To the Members of Future Consumer Limited
Report on the Audit of the Standalone Financial Statements
Qualified Opinion
1. We have audited the accompanying standalone financial statements of Future Consumer 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.
2. In our opinion and to the best of our information and according to the explanations given to us, except for the effects of the matter described in the 'Basis for Qualified Opinion' section of our report, 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 loss including other comprehensive income, its cash flows and the changes in equity for the year ended on that date.
Basis for Qualified Opinion
3. As described in Note 49 to the standalone financial statements, due to non-availability of financial information and ongoing dispute with the Joint Venture partner, the Company is unable to determine the fair valueof Company's investments in Aussee Oats Milling Private Limited (joint venture) and Aussee Oats IndiaPrivate Limited (step down joint venture) as at March 31, 2024. In absence of sufficient and appropriate evidence, we are unable to comment on the carrying value of above investments (including investments, loans and other assets) amounting to Rs. 9,564.13 lakhs and the consequent impact thereof.
4. 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 qualified audit opinion on the standalone financial statements.
Material Uncertainty Related to Going Concern
5. We refer to Note 47 to the standalone financial statements, the Company has incurred a loss before tax of Rs. 19,077.66 lakhs (including exceptional items) for the year ended March 31, 2024 and has a net capital deficiency of Rs. 29,542.87 lakhs as at March 31, 2024. The Company has also suffered consistent downgrades in its credit ratings, significantly impairing it's ability to raise funds and substantially curtailing normal business operations. Furthermore, the Company has defaulted on repayment of loan and interest thereon to banks and consequently the lenders have classified the Company's account as non-performing assets (NPA).
Additionally, the Company received a notice on April 26, 2024, from Catalyst Trusteeship Limited regarding outstanding 11.07% Non-Convertible Debentures amounting to Rs. 21,683.3 lakhs as of March 31, 2024, demanding repayment within 15 days from the date of the notice. Further, RBL Bank Limited ("RBL Bank") has taken physical possession of land and buildings situated at Veerasandra Village in the district of Bangalore, measuring 44,116 Sq. Ft. ("Secured Assets"), owned by Appu Nutritions Private Limited (a wholly-owned subsidiary) against term loan obligation of the Company. These events/conditions, along with other matters, set forth in said note, indicate the existence of a material uncertainty that may cast significant doubt about the Company's ability to continue as a going concern. As explained in aforesaid note, management is of the view that the appropriateness of going concern assumption is dependent upon Company's ability to arrange sufficient liquidity by monetization of its assets and other strategic initiatives, including fresh investment, to meet its obligations.
Our opinion is not modified with respect to this matter.
Emphasis of Matter
6. We draw attention to Note 48 to the standalone financial statements, which more fully describes that forensic audits have been initiated on the Company, by SEBI and by lenders, which are currently in progress.
7. We draw attention to Note 47 to the standalone financial statements towards outstanding debt obligation including interest of Rs. 1,808.81 lakhs which is secured against immovable property comprising of land and building situated at Veerasandra Village in the district of Bangalore admeasuring 44116 Sq. Fts. ("Secured Assets") owned by Appu Nutritions Private Limited ('wholly owned subsidiary') payable to the RBL Bank Limited ("RBL Bank"). As on January 23, 2024, the RBL Bank has taken physical possession of the secured assets u/s 13(4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 read with the Security Interest (Enforcement) Rules, 2002 framed thereunder. Further, RBL Bank informed the Company on April 23, 2024 about publication of E-Auction sale notice in few newspapers for sale of the said Mortgaged Property on May 30, 2024.
8. We draw attention to Note 40(b) to standalone financial statements towards the Scheme of Amalgamation between Future Food and Products Limited and Future Food Processing Limited and the Future Consumer Limited ("The Company") and their respective shareholders under section 230 to 232 and other applicable provisions of the Companies Act, 2013 (hereinafter "the Scheme") was filed in the year 2021. NCLT has approved the said scheme of merger vide order C.A.(CAA)/234/MB-V/2021 dated November 22, 2023 having effective date as November 30, 2023 and appointed date as April 01, 2021. The accounting treatment for the said transaction have been taken in Book of Accounts effective from appointed date. Accordingly, figures of the Company's standalone financial statements for the previous year i.e. March 31, 2023, restated in accordance with the Scheme of Amalgamation between Future Food and Products Limited, Future Food Processing Limited, and Future Consumer Limited ('the Company')."
