1. We have audited the accompanying standalone financial statements of Indo Rama Synthetics (India) Limited ('the Company'), which comprise the Balance Sheet as at 31 March 2024, the Statement of Profit and Loss (including Other Comprehensive Income), the Statement of Cash Flow and the 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 loss (including other comprehensive income), 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 Matter
4. Key audit matters are those matters that, in our professional judgement, 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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Recoverability of deferred tax assets (refer note 47 to the accompanying Our audit procedures in relation to the recoverability of deferred tax assets
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standalone financial statements)
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included, but were not limited to, the following:
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As detailed in note 47 to the accompanying standalone financial statements,
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• Evaluated the design and tested the operating effectiveness of key controls
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the Company has deferred tax assets (net) aggregating to H258.61 Crore as
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implemented by the Company over recognition and recoverability of
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at 31 March 2024.
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deferred tax assets based on the assessment of Company's ability to
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The Company's ability to recover the deferred tax assets is assessed by the
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generate sufficient taxable profits in foreseeable future allowing the use
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management at the close of each reporting period which depends on the
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of deferred tax assets within the time prescribed by income tax laws.
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forecasts of the future results and taxable profits that Company expects to
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• Reconciled the future taxable profit projections to future business plans
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earn within the period by which such brought forward losses and unabsorbed
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of the Company as approved by the management.
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depreciation can be adjusted against the taxable profits as governed by the
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• Tested the assumptions used in the aforesaid future projections such
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Income-tax Act, 1961.
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as growth rates, expected saving, increased utilisation of plants, etc.
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The projected cash flows involve key assumptions such as future growth
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considering our understanding of the business, actual historical results,
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rate and market conditions. Any change in these assumptions could have
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other relevant existing conditions, external data and market conditions.
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a material impact on the carrying value of deferred tax assets. These
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• Tested the arithmetical accuracy of the calculations including those
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assumptions and estimates are judgemental, subjective and depend on the future market and economic conditions, including industry focused trade
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related to sensitivity analysis performed by the management.
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policies, materialisation of the Company's expansion plans.
We have identified the recoverability of deferred tax assets recognised
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• Performed independent sensitivity analysis to test the impact of possible variations in key assumptions.
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on carried forward tax losses and unabsorbed depreciation as a key audit
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• Reviewed the historical accuracy of the cash flow projections prepared
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matter for the current year audit considering the materiality of the amounts,
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by the management in prior periods.
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complexities and significant judgements involved, as described above.
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• Evaluated management's assessment of time period available for
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In addition to the above, the corresponding disclosures made in the
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adjustment of such deferred tax assets as per provisions of the Income-
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accompanying standalone financial statements with respect to above matter
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tax Act, 1961 and appropriateness of the accounting treatment with
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have also been considered as fundamental to user's understanding of such
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respect to the recognition of deferred tax assets as per requirements of Ind AS 12, Income Taxes.
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financial statements.
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• Evaluated the appropriateness and adequacy of the disclosures made in the standalone financial statements in respect of deferred tax assets in accordance with applicable accounting standards.
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Key audit matter
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How our audit addressed the key audit matter
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Provisions and contingent liabilities relating to litigations (refer note 20 Our audit procedures in relation to the assessment of litigations and
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and note 35 to the accompanying standalone financial statements)
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provisions included, but were not limited to, the following:
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As detailed in note 20 and note 35 to the standalone financial statements,
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• Obtained an understanding of the management process for:
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the Company is exposed to a large number of litigations including matters pertaining to income tax and prior years' matters pertaining to excise,
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- identification of legal and tax matters initiated against the Company,
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customs, value added tax, service tax, etc., which could have a significant
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- assessment of accounting treatment for each such litigation
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impact on the financial position of the Company, if the potential exposures
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identified under Ind AS 37 accounting principles, and
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were to materialise.
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- measurement of amounts involved
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Provision for such litigations amounts to H38.30 Crore as at 31 March 2024
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• Evaluated the design and tested the operating effectiveness of key
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based on its estimate of the likelihood of such liability devolving upon the
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controls around above process including for completeness and accuracy
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Company.
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of the list of litigations outstanding against the Company.
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The amounts involved are material and the application of accounting
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• Obtained understanding of the developments during the year in each
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principles as given under Ind AS 37, 'Provisions, Contingent Liabilities and
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existing litigation, and understanding of the new litigations initiated
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Contingent Assets', in order to determine the amount to be recognised as a
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against the Company during the year by inquiry with the management,
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liability or to be disclosed as a contingent liability, in each case, is inherently
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inspection of case related documents such as notices, orders, etc. and
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subjective, and needs careful evaluation and judgement to be applied by the
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correspondence of the Company with their external counsels handling
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management.
