financial Statements.
Based on the above the financial statements of the Company are not in compliance with the requirements of Ind AS 36, 'Impairment of Assets,' and Ind AS 38, 'Intangible Assets.
vi. The company has adopted cash basis of accounting, as regards Sales commission payable to the sales agents. Hence the impact on the profit for the year and the consequential impact on the Reserves and Surplus of the Company as on the balance sheet date are not ascertainable.
vii. During the Financial Year 2023-24 there were delays in making payments to the small and micro enterprises. The company is liable to pay interest for the delays in making Payments to these small and Micro enterprises to the tune of Rs.42 Lakhs. Also, this amount of interest payable is not provided in the financial statements.
Our Opinion is modified in respect of the above said matters.
KEY AUDIT MATTERS:
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements, 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.
We draw attention to following matters of the Company.
A) Revenue recognition:
Revenue is recognized when the control over the underlying products has been transferred to the customer. Due to the Company's sales under various contractual terms and across the country, delivery to customers in different regions might take different time periods and may result in undelivered goods at the period end. We consider a risk of misstatement of the Financial Statements related to transactions occurring close to the year end, as these transactions could be recorded in the incorrect financial period (cut-off). Our tests of detail focused on sample of cut-off transactions, to verify that only revenue pertaining to current year is recognized based on terms and conditions set out in sales contracts and delivery documents and performing testing on selected statistical samples of revenue transactions recorded during the year.
B) IT Systems and Controls:
We have identified IT Systems and controls over financial reporting as a key audit matter for the company because it's financial and reporting system should be integrated and must be fundamentally reliant on IT systems and controls to process the voluminous data specifically with respect to revenue, debtors, inventory management and raw material consumption. Automated accounting procedures and IT environment controls are required to be modified and implemented to operate effectively to ensure accurate financial reporting to comply with all the reporting requirements under various statues. We have assessed the management's position through discussion with the in-house experts and the Management has informed that they are making efforts to integrate all activities in this regard.
Accordingly, the same is considered as a key Audit matter.
C) Capital Work-in-Progress:
The Company is in the process of executing major project for expansion of its Manufacturing facility. This project takes a substantial period to get ready for intended use. We considered Capital expenditure as a key audit matter due to: (a) Significance of amount incurred on such items during the year ended 31st March, 2024. (b) Judgement involved in determining the eligibility of costs including borrowing cost and other directly attributable costs for capitalization as per the criteria set out in Ind AS 16-Property, Plant and Equipment.
We have obtained an understanding of the Company's capitalization policy and assessed for compliance with the relevant accounting standards. We have performed substantive testing on a sample basis for each element of capitalized costs including inventory issued to contractors for the purpose of this project and understanding nature of the costs capitalized.
Management maintains that, during the period, the interest cost of funds borrowed for the purpose amounting to Rs.113.20 Lakhs has been capitalised. (Refer Note No.32(xix)).
Other Information
The Company's management and Board of Directors are responsible for the other information. The other information comprises the information included in the company's annual report but does not include the financial statements and our auditors' report thereon. The Company's annual report is expected to be made available to us after the date of this auditor's report.
Our opinion on the financial statements does not cover the other information and we do not express any assurance and 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 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.
MANAGEMENT'S AND BOARD OF DIRECTORS' RESPONSIBILITY FOR THE FINANCIAL STATEMENTS:
The Company's Board of Directors is responsible for the matters stated in section 134(5) of the Companies Act, 2013 (“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 with6 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 statement 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 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.
AUDITORS' RESPONSIBILITY:
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, 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 based on these financial statements.
As part of an audit in accordance with standards on auditing 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 control relevant to the audit 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 Management and Board of Directors.
• Conclude on the appropriateness of management and Board of Directors 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.
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 financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors' 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 A” 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 Profit and Loss Statement, the Statement of Changes in Equity and the Cash Flow Statement dealt with by this Report are in agreement with the books of account.
(d) In our opinion, the aforesaid financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Indian Accounting
Standards) Rules, 2015 except with regard to the compliance requirements under, “IND AS-19-Employee Benefits”, IND AS-36 Impairment of Assets, IND AS-38 Intangible Assets, Ind As-115 Revenue Recognition as stated in Basis for qualified opinion Para.
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 are 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 over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate Report in “Annexure-B”.
(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, 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 as at 31st March, 2024 on its financial position in its financial Statements. Refer Note No: 32(viii) of the Financial Statements.
ii. The Company does 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, other than as disclosed in the notes to the accounts, 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 it's knowledge and belief, other than as disclosed in the notes to the accounts, 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 audit procedures which we considered reasonable and appropriate in the circumstances, nothing has come to their notice that has caused them to believe that the representations under sub-clause (i) and (ii) contain any material mis-statement.
v. The company has not declared dividend during the year F.Y. 2023-24.
vi. The reporting under Rule 11(g) of the Companies (Audit and Auditors) Rules, 2014 is applicable from 1 April 2023. Based on our examination which included test checks, the Company have
used accounting software for maintaining its books of account, which have a feature of recording audit trail (edit log) facility and the same has operated throughout the year for all relevant transactions recorded in the respective software. Further during the course of our audit, we did not come across any instance of audit trial feature being tampered with.
The statutory requirement regarding retention of Audit Trail is not applicable since it is the first year of implementation of Audit Trail.
3. Further, with respect to the matter to be included in the Auditors' Report under section 197(16):
In our opinion and according to the information and explanations given to us, the remuneration paid by the company to its directors during the current year is in accordance with the provisions of section 197 of the Act. The remuneration paid to any director is not in excess of the limit laid down under section 197 of the Act.
For P.S.N RAVISHANKER & ASSOCIATES
Chartered Accountants FRN.003228S
YADAVILLI SAI KARUNAKAR
Partner
Place: Hyderabad, Membership No. 207033
Date: 27-05-2024. UDIN. 24207033BKETWW9540
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