9. We draw attention to Note 47 to standalone financial statements towards the Company has outstanding 11.07% Non-Convertible Debentures of Rs. 21,683.32 (Including principle of Rs 15,882.35 lakhs and interest accrued of Rs. 5,800.97 lakhs) as at March 31, 2024 to British International Investment Plc ("BII") through Catalyst Trusteeship Limited ('debenture trustee' or 'CTL') which is secured against fixed assets of its subsidiary. On April 26, 2024, the CTL has issued notice to the Company and Integrated Food Park Limited ('Wholly Owned Subsidiary' or 'IFPL') to repay the outstanding amount within 15 days from the date of notice, failure of which shall lead to initiation of mortgaged immovable properties situated at Tumkur, Karnataka, owned by IFPL.
Our opinion is not modified in respect of the above matters.
Key Audit Matters
10. 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. In addition to the matter described in the 'Basis for Qualified Opinion' section and in the 'Material Uncertainty Related to Going Concern' section, we have determined the matters described below to be the key audit matters to be communicated in our report. For each matter below, our description of how our audit addressed the matter is provided in that context.
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11. 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 ofmaterial 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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Key audit matters
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How to audit addressed the key audit matter
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Impairment of Investment (As described in Note 5, 41 and 42 of the standalone financial statements)
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During the year, impairment indicators were identified by the management on certain investments wherein net worth of the investee company is negative or the carrying value of the investments is higher than the Company’s share in net worth. As a result, an impairment assessment was required to be performed by the Company by comparing the carrying value of these investments to their recoverable amount to determine whether an impairment loss was required to be recognised.
For the purpose of the above impairment assessment, recoverable value has been determined on the basis of the open offer available in market for the investment which submitted to banks for monetising or net asset method by using revenue multiple of comparable companies to future sales, as appropriate to the respective investment. Furthermore, the recoverable value is highly sensitive to changes in some of the inputs used for forecasting the future cash flows/enterprise value.
The determination of the recoverable amount of the investments involved judgment due to inherent uncertainty in the assumptions supporting the recoverable amount of these investments.
Accordingly, the impairment of investments was determined to be a key audit matter in our audit of the standalone financial statements.
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Our audit procedures included and were not limited to the following:
• We obtained an understanding, evaluated the design and tested the operating effectiveness of controls that the Company has in relation to impairment assessment processes;
• We assessed the Company's valuation methodology applied in determining the recoverable amount. In making this assessment, we evaluated the competence and objectivity of Company's internal and external specialists involved in the process;
• We assessed the projections submitted to banks for recoverable value of its investments;
• We discussed potential changes in key drivers as compared to previous year / actual performance with management to evaluate the inputs and assumptions used in the cash flow forecasts;
• Compared the amounts quoted by potential buyer/investor for assets / business and compared the proposed values with the estimated sales values considered by the Company.
• Obtained management assessment and evaluated assumptions considered for investments classified as asset held for sale.
• We assessed the adequacy of disclosures made in the standalone financial statements as per Ind AS 36 and Ind AS 105.
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Carrying Value of Trade and Other Receivables (as described in Note 7 and Note 11 of the standalone financial statements)
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As at March 31, 2024, Trade and Other Receivables (net of expected credit loss) constitutes approximately 0.41% of total assets of the Company. The Company is required to regularly assess the recoverability of its Trade and Other receivables.
Recoverability of Trade and Other receivables was significant to our audit due to the value of amounts which also represents significant portion of the Company's working capital.
