Heritage Foods Limited
Report on the Audit of the Standalone Financial Statements
Opinion
1. We have audited the accompanying standalone financial statements of Heritage Foods Limited (‘the Company'), which comprise the Standalone Balance Sheet as at 31 March 2024, the Standalone Statement of Profit and Loss (including Other Comprehensive Loss), the Standalone Statement of Cash Flow and the Standalone Statement of Changes in Equity for the year then ended, and notes to the standalone financial statements, including material accounting policy information and other explanatory information.
2. 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 (‘Ind AS') specified under Section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015 and other accounting principles generally accepted in India, of the state of affairs of the Company as at 31 March 2024, and its profit (including other comprehensive income/(loss)), its cash flows and the changes in equity for the year ended on that date.
Basis for Opinion
3. We conducted our audit in accordance with the Standards on Auditing 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 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 opinion.
Key Audit Matters
4. Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the standalone 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.
5. We have determined the matters described below to be the key audit matters to be communicated in our report.
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Key audit matter
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How our audit addressed the key audit matter
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Revenue recognition
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Our audit procedures relating to revenue recognition included, but
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Refer Note 3(c) to the accompanying standalone
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was not limited to, the following:
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financial statements for material accounting
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Understood the process of revenue recognition and assessed
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policy on revenue recognition and Note 24 for
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the appropriateness of the revenue recognition accounting
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details of revenue from operations.
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policies adopted by the management in accordance with Ind
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Revenue from sale of goods is recognised in
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AS 115;
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accordance with the principles of Ind AS 115,
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Evaluated the design, integrity of the general information and
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“Revenue from Contracts with Customers” (‘Ind
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technology control environment and tested the operating
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AS 115'), at a point in time when control of the
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effectiveness of Company's manual and IT application controls
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products being sold is transferred to the customer
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in respect of revenue recognition, including discounts;
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and when there are no longer any unfulfilled obligations.
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Performed substantive testing on a sample of revenue transactions recorded during the year by verifying the
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The Company also focuses on revenue as a
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underlying documents, such as trip sheets, invoices, shipping
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key performance measure, which could create
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documents and evidence of collection of receipts, as appropriate
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an incentive for overstating revenue resulting
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to ensure the accuracy of revenue recorded during the year;
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from the pressure on management to achieve performance targets at the reporting period end.
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Performed substantive testing on a sample of discount transactions recorded during the year by verifying the terms
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Considering the significance of amount,
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and conditions of the underlying approved scheme and credit
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multiplicity of Company's products, volume of
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notes, basis which the discount was granted;
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transactions including discounts offered, size of distribution network, nature of customers
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Performed analytical procedures such as customer group ratio analysis, price volume variance analysis, geographical
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Key audit matter
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How our audit addressed the key audit matter
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and significant attention required from us,
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area analysis, sales made during the specific period before
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revenue recognition is determined to be an
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the year end etc. for the revenue recorded considering both
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area involving significant risk in line with the
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qualitative and quantitative factors to identify any unusual
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requirements of Standards on Auditing and has
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trends or any unusual items; and
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been determined as a key audit matter for the current year audit.
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Evaluated adequacy and appropriateness of disclosures made in the standalone financial statements in accordance with
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Impairment assessment of investment in Joint
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applicable accounting standards.
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venture (Heritage Novandie Foods Private Limited)
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Our audit procedures relating to impairment assessment of investment in joint venture included, but was not limited to, the
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Refer Note 3(k) to the accompanying standalone
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following:
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financial statements for material accounting policy on impairment assessment.
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Evaluated the design and tested the operating effectiveness of controls over the management's assessment of the impairment
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As described in Note 9, the Company has an
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indicators and the impairment testing performed;
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investment amounting to INR 423.35 millions in a joint venture, Heritage Novandie Foods Private Limited. The joint venture has incurred losses over the years and its net-worth has been substantially eroded on account of accumulated losses, indicating possible impairment.
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Reconciled the cash flow projections to the business plans as approved by the Company's board of directors and evaluated the appropriateness of the assumptions used in such plan as revenue growth, expected EBIDTA margins, operating costs etc., basis our understanding of the business, market conditions and industry outlook, as relevant;
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In view of above, the management of the Company, during the current year ended 31 March 2024, has carried out an impairment assessment to assess recoverability of the aforesaid investment in accordance with Ind AS 36, Impairment of Assets (‘Ind AS 36') by estimating the recoverable
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Assessed the professional competence, objectivity and capability of the external valuation expert engaged by the management for performing the required valuations to estimate the recoverable value of the amounts invested in the joint venture;
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amount of investment with the help of an external
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Involved auditors' valuation expert to assess the reasonableness
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valuation expert engaged by the management.
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of the assumptions used such as discount rate, long-term
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The recoverable value of the investment is determined using a discounted cashflow method which require management to make significant
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growth rates including comparison to economic and industry forecasts where appropriate and evaluate the appropriateness of valuation methodology used by management's expert;
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estimates and assumptions such as expected
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Applied sensitivity analysis to certain key assumptions such as
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growth rate basis business plans, successful
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discount and growth rates to determine estimation uncertainty
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launch of new products, industry outlook, EBDITA
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involved and impact on conclusions drawn basis headroom
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margins, selection of discount rates, etc.