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such matters on behalf of the Company.
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The key judgements involved are with respect to the potential exposure of
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• Conducted a critical review of the assessment done by the management
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each litigation and the likelihood and/or timing of cash outflows from the
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with the help of its experts for the likelihood and potential impact of
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Company, requires interpretation of laws and past legal rulings.
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each litigation, examining the available supporting documents. Tested
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Considering the significant judgements, materiality of the amounts involved,
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the independence, objectivity and competence of such experts involved.
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inherent high estimation uncertainty and reliance on experts, this matter has
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• Exercised our professional judgement to assess the management's
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been identified as a key audit matter for the current year audit.
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assessment of the potential likelihood of liability devolving upon the Company with respect to each legal case.
• Involved auditor's experts to assess the Company's interpretation and application of relevant tax laws to evaluate the appropriateness of key assumptions used and the reasonableness of estimates made in relation to uncertain tax positions, taking into account past precedents.
• Reviewed significant movements in provision with supporting documents.
• Tested the underlying calculations of amount of liability recognised and contingent liability disclosed in the standalone financial statements.
• Evaluated the appropriateness and adequacy of disclosures made in the standalone financial statements with respect to provisions and contingent liability in accordance with applicable accounting standards.
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Capitalisation of Property, Plant and Equipment
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• Obtained understanding of the business process relating to accounting
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Refer notes 1(iv)(d) and 2 and 4 to the standalone financial statements for
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for various capital projects;
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material accounting policy information on property, plant and equipment and
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• Assessed the appropriateness of the Company's material accounting
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related financial statement disclosures respectively.
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policy information on property, plant and equipment and capital work-
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As a part of expansion plan, during the year ended 31 March 2024, the
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in-progress and ensured that it is in line with Ind AS 16 'Property, Plant
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Company has capitalised significant capital assets aggregating to H130.24
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and Equipment';
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Crore towards de-bottlenecking of the existing plants and has H70.10 Crore
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• Evaluated the design and tested the operating effectiveness of key
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under capital work in progress as at reporting date.
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internal controls relating to capitalisation of various costs;
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Such capital expenditure includes purchase costs and costs directly
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• Performed test of details by selecting samples of additions during the
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attributable for bringing the assets to the location and conditions necessary
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year, and verified the underlying supporting documents including
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for it to be capable of operating in the manner intended by the management,
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contracts, agreements and invoices to ensure capital work-in-progress
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which have been capitalised under various classes of PPE in accordance with
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is recorded accurately in the correct period. Further, tested the
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the principles of Ind AS 16, Property, Plant and Equipment ("Ind AS 16").
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classification of the items capitalised in the current year including timing
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Such expansions being non-recurring in nature, required management efforts
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of such capitalisation.
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and judgement to identify the eligible costs which meet the recognition
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• In respect of allocated overhead, finance costs and employee costs,
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criteria under Ind AS 16, including allocation of overheads, finance costs and
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checked the reasonableness and appropriateness of allocation;
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employee costs to capital projects, determine timing of capitalisation and
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• Examined the useful economic lives and residual values assigned to
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classification of PPE in various asset classes, estimate related useful lives and
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various items of PPE capitalised during the year, with reference to the
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assign residual values to various items capitalised as PPE.
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Company's accounting policy, technical evaluation, applicable regulatory
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Considering the magnitude of capitalisation during the current year, efforts
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guidance; and the requirements of Schedule II to the Companies Act
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and judgements involved as mentioned above, we have determined this
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2013;
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matter to be a key audit matter for the year ended 31 March 2024.
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• Evaluated the appropriateness and adequacy of the related presentation and disclosures made in the standalone financial statements in accordance with the applicable accounting standards.
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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. The Annual Report is expected to be made available to us after the date of this auditor's report.
Our opinion on the standalone financial statements does not cover the other information and we will 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 identified above when it becomes available 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.
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.
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 judgements 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 judgement 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) I n 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 modification 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 35 to the standalone financial statements, has disclosed the impact of pending litigations 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 51(e) 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 51(f) 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. The Company has not declared or paid any dividend during the year ended 31 March 2024.
vi. Based on our examination which included test checks, the Company, in respect of financial year commencing on 1 April 2023, has used 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 database level for accounting software to log any direct data changes, as described in note 52 to the 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
Kartik Gogia
Partner
Membership No.: 512371 UDIN: 24512371BKFEUN3537
Place: Gurugram Date: 17 May 2024
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