Further, on July 20, 2022, the Hon'ble National Company Law Tribunal, Mumbai bench ("NCLT") has ordered commencement of the corporate insolvency resolution process of Future Retail Limited, one of the major customer of the Company (Corporate Debtor) in terms of the provisions of Insolvency and Bankruptcy Code, 2016 (the 'Code'). In light of the same, the Company has recorded an expected credit loss of Rs. 37,803.97 lakhs in earlier years on the entirety of the amount receivable from the said customer. Creation of expected credit loss involves judgement as the expected credit losses must reflect information about past events, current conditions and forecasts of future conditions, as well as the time value of money.
Accordingly, the recoverability of Trade and Other Receivables is a key audit matter in our audit of the standalone financial statements.
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Our audit procedures included and were not limited to the following:
• We obtained an understanding, evaluated the design, and tested the operating effectiveness of the controls that the Company has for review of credit loss allowance process;
• We evaluated the Management's assessment of the financial circumstances and ability to pay of relevant entities with receivable balances. These considerations include whether there are regular receipts from the customers, past collection history as well as an assessment of the customers' credit ability to make payments;
• We tested the aging of trade and other receivables and receipts subsequent to the year-end;
• We assessed the legal process followed by the Company for recover of the said receivables.
• We assessed the adequacy of Company's disclosures in relation to Trade and Other receivables included in the standalone financial statements as per Ind AS 109.
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Other Information
12. The Company's Board of Directors is responsible for the other information. The other information comprises the Director's Report and it's annexure, Business Responsibility and Sustainability report and Management Discussion and Analysis Report, but does not include the standalone financial statements and our auditor's report thereon.
13. Our opinion on the standalone financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.
14. 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 the Management for the Standalone Financial
Statements
15. 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.
16. 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
17. 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 thesestandalone financial statements.
18. 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)(i) of the Act, we are also responsible for expressing our opinion on whether the Company has adequate internal financial controls with reference to standalone 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 standalone 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.
19. 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.
20. 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.
21. 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.
Other Matters
22. The comparative Ind AS standalone financial statements of the Group, its associates and joint ventures for the corresponding quarter and year ended March 31, 2023, were audited by predecessor auditor i.e. S R B C & CO LLP, Chartered Accountants who expressed qualified opinion on those consolidated financial statement on May 30, 2023.
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 subsection (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 that:
(a) We have sought and except for the matter described in the Basis for Qualified Opinion paragraph, obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit;
(b) Except for the matter described in the Basis for Qualified Opinion paragraph, 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 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) Except for the effects of the matter described in the Basis for Qualified Opinion paragraph above, in our opinion, the aforesaid financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Companies (Indian Accounting Standards) 2015, as amended;
(e) The going concern matter described in Material Uncertainty Related to Going Concern paragraph above, the matter described in the Basis for Qualified Opinion paragraph above, in our opinion, may have an adverse effect on the functioning of the Company;
(f) 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;
(g) The qualification relating to the maintenance of accounts and other matters connected therewith are as stated in the Basis for Qualified Opinion paragraph and paragraph (b) above;
(h) With respect to the adequacy of the internal financial controls with reference to standalone financial statements and the operating effectiveness of such controls, refer to our separate Report in "Annexure 2" to this report;
(i) 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 readwith Schedule V to the Act.
(j) 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 36 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 are no amounts which were 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 note 50 (v) to the standalone financial statements, no funds have been advanced or loaned or invested (either from borrowed fundsor share premium
or any other sources or kind of funds) by the Company to or in any other person or entity, 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, other than as disclosed in the note 50 (vi) to the standalone financial statements, no funds have beenreceived by the Company from any person or entity, 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. No dividend has been declared or paid during the year by the Company.
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) Rule 2014 is applicable from April 1, 2023, reporting under Rule 11(g) of the Companies (Audit and Auditor) 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.
For Borkar & Muzumdar Chartered Accountants Firm Registration Number: 101569W
Deepak Kumar Jain Partner
Membership No.:154390 UDIN: 24154390BKAVVI7957
Place: Mumbai Date: May 23,2024
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