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available; and
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Pursuant to the same, an impairment loss of INR
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Assessed the appropriateness and adequacy of the disclosures
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167.95 million was recognised in the standalone
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made by the management in the standalone financial
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statement of profit and loss during the current
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statements, in accordance with applicable accounting
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year.
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standards.
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Considering the materiality of the amounts involved and significant degree of management judgement and subjectivity involved in business plans used in determining the recoverable value, and significant auditor attention required to test such management's judgements, estimates and key assumptions, impairment assessment of such investment has been determined as a key audit matter for the current year audit.
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Information other than the Financial Statements and Auditor’s Report thereon
6. The Company's Board of Directors are responsible for the other information. The other information comprises the information included in the Annual Report, but does not include the standalone financial statements and our auditor's report thereon.
Our opinion on the standalone financial statements does not cover the other information and we do not
express any form of assurance conclusion thereon.
In connection with our audit of the standalone financial statements, our responsibility is to read the other information and, in doing so, consider whether 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.
Responsibilities of Management and Those Charged with Governance for the Standalone Financial Statements
7. The accompanying standalone financial statements have been approved by the Company's Board of Directors. The Company's Board of Directors are responsible for the matters stated in Section 134(5) of the Act with respect to the preparation and presentation of these standalone 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 Ind AS specified under Section 133 of the Act and other accounting principles generally accepted in India. 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 statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
8. In preparing the financial statements, the 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.
9. 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
10. 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 Standards on Auditing 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.
11. As part of an audit in accordance with Standards on Auditing, specified under Section 143(10) of the Act we exercise professional judgment and maintain professional skepticism 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 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 management;
• Conclude on the appropriateness of 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; and
• 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.
12. 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.
13. 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.
14. 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.
Report on Other Legal and Regulatory Requirements
15. As required by section 197(16) of the Act based on our audit, we report that the Company has paid remuneration to its directors during the year in accordance with the provisions of and limits laid down under section 197 read with Schedule V to the Act.
16. As required by the Companies (Auditor's Report) Order, 2020 (‘the Order') issued by the Central Government of India in terms of Section 143(11) 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.
17. Further to our comments in Annexure A, as required by Section 143(3) of the Act based on our audit, we report, to the extent applicable, that:
a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit of the accompanying standalone financial statements;
b) In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books, except for the matters stated in paragraph 17(h)(vi) below on reporting under Rule 11(g) of the Companies (Audit and Auditors) Rules, 2014 (as amended);
c) The standalone financial statements dealt with by this report are in agreement with the books of account;
d) In our opinion, the aforesaid standalone financial statements comply with Ind AS specified under Section 133 of the Act;
e) On the basis of the written representations received from the directors and taken on record by the Board of Directors, none of the directors is disqualified as on 31 March 2024 from being appointed as a director in terms of Section 164(2) of the Act;
f) The qualification relating to the maintenance of accounts and other matters connected therewith are as stated in paragraph 17(b) above on reporting under section 143(3)(b) of the Act and paragraph 17(h)(vi) below on reporting under Rule 11(g) of the Companies (Audit and Auditors) Rules, 2014 (as amended);
g) With respect to the adequacy of the internal financial controls with reference to financial statements of the Company as on 31 March 2024 and the operating effectiveness of such controls, refer to our separate report in Annexure B wherein we have expressed an unmodified opinion; and
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, as detailed in note 42(b) to the standalone financial statements, has disclosed the impact of pending litigation(s) on its financial position as at 31 March 2024;
ii. the Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses as at 31 March 2024;
iii. there has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company during the year ended 31 March 2024;
iv. a. The management has represented
that, to the best of its knowledge and belief, as disclosed in note 34(i) to the standalone financial statements, no funds have been advanced or loaned or invested (either from borrowed funds or securities premium or any other sources or kind of funds) by the Company to or in any person(s) or entity(ies), including foreign entities (‘the 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 (‘the Ultimate Beneficiaries') or provide any guarantee, security or the like on behalf the Ultimate Beneficiaries;
b. The management has represented that, to the best of its knowledge and belief, as disclosed in note 34(ii) to the standalone financial statements, no funds have been
received by the Company from any person(s) or entity(ies), including foreign entities (‘the 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 as considered reasonable and appropriate in the circumstances, nothing has come to our notice that has caused us to believe that the management representations under sub-clauses (a) and (b) above contain any material misstatement.
v. As stated in note 33 to the accompanying standalone financial statements, the final dividend paid by the Company during the year ended 31 March 2024 in respect of such dividend declared in the previous year is in accordance of Section 123 of the Act to the extent it applies to payment of dividend. The Board of Directors of the Company have proposed final dividend for the year ended 31 March 2024 which is subject to the approval of the members at the ensuing Annual General Meeting. The dividend declared is in accordance with Section 123 of the Act to the extent it applies to declaration of dividend.
vi. Based on our examination which included test checks, the Company, in respect of financial year commencing on 1 April 2023, 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 except that audit trail feature was not enabled at the database level for the accounting software to log any direct data changes, as described in note 49 to the standalone financial statements. Further, during the course of our audit we did not come across any instance of audit trail feature being tampered with in respect of the accounting software where such feature is enabled.
For Walker Chandiok & Co LLP
Chartered Accountants
Firm's Registration No.: 001076N/N500013
Sanjay Kumar Jain
Partner
Membership No.: 207660
UDIN: 24207660BKERHW5646
Place: Hyderabad
Date: 29 May 2